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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Great Elm Capital Corporation | NASDAQ:GECC | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 10.14 | 4.06 | 16.13 | 0 | 09:09:42 |
Rory
T. Hood
Jones
Day
250
Vesey Street
New
York, New York 10281
(212)
326-3939 |
| |
William
J. Tuttle, P.C.
Matthew
D. Turner
Kirkland
& Ellis LLP
1301
Pennsylvania Ave, N.W.
Washington,
DC 20004
(202)
389-5000 |
|
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. |
|
when
declared effective pursuant to Section 8(c) of the Securities Act. |
|
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: . |
|
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). |
|
| |
Per
Note |
| |
Total |
Public
Offering Price |
| |
$ |
| |
$ |
Underwriting
Discount and Commissions (sales load) |
| |
$ |
| |
$ |
Proceeds
to us, before expenses(1) |
| |
$ |
| |
$ |
(1) |
Before deducting expenses
payable by us related to this offering, estimated at $ , or approximately $ per Note. See “Underwriting.”
The underwriters may also purchase up to an additional $ aggregate principal amount of the Notes offered hereby,
to cover over-allotments, if any, within 30 days of the date of this prospectus. If the underwriters exercise this option in full, the
total public offering price would be $ , the total underwriting discount and commissions (sales load) paid by us would
be $ , and total proceeds to us, before expenses, would be $ . |
Ladenburg
Thalmann |
| |
Janney Montgomery Scott |
| |
|
| |
Oppenheimer & Co. |
|
| |
Page |
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(in
thousands) |
| |
For
the Six Months
Ended
June 30, 2023 |
| |
For
the Year
Ended
December 31,
2022 |
Beginning
Investment Portfolio, at fair value |
| |
$ 224,957 |
| |
$212,149 |
Portfolio
Investments acquired(1) |
| |
76,335 |
| |
150,128 |
Amortization
of premium and accretion of discount, net |
| |
1,121 |
| |
1,328 |
Portfolio
Investments repaid or sold(2) |
| |
(73,150) |
| |
(112,628) |
Net
change in unrealized appreciation (depreciation) on investments |
| |
4,774 |
| |
100,016 |
Net
realized gain (loss) on investments |
| |
2,394 |
| |
(126,036) |
Ending
Investment Portfolio, at fair value |
| |
$236,431 |
| |
$224,957 |
(1) |
Includes new investments,
additional fundings (inclusive of those on revolving credit facilities), refinancings, and capitalized payment-in-kind (“PIK”)
income. |
(2) |
Includes scheduled principal
payments, prepayments, sales, and repayments (inclusive of those on revolving credit facilities). |
June 30, 2023 | December 31, 2022 | |||||||||||
Industry | Investments at Fair Value | Percentage of Fair Value | Investments at Fair Value | Percentage of Fair Value | ||||||||
Specialty Finance | $54,208 | 22.93% | $58,250 | 25.89% | ||||||||
Chemicals | 26,172 | 11.07% | 31,702 | 14.09% | ||||||||
Insurance | 16,365 | 6.92% | 2,340 | 1.04% | ||||||||
Transportation Equipment Manufacturing | 16,041 | 6.79% | 11,803 | 5.25% | ||||||||
Shipping | 14,066 | 5.95% | 7,206 | 3.20% | ||||||||
Oil & Gas Exploration & Production | 13,262 | 5.61% | 15,136 | 6.74% | ||||||||
Consumer Products | 11,951 | 5.05% | 8,413 | 3.74% | ||||||||
Metals & Mining | 10,938 | 4.63% | 6,046 | 2.69% | ||||||||
Internet Media | 9,870 | 4.17% | 12,247 | 5.44% | ||||||||
Energy Services | 9,647 | 4.08% | 2,877 | 1.28% | ||||||||
Casinos & Gaming | 9,332 | 3.95% | 9,301 | 4.13% | ||||||||
Closed-End Fund | 7,738 | 3.27% | 5,825 | 2.59% | ||||||||
Food & Staples | 7,657 | 3.24% | 3,660 | 1.63% | ||||||||
Energy Midstream | 6,327 | 2.68% | 22,559 | 10.03% | ||||||||
Industrial | 6,014 | 2.54% | 5,498 | 2.44% | ||||||||
Aircraft | 4,015 | 1.70% | 3,577 | 1.59% | ||||||||
Oil & Gas Refining | 3,917 | 1.66% | 5,388 | 2.40% | ||||||||
Restaurants | 3,483 | 1.47% | 3,110 | 1.38% | ||||||||
Hospitality | 3,338 | 1.41% | 4,988 | 2.22% | ||||||||
Apparel | 2,013 | 0.85% | 2,371 | 1.05% | ||||||||
Retail | 44 | 0.02% | 5 | 0.00% | ||||||||
Special Purpose Acquisition Company | 28 | 0.01% | 19 | 0.01% | ||||||||
IT Services | 2 | 0.00% | — | —% | ||||||||
Auto Manufacturer | 1 | 0.00% | 2 | 0.00% |
June 30, 2023 | December 31, 2022 | ||||||||||||
Industry | Investments at Fair Value |
Percentage of Fair Value |
Investments at Fair Value |
Percentage of Fair Value | |||||||||
Communications Equipment | 1 | 0.00 | % | — | — | % | |||||||
Biotechnology | 1 | 0.00 | % | 1 | 0.00 | % | |||||||
Technology | — | — | % | (365) | (0.16 | )% | |||||||
Household & Personal Products | — | — | % | 1 | 0.00 | % | |||||||
Wireless Telecommunications Services | — | — | % | 2,997 | 1.33 | % | |||||||
Total | $ 236,431 | 100.00 | % | $ 224,957 | 100.00 | % |
• |
We face competition for
investment opportunities. Limited availability of attractive investment opportunities in the market could cause us to hold a larger percentage
of our assets in liquid securities until market conditions improve. |
• |
Our portfolio is limited
in the number of portfolio companies which may subject us to a risk of significant loss if one or more of these companies defaults on
its obligations under any of its debt instruments. |
• |
Our portfolio is concentrated
in a limited number of industries, which subjects us to a risk of significant loss if there is a downturn in a particular industry in
which a number of our investments are concentrated. |
• |
Defaults by our portfolio
companies may harm our operating results. |
• |
By investing in companies
that are experiencing significant financial or business difficulties, we are exposed to distressed lending risks. |
• |
Certain of the companies
we target may have difficulty accessing the capital markets to meet their future capital needs, which may limit their ability to grow
or to repay their outstanding indebtedness upon maturity. |
• |
Investing in middle market
companies involves a high degree of risk and our financial results may be affected adversely if one or more of our portfolio investments
defaults on its loans or notes or fails to perform as we expect. |
• |
An investment strategy that
includes privately held companies presents challenges, including the lack of available information about these companies, a dependence
on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns. |
• |
Investments in foreign securities
may involve significant risks in addition to the risks inherent in U.S. investments. |
• |
Economic recessions or downturns
could impair our portfolio companies and harm our operating results. |
• |
Our failure to maintain
our status as a BDC would reduce our operating flexibility. |
• |
Regulations governing our
operations as a BDC affect our ability to raise additional capital and the way in which we do so. As a BDC, the necessity of raising additional
capital may expose us to risks, including the typical risks associated with leverage. |
• |
We will be subject to corporate
level U.S. federal income tax if we are unable to qualify as a RIC under the Code. |
• |
We may incur additional
debt, which could increase the risk in investing in our Company. |
• |
The failure in cyber security
systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity planning, could
impair our ability to conduct business effectively. |
• |
There are significant potential
conflicts of interest that could impact our investment returns. |
• |
pari
passu, or equal, with our existing and future unsecured indebtedness, including, without limitation, the $45.6 million in
aggregate principal amount of 6.75% unsecured notes that mature on January 31, 2025 (the “GECCM Notes”), the $42.8 million
in aggregate principal amount of 6.50% unsecured notes that mature on June 30, 2024 (the “GECCN Notes”) and the $57.5 million
in aggregate principal amount of 5.875% unsecured notes that mature on June 30, 2026 (the “GECCO Notes”); |
• |
effectively subordinated
to all of our existing and future secured indebtedness, including any amounts outstanding under the Loan, Guarantee and Security Agreement,
as amended (the “Loan Agreement”), with City National Bank (“CNB”) and any indebtedness that is initially unsecured
to which we subsequently grant security, to the extent of the value of the assets securing such indebtedness (as of June 30, 2023,
there were $5.0 million in borrowings outstanding under the Loan Agreement); |
• |
structurally subordinated
to all existing and future indebtedness and other obligations of any of our subsidiaries; and |
• |
senior to any of our future
indebtedness that expressly provides it is subordinated to the Notes. |
• |
We do not pay the principal
of any Note when due and payable. |
• |
We do not pay interest on
any Note when due, and such default is not cured within 30 days. |
• |
We remain in breach of any
other covenant with respect to the Notes for 60 days after we receive a written notice of default stating we are in breach. The notice
must be sent by either the Trustee or holders of at least 25% of the principal amount of the Notes. |
• |
We file for bankruptcy or
certain other events of bankruptcy, insolvency or reorganization occur |
• |
If, pursuant to Sections
18(a)(1)(c)(ii) and 61 of the Investment Company Act, or any successor provisions thereto of the Investment Company Act, on the last
business day of each of 24 consecutive calendar months, the Notes have an asset coverage (as such term is used in the Investment Company
Act) of less than 100%, as such obligation may be amended or superseded but giving effect to any exemptive relief that may be granted
to us by the SEC. |
• |
We agree that for the period
of time during which the Notes are outstanding, we will not violate, whether or not we are subject to, Section 18(a)(1) (A) as modified
by Sections 61(a)(1) and (2) of the Investment Company Act or any successor provisions thereto of the Investment Company Act, as such
obligation may be amended or superseded but giving effect to any exemptive relief that may be granted to us by the SEC. Currently, these
provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt securities, unless
our asset coverage, as defined in the Investment Company Act, equals at least 150% after such borrowings. See “Risk Factors—Risks
Relating to Indebtedness—Incurring additional indebtedness could increase the risk in investing in our Company.” |
• |
We agree that for the period
of time during which the Notes are outstanding, we will not declare any dividend (except a dividend payable in our stock), or declare
any other distribution, upon a class of our capital stock, or purchase any such capital stock, unless, in every such case, at the time
of the declaration of any such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in
the Investment Company Act) of at least the threshold specified in pursuant to Section 18(a)(1)(B) as modified by Sections 61(a)(1) and
(2) of the Investment Company Act or any successor provisions thereto of the Investment Company Act, as such obligation may be amended
or superseded (regardless of whether we are subject thereto), after deducting the amount of such dividend, distribution or purchase price,
as the |
• |
If, at any time, we are
not subject to the reporting requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), to file any periodic reports with the SEC, we agree to furnish to holders of the Notes and the Trustee, for the period of
time during which the Notes are outstanding, our audited annual consolidated financial statements, within 90 days of our fiscal year end,
and unaudited interim consolidated financial statements, within 45 days of our fiscal quarter end (other than our fourth fiscal quarter).
All such financial statements will be prepared, in all material respects, in accordance with GAAP. |
• |
issue securities or otherwise
incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of
payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of
payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one
or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued
or incurred by our subsidiaries that |
• |
pay dividends on, or purchase
or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, except
that we have agreed that for the period of time during which the Notes are outstanding, we will not declare any dividend (except a dividend
payable in our stock), or declare any other distribution, upon a class of our capital stock, or purchase any such capital stock, unless,
in every such case, at the time of the declaration of any such dividend or distribution, or at the time of any such purchase, we have
an asset coverage (as defined in the Investment Company Act) of at least the threshold specified in pursuant to Section 18(a)(1)(B)
as modified by Sections 61(a)(1) and (2) of the Investment Company Act or any successor provisions thereto of the Investment Company Act,
as such obligation may be amended or superseded (regardless of whether we are subject thereto), after deducting the amount of such dividend,
distribution or purchase price, as the case may be, and giving effect, in each case, (i) to any exemptive relief granted to us by
the SEC and (ii) to any no-action relief granted by the SEC to another BDC (or to us if we determine to seek such similar no-action
or other relief) permitting the BDC to declare any cash dividend or distribution notwithstanding the prohibition contained in Section
18(a)(1)(B) as modified by Sections 61(a)(1) and (2) of the Investment Company Act, as such obligation may be amended or superseded, in
order to maintain such BDC’s status as a RIC under Subchapter M of the Code; |
• |
sell assets (other than
certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); |
• |
enter into transactions
with affiliates; |
• |
create liens (including
liens on the stock of our subsidiaries) or enter into sale and leaseback transactions; |
• |
make investments; or |
• |
create restrictions on the
payment of dividends or other amounts to us from our subsidiaries. |
• |
these companies may have
limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied
by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained
in connection with our investment; |
• |
they typically have shorter
operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable
to competitors’ actions and market conditions, as well as general economic downturns; |
• |
they are more likely to
depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination
of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on you; |
• |
they generally have less
predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products
subject to a substantial risk of obsolescence, and may require substantial additional capital to support their operations, finance expansion
or maintain their competitive position. In addition, our executive officers, directors and GECM may be named as defendants in litigation
arising from our investments in the portfolio companies; |
• |
they may have difficulty
accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness
upon maturity; and |
• |
a portion of our income
may be non-cash income, such as contractual PIK interest, which represents interest added to the debt balance and due at the end of the
instrument’s term, in the case of loans, or issued as additional notes in the case of bonds. Instruments bearing PIK interest typically
carry higher interest rates as a result of their payment deferral and increased credit risk. When we recognize income in connection with
PIK interest, there is a risk that such income may become uncollectable if the borrower defaults. |
• |
as part of GECM’s
strategy in order to take advantage of investment opportunities as they arise; |
• |
when GECM believes that
market conditions are unfavorable for profitable investing; |
• |
when GECM is otherwise unable
to locate attractive investment opportunities; |
• |
as a defensive measure in
response to adverse market or economic conditions; or |
• |
to meet RIC qualification
requirements. |
• |
management’s attention
will be diverted from running our existing business by efforts to source, negotiate, close and integrate acquisitions; |
• |
our due diligence investigation
of potential acquisitions may not reveal risks inherent in the acquired business or assets; |
• |
we may over-value potential
acquisitions resulting in dilution to stockholders, incurrence of excessive indebtedness, asset write downs and negative perception of
our common stock; |
• |
the interests of our existing
stockholders may be diluted by the issuance of additional shares of our common stock or preferred stock; |
• |
we may borrow to finance
acquisitions, and there are risks associated with borrowing as described in this prospectus; |
• |
GECM has an incentive to
increase our assets under management in order to increase its fee stream, which may not be aligned with your interests; |
• |
we and GECM may not successfully
integrate any acquired business or assets; and |
• |
GECM may compensate the
existing managers of any acquired business or assets in a manner that results in the combined company taking on excessive risk. |
Assumed
Return on Our Portfolio(1)(2) (net of expenses) |
| |
(10.0)% |
| |
(5.0)% |
| |
0.0% |
| |
5.0% |
| |
10.0% |
Corresponding
net return to common stockholder |
| |
( |
| |
( |
| |
( |
| |
|
| |
|
(1) |
Assumes $225.0 million
in total portfolio assets, excluding short term investments, $155.9 million in senior securities outstanding, $84.8 million
in net assets, and an average cost of funds of 6.43%. Actual interest payments may be different. |
(2) |
In order for us to cover
our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2022 total portfolio assets of at
least 4.46%. |
Assumed
Return on Our Portfolio(1)(2) (net of expenses) |
| |
(10.0)% |
| |
(5.0)% |
| |
0.0% |
| |
5.0% |
| |
10.0% |
Corresponding
net return to common stockholder |
| |
( |
| |
( |
| |
( |
| |
|
| |
|
(1) |
Assumes $238.6 million
in total portfolio assets, excluding short term investments, $169.6 million in senior securities outstanding, $84.8 million
in net assets, and an average cost of funds of 6.43%. Actual interest payments may be different. |
(2) |
In order for us to cover
our annual interest payments on indebtedness, we must achieve annual returns on our December 31, 2022 total portfolio assets of at
least 4.57%. |
• |
our, or our portfolio companies’,
future business, operations, operating results or prospects; |
• |
the return or impact of
current and future investments; |
• |
the impact of a protracted
decline in the liquidity of credit markets on our business; |
• |
the impact of fluctuations
in interest rates on our business; |
• |
the impact of changes in
laws or regulations governing our operations or the operations of our portfolio companies; |
• |
our contractual arrangements
and relationships with third parties; |
• |
our current and future management
structure; |
• |
the general economy, including
recessionary trends, and its impact on the industries in which we invest; |
• |
the financial condition
of and ability of our current and prospective portfolio companies to achieve their objectives; |
• |
serious disruptions and
catastrophic events; |
• |
our expected financings
and investments, including interest rate volatility; |
• |
the adequacy of our financing
resources and working capital; |
• |
the ability of our investment
adviser to locate suitable investments for us and to monitor and administer our investments; |
• |
the timing of cash flows,
if any, from the operations of our portfolio companies; |
• |
the timing, form and amount
of any dividend distributions; |
• |
the valuation of any investments
in portfolio companies, particularly those having no liquid trading market; and |
• |
our ability to maintain
our qualification as a RIC and as a BDC. |
• |
On an actual basis; and |
• |
On an as adjusted basis to give effect
to (i) the assumed sale of $40.0 million aggregate principal amount of the Notes
at a public offering price of $25.00 per Note, after deducting underwriting discounts and commissions of approximately $1.5 million and estimated offering expenses of $0.5 million payable by us and (ii) the
use of such net proceeds to redeem all of the outstanding GECCN Notes. |
|
| |
As
of June 30, 2023 | |||
Dollar
amounts in thousands (except per share amounts) |
| |
Actual |
| |
As
Adjusted(1) |
Investments,
at fair value(2) |
| |
$314,570 |
| |
$
313,780 |
Cash
and cash equivalents |
| |
3,352 |
| |
— |
Total
assets |
| |
322,477 |
| |
318,335 |
GECCM
Notes(3) |
| |
45,204 |
| |
45,204 |
GECCN
Notes(3) |
| |
42,385 |
| |
— |
GECCO
Notes(3) |
| |
56,132 |
| |
56,132 |
The
Notes(4) |
| |
— |
| |
38,243 |
Revolving Credit Facility |
| |
5,000 |
| |
5,000 |
Total
liabilities |
| |
$229,627 |
| |
$ 225,485 |
NET
ASSETS |
| |
|
| |
|
Common
stock, par value $0.01 per share, 100,000,000 shares of common stock authorized, 7,601,958 shares issued and outstanding |
| |
$76 |
| |
$ 76 |
Additional
paid in capital |
| |
284,107 |
| |
284,107 |
Accumulated
losses |
| |
(191,333) |
| |
(191,333) |
Total
net assets |
| |
92,850 |
| |
92,850 |
Total
liabilities and net assets |
| |
$322,477 |
| |
$
318,335 |
(1) |
Excludes
up to $7.5 million in aggregate principal amount
of Notes issuable by us upon exercise of the underwriters’ over-allotment option. |
(2) |
Includes approximately $8.4 million of money market fund investments
at fair value, a portion of which may be used to redeem the outstanding GECCN Notes. |
(3) |
Including
unamortized discount of $406, $438 and $1,368 relating to the GECCM Notes, GECCN Notes
and GECCO Notes, respectively. |
(4) |
Net
of deferred offering costs. |
As
of |
| |
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) |
December 31,
2016 |
| |
|
| |
|
| |
|
| |
|
8.25%
Notes due 2020 |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
December 31,
2017 |
| |
|
| |
|
| |
|
| |
|
6.50%
Notes due 2022 (“GECCL Notes”) |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
December 31,
2018 |
| |
|
| |
|
| |
|
| |
|
GECCL
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCM
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
December 31,
2019 |
| |
|
| |
|
| |
|
| |
|
GECCL
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCM
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCN
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
December 31,
2020 |
| |
|
| |
|
| |
|
| |
|
GECCL
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCM
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCN
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
December 31,
2021 |
| |
|
| |
|
| |
|
| |
|
GECCM
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCN
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCO
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
December 31,
2022 |
| |
|
| |
|
| |
|
| |
|
GECCM
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCN
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCO
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
Revolving
Credit Facility |
| |
$ |
| |
$ |
| |
N/A |
| |
|
June 30,
2023 (Unaudited) |
| |
|
| |
|
| |
|
| |
|
GECCM
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCN
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
GECCO
Notes |
| |
$ |
| |
$ |
| |
N/A |
| |
$ |
Revolving
Credit Facility |
| |
$ |
| |
$ |
| |
N/A |
| |
|
(1) |
|
(2) |
|
(3) |
The amount to which such
class of senior security would be entitled upon the voluntary liquidation of the issuer in preference to any security junior to it. |
(4) |
|
• |
We do not pay the principal
of any Note when due and payable. |
• |
We do not pay interest on
any Note when due, and such default is not cured within 30 days. |
• |
We remain in breach of any
other covenant with respect to the Notes for 60 days after we receive a written notice of default stating we are in breach. The notice
must be sent by either the Trustee or holders of at least 25% of the principal amount of the Notes. |
• |
We file for bankruptcy or
certain other events of bankruptcy, insolvency or reorganization occur and, in the case of certain orders or decrees entered against us
under any bankruptcy law, such order or decree remains undischarged or unstayed for a period of 90 days. |
• |
If, pursuant to Sections
18(a)(1)(c)(ii) and 61 of the Investment Company Act, or any successor provisions thereto of the Investment Company Act, on the last
business day of each of 24 consecutive calendar months the Notes have an asset coverage (as such term is used in the Investment Company
Act) of less than 100%, as such obligation may be amended or superseded but giving effect to any exemptive relief that may be granted
to us by the SEC. |
• |
You must give the Trustee
written notice that an Event of Default has occurred with respect to the Notes and remains uncured. |
• |
The holders of at least
25% in principal amount of all the Notes must make a written request that the Trustee take action because of the default and must offer
reasonable indemnity to the Trustee against the cost and other liabilities of taking that action. |
• |
The Trustee must not have
taken action for 60 days after receipt of the above notice and offer of indemnity. |
• |
The holders of a majority
in principal amount of the Notes must not have given the Trustee a direction inconsistent with the above notice during that 60-day period. |
• |
in the payment of principal
or interest; or |
• |
in respect of a covenant
that cannot be modified or amended without the consent of each holder of the Notes. |
• |
Where we merge out of existence
or convey or transfer substantially all of our assets, the resulting entity must agree to be legally responsible for our obligations under
the Notes; |
• |
The merger or sale of assets
must not cause a default on the Notes and we must not already be in default (unless the merger or sale would cure the default). For purposes
of this no-default test, a default would include an Event of Default that has occurred and has not been cured, as described under “Events
of Default” above. A default for this purpose would also include any event that would be an Event of Default if the requirements
for giving us a notice of default or our default having to exist for a specified period of time were disregarded; and |
• |
We must deliver certain
certificates and documents to the Trustee. |
• |
change the stated maturity
of the principal of or interest on the Notes; |
• |
reduce any amounts due on
the Notes; |
• |
reduce the amount of principal
payable upon acceleration of the maturity of the Notes following a default; |
• |
change the place or currency
of payment on the Notes; |
• |
impair your right to sue
for payment; |
• |
reduce the percentage of
holders of Notes whose consent is needed to modify or amend the indenture; and |
• |
reduce the percentage of
holders of Notes whose consent is needed to waive compliance with certain provisions of the indenture or to waive certain defaults. |
• |
If the change affects only
the Notes, it must be approved by the holders of a majority in principal amount of the Notes. |
• |
If the change affects more
than one series of debt securities issued under the same indenture, it must be approved by the holders of a majority in principal amount
of all of the series affected by the change, with all affected series voting together as one class for this purpose. |
• |
Since the Notes are denominated
in U.S. dollars, we must deposit in trust for the benefit of all holders of the Notes a combination of money and U.S. government or U.S.
government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their
due dates. |
• |
We must deliver to the Trustee
a legal opinion of our counsel confirming that, under current U.S. federal income tax law, we may make the above deposit without causing
you to be taxed on the Notes any differently than if we did not make the deposit and just repaid the Notes ourselves at maturity. |
• |
Defeasance must not result
in a breach or violation of, or result in a default under, the indenture or any of our other material agreements or instruments. |
• |
No default or Event of Default
with respect to the Notes shall have occurred and be continuing and no defaults or Events of Default related to bankruptcy, insolvency
or reorganization shall occur during the next 90 days. |
• |
We must deliver to the Trustee
a legal opinion of our counsel stating that the above deposit does not require registration by us under the Investment Company Act and
a legal opinion and officers’ certificate stating that all conditions precedent to covenant defeasance have been complied with. |
• |
Since the Notes are denominated
in U.S. dollars, we must deposit in trust for the benefit of all holders of the Notes a combination of money and U.S. government or U.S.
government agency notes or bonds that will generate enough cash to make interest, principal and any other payments on the Notes on their
various due dates. |
• |
We must deliver to the Trustee
a legal opinion confirming that there has been a change in current U.S. federal tax law or an IRS ruling that allows us to make the above
deposit without causing you to be taxed on the Notes any differently than if we did not make the deposit and just repaid the Notes ourselves
at maturity. Under current U.S. federal tax law, the deposit and our legal release from the |
• |
We must deliver to the Trustee
a legal opinion of our counsel stating that the above deposit does not require registration by us under the Investment Company Act and
a legal opinion and officers’ certificate stating that all conditions precedent to defeasance have been complied with. |
• |
Defeasance must not result
in a breach or violation of, or constitute a default under, the indenture or any of our other material agreements or instruments. |
• |
No default or Event of Default
with respect to the Notes shall have occurred and be continuing and no defaults or Events of Default related to bankruptcy, insolvency
or reorganization shall occur during the next 90 days. |
• |
We agree that for the period
of time during which the Notes are outstanding, we will not violate, whether or not it is subject to, Section 18 (a)(1)(A) as modified
by Sections 61(a)(1) and (2) of the Investment Company Act or any successor provisions thereto of the Investment Company Act, as such
obligation may be amended or superseded but giving effect to any exemptive relief that may be granted to us by the SEC. Currently, these
provisions generally prohibit us from making additional borrowings, including through the issuance of additional debt securities, unless
our asset coverage, as defined in the Investment Company Act, equals at least 150% after such borrowings. |
• |
We agree that for the period
of time during which the Notes are outstanding, we will not declare any dividend (except a dividend payable in our stock), or declare
any other distribution, upon a class of our capital stock, or purchase any such capital stock, unless, in every such case, at the time
of the declaration of any such dividend or distribution, or at the time of any such purchase, we have an asset coverage (as defined in
the Investment Company Act) of at least the threshold specified in pursuant to Section 18(a)(1) (B) as modified by Sections 61(a)(1) and
(2) of the Investment Company Act or any successor provisions thereto of the Investment Company Act, as such obligation may be amended
or superseded (regardless of whether we are subject thereto), after deducting the amount of such dividend, distribution or purchase price,
as the case may be, and giving effect, in each case, (i) to any exemptive relief granted to us by the SEC and (ii) to any no-action
relief granted by the SEC to another BDC (or to us if we determine to seek such similar no-action or other relief) permitting the BDC
to declare any cash dividend or distribution notwithstanding the prohibition contained in Section 18(a)(1)(B) as modified by Sections
61(a)(1) and (2) of the Investment Company Act, as such obligation may be amended or superseded, in order to maintain such BDC’s
status as a RIC under Subchapter M of the Code. |
• |
If, at any time, we are
not subject to the reporting requirements of Sections 13 or 15(d) of the Exchange Act to file any periodic reports with the SEC, we will
furnish to holders of the Notes and the Trustee, for the period of time during which the Notes are outstanding, our audited annual consolidated
financial statements, within 90 days of our fiscal year end, and unaudited interim consolidated financial statements, within 45 days of
our fiscal quarter end (other than our fourth fiscal quarter). All such financial statements will be prepared, in all material respects,
in accordance with applicable GAAP. |
• |
only in fully registered
certificated form; |
• |
without interest coupons;
and |
• |
unless we indicate otherwise,
in denominations of $25 and amounts that are multiples of $25. |
• |
pari
passu, or equal, with our existing and future unsecured indebtedness, including, without limitation, the GECCM Notes, the GECCN
Notes and the GECCO Notes; |
• |
effectively subordinated
to all of our existing and future secured indebtedness, including any amounts outstanding under the Loan Agreement, and any indebtedness
that is initially unsecured to which we subsequently grant security, to the extent of the value of the assets securing such indebtedness;
|
• |
structurally subordinated
to all existing and future indebtedness and other obligations of any of our subsidiaries; and |
• |
senior to our common stock
and any of our future indebtedness that expressly provides it is subordinated to the Notes. |
• |
our indebtedness (including
indebtedness of others guaranteed by us), whenever created, incurred, assumed or guaranteed, for money borrowed, that we have designated
as “Senior Indebtedness” for purposes of the indenture and in accordance with the terms of the indenture (including any indenture
securities designated as Senior Indebtedness), and |
• |
renewals, extensions, modifications
and refinancings of any of this indebtedness. |
Dollar amounts in thousands
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity |
Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Investments at Fair Value | |||||||||||||||||||||||||||
Advancion |
Chemicals | 2nd Lien, Secured Loan | 2 | 1M L + 7.75%, 8.50% Floor (12.94%) | 09/21/2022 | 11/24/2028 | 1,625 | 1,509 | 1,430 | ||||||||||||||||||
APTIM
Corp. 4171 Essen Lane Baton Rouge, LA 70809 |
Industrial | 1st Lien, Secured Bond | 11 | 7.75% | 03/28/2019 | 06/15/2025 | 5,000 | 4,274 | 4,050 | ||||||||||||||||||
Avanti
Space Limited Cobham House 20 Black Friars Lane London, UK EC4V 6EB |
Wireless Telecommunications Services | Junior Priority E2 Notes | 6, 7, 9, 10 | 12.50% | 04/13/2022 | 04/13/2024 | 1,373 | 1,138 | — | ||||||||||||||||||
Avanti
Space Limited Cobham House 20 Black Friars Lane London, UK EC4V 6EB |
Wireless Telecommunications Services | Junior Priority F Notes | 6, 7, 9, 10 | 12.50% | 04/13/2022 | 04/13/2024 | 5,442 | 4,552 | — | ||||||||||||||||||
Avanti
Space Limited Cobham House 20 Black Friars Lane London, UK EC4V 6EB |
Wireless Telecommunications Services | Junior Priority G Notes | 6, 7, 9, 10 | 12.50% | 04/13/2022 | 10/13/2024 | 1,601 | 1,339 | — | ||||||||||||||||||
Avanti
Space Limited Cobham House 20 Black Friars Lane London, UK EC4V 6EB |
Wireless Telecommunications Services | Common Equity | 6, 8, 10 | n/a | 04/13/2022 | n/a | 1,722 | — | — | 1.39 | % | ||||||||||||||||
Avation
Capital SA 65 Kampong Bahru Road, #01-01 Singapore 169370 |
Aircraft | 2nd Lien, Secured Bond | 7, 10 | 9.00%, (6.50% cash + 2.50% PIK) | 02/04/2022 | 10/31/2026 | 4,613 | 4,111 | 4,015 | ||||||||||||||||||
Blackstone
Secured Lending 345 Park Avenue New York, NY 10154 |
Closed-End Fund | Common Stock | 10 | n/a | 08/18/2022 | n/a | 190,000 | 4,405 | 5,198 | * | |||||||||||||||||
Blue
Ribbon, LLC 110 E Houston St. San Antonio, TX 78205 |
Food & Staples | 1st Lien, Secured Loan | 2, 6 | 1M L + 6.00%, 6.75% Floor (11.17%) | 02/06/2023 | 05/07/2028 | 4,954 | 3,607 | 3,495 | ||||||||||||||||||
Eagle
Point Credit Company Inc 600 Steamboat Road, Suite 202 Greenwich, CT 06830 |
Closed-End Fund | Common Stock | 10 | n/a | 08/18/2022 | n/a | 250,000 | 2,705 | 2,540 | * | |||||||||||||||||
ECL
Entertainment, LLC 8978 Spanish Ridge Ave Las Vegas, NV 89148 |
Casinos & Gaming | 1st Lien, Secured Loan | 2, 6 | 1M SOFR + 7.50%, 8.25% Floor (12.72%) | 03/31/2021 | 04/30/2028 | 4,659 | 4,626 | 4,660 | ||||||||||||||||||
Enservco
/ Heat Waves 14133 County Rd 9 1/2 Longmont, CO 80504 |
Specialty Finance | Term Loan | 6 | 29.44% | 03/24/2022 | 06/24/2026 | 1,674 | 1,695 | 1,872 | ||||||||||||||||||
First
Brands, Inc. 3255 West Hamlin Road Rochester Hills, MI 48309 |
Transportation Equipment Manufacturing | 2nd Lien, Secured Loan | 2 | 6M L + 8.50%, 9.50% Floor (13.6%) | 03/24/2021 | 03/30/2028 | 12,545 | 12,189 | 11,165 | ||||||||||||||||||
First
Brands, Inc. 3255 West Hamlin Road Rochester Hills, MI 48309 |
Transportation Equipment Manufacturing | 1st Lien, Secured Loan | 2 | 6M SOFR + 5.00%, 6.00% Floor (10.25%) | 06/09/2023 | 03/30/2027 | 4,987 | 4,848 | 4,872 | ||||||||||||||||||
Flexsys
Holdings 260 Springside Drive Akron, OH 44333 |
Chemicals | 1st Lien, Secured Loan | 2 | 3M SOFR + 5.25%, 6.00% Floor (10.75%) | 11/04/2022 | 11/01/2028 | 4,962 | 3,977 | 4,483 | ||||||||||||||||||
Florida
Marine, LLC 2360 5th Street Mendeville, LA 70471 |
Shipping | 1st Lien, Secured Loan | 2, 6 | 1M SOFR + 10.30%, 12.30% Floor (15.51%) | 03/17/2023 | 03/17/2028 | 7,107 | 6,916 | 6,932 |
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity | Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Foresight
Energy 211 North Broadway, Suite 2600 St. Louis, MO 63102 |
Metals & Mining | 1st Lien, Secured Loan | 2, 6 | 3M SOFR + 8.00%, 9.50% Floor (13.34%) | 07/29/2021 | 06/30/2027 | 6,009 | 6,041 | 6,009 | ||||||||||||||||||
FTAI
Infrastructure Inc. 1345 Avenue of the Americas, 45th Floor New York, NY 10105 |
Industrial | 1st Lien, Secured Bond | 10 | 10.50% | 06/29/2022 | 06/01/2027 | 2,000 | 1,908 | 1,964 | ||||||||||||||||||
GAC
HoldCo Inc. Suite 1220, 407 - 2nd Street S.W. Calgary, AB T2P 2Y3 |
Oil & Gas Exploration & Production | 1st Lien, Secured Bond | 10 | 12.00% | 07/27/2021 | 08/15/2025 | 6,850 | 7,123 | 7,278 | ||||||||||||||||||
Great
Elm Healthcare Finance, LLC 3100 West End Ave, Suite 750 Nashville, TN 37203 |
Specialty Finance | Subordinated Note | 4, 6 | 12.00% | 11/17/2022 | 11/09/2027 | 4,375 | 4,375 | 4,375 | ||||||||||||||||||
Great
Elm Healthcare Finance, LLC 3100 West End Ave, Suite 750 Nashville, TN 37203 |
Specialty Finance | Common Equity | 4, 6 | n/a | 11/17/2022 | n/a | 88 | 4,375 | 4,375 | 87.50 | % | ||||||||||||||||
Greenway
Health, LLC 4301 W. Boy Scout Blvd, Suite 800 Tampa, FL 33607 |
Technology | 1st Lien, Secured Revolver | 2, 6 | 3M SOFR + 3.75%, 3.75% Floor (8.91%) | 01/27/2020 | 11/17/2023 | — | (15 | ) | — | |||||||||||||||||
Greenway
Health, LLC 4301 W. Boy Scout Blvd, Suite 800 Tampa, FL 33607 |
Technology | 1st Lien, Secured Revolver - Unfunded | 6 | 0.50% | 01/27/2020 | 11/17/2023 | 8,026 | — | — | ||||||||||||||||||
Harvey
Gulf Holdings LLC 701 Poydras Street, Suite 3700 New Orleans, LA 70139 |
Shipping | Secured Loan A | 2, 6 | 3M SOFR + 4.50%, 5.50% Floor (9.81%) | 08/10/2022 | 08/10/2027 | 434 | 428 | 433 | ||||||||||||||||||
Harvey
Gulf Holdings LLC 701 Poydras Street, Suite 3700 New Orleans, LA 70139 |
Shipping | Secured Loan B | 2, 6 | 3M SOFR + 8.62%, 9.62% Floor (13.93%) | 08/10/2022 | 08/10/2027 | 6,634 | 6,463 | 6,701 | ||||||||||||||||||
ITP
Live Production Group 101 Greenwich Street, Floor 26 New York, NY 10006 |
Specialty Finance | Term Loan | 2, 6 | 25.61% | 12/22/2021 | 05/22/2026 | 1,364 | 1,379 | 1,451 | ||||||||||||||||||
Lenders
Funding, LLC 523 A Avenue Coronado, CA 92118 |
Specialty Finance | Subordinated Note | 4, 6, 10 | 6.73% | 09/20/2021 | 09/20/2026 | 9,521 | 9,521 | 9,521 | ||||||||||||||||||
Lenders
Funding, LLC 523 A Avenue Coronado, CA 92118 |
Specialty Finance | 1st Lien, Secured Revolver - Unfunded | 4, 6, 10 | n/a | 09/20/2021 | 09/20/2023 | 5,000 | — | — | ||||||||||||||||||
Lenders
Funding, LLC 523 A Avenue Coronado, CA 92118 |
Specialty Finance | Common Equity | 4, 6, 10 | n/a | 09/20/2021 | n/a | 6,287 | 7,250 | 250 | 56.13 | % | ||||||||||||||||
Lummus
Technology Holdings 5825 N. Sam Houston Parkway West, #600 Houston, TX 77086 |
Chemicals | Unsecured Bond | 9.00% | 05/17/2022 | 07/01/2028 | 4,150 | 3,587 | 3,616 | |||||||||||||||||||
Mad
Engine Global, LLC 6740 Cobra Way San Diego, CA, 92121 |
Apparel | 1st Lien, Secured Loan | 2 | 3M L + 7.00%, 8.00% Floor (12.54%) | 06/30/2021 | 07/15/2027 | 2,869 | 2,815 | 2,013 | ||||||||||||||||||
Martin
Midstream Partners LP 4200 Stone Road Kilgore, TX 75662 |
Energy Midstream | 2nd Lien, Secured Bond | 11.50% | 01/31/2023 | 02/15/2028 | 2,000 | 1,944 | 1,929 |
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity | Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Maverick
Gaming LLC 12530 NE 144th Street Kirkland, WA 98034 |
Casinos & Gaming | 1st Lien, Secured Loan | 2, 6 | 3M L + 7.50%, 8.50% Floor (12.98%) | 11/16/2021 | 09/03/2026 | 5,884 | 5,748 | 4,672 | ||||||||||||||||||
New
Wilkie Energy Pty Limited 56 Pitt Street Sydney, New South Wales 2000, Australia |
Metals & Mining | 1st Lien, Secured Loan | 2, 6, 7, 10 | 3M SOFR + 12.50%, 14.50% Floor (17.44%), (12.44% cash + 5.00% PIK) | 04/06/2023 | 04/06/2026 | 5,000 | 4,860 | 4,894 | ||||||||||||||||||
New
Wilkie Energy Pty Limited 56 Pitt Street Sydney, New South Wales 2000, Australia |
Metals & Mining | Warrants | 6, 10 | n/a | 04/06/2023 | n/a | 1,078,899 | — | 35 | * | |||||||||||||||||
NICE-PAK
Products, Inc. Two Nice-Pak Park Orangeburg, NY 10962 |
Consumer Products | Secured Loan B | 2, 6, 7 | 3M SOFR + 13.50%, 14.50% Floor (19.00%), (11.00% cash + 8.00% PIK) | 09/30/2022 | 09/30/2027 | 9,026 | 8,783 | 8,189 | ||||||||||||||||||
NICE-PAK
Products, Inc. Two Nice-Pak Park Orangeburg, NY 10962 |
Consumer Products | Promissory Note | 6, 8 | n/a | 09/30/2022 | 09/30/2029 | 1,449 | — | 1,065 | ||||||||||||||||||
NICE-PAK
Products, Inc. Two Nice-Pak Park Orangeburg, NY 10962 |
Consumer Products | Warrants | 6 | n/a | 09/30/2022 | n/a | 880,909 | — | — | 2.56 | % | ||||||||||||||||
NuStar
Energy LP 19003 1H-10 West San Antonio, TX 78257 |
Energy Midstream | Preferred Equity | 2, 10 | 3M L + 6.88%, 6.88% Floor (11.72%) | 12/12/2022 | n/a | 6,406 | 142 | 162 | * | |||||||||||||||||
Par
Petroleum, LLC 825 Town & Country Lane, Suite 1500 Houston, TX 77024 |
Oil & Gas Refining | 1st Lien, Secured Loan | 2, 10 | 3M SOFR + 4.25%, 4.75% Floor (9.61%) | 02/14/2023 | 02/28/2030 | 3,990 | 3,931 | 3,917 | ||||||||||||||||||
PFS
Holdings Corp. 3747 Hecktown Road Easton, PA 18045 |
Food & Staples | 1st Lien, Secured Loan | 2, 5, 6 | 1M L + 7.00%, 8.00% Floor (12.15%) | 11/13/2020 | 11/13/2024 | 1,049 | 1,049 | 944 | ||||||||||||||||||
PFS
Holdings Corp. 3747 Hecktown Road Easton, PA 18045 |
Food & Staples | Common Equity | 5, 6, 8 | n/a | 11/13/2020 | n/a | 5,238 | 12,378 | 506 | 5.20 | % | ||||||||||||||||
PIRS
Capital LLC 1688 Meridian Ave Ste 700 Miami Beach, FL 33139 |
Specialty Finance | Term Loan | 2, 6 | Prime + 6.50%, 6.50% Floor (14.75%) | 11/22/2021 | 12/31/2024 | 2,000 | 2,000 | 1,995 | ||||||||||||||||||
Prestige
Capital Finance, LLC 400 Kelby St., 10th Floor Fort Lee, NJ 07024 |
Specialty Finance | Subordinated Note | 2, 4, 6, 10 | 3M SOFR + 8.50%, 10.50% Floor (13.74%) | 06/15/2021 | 06/15/2025 | 3,000 | 3,000 | 3,000 | ||||||||||||||||||
Prestige
Capital Finance, LLC 400 Kelby St., 10th Floor Fort Lee, NJ 07024 |
Specialty Finance | Common Equity | 4, 6, 10 | n/a | 02/08/2019 | n/a | 100 | 7,786 | 12,792 | 80.00 | % | ||||||||||||||||
ProFrac
Holdings II, LLC 333 Shops Boulevard Suite 301 Weatherford, Texas 76087 |
Energy Services | 1st Lien, Secured Loan | 2, 10 | 3M SOFR + 7.25%, 8.25% Floor (12.75%) | 02/01/2023 | 03/04/2025 | 9,647 | 9,487 | 9,647 | ||||||||||||||||||
Research
Now Group, Inc. 5800 Tennyson Parkway Suite 600 Plano, TX 75024 |
Internet Media | 1st Lien, Secured Revolver | 2, 6 | 3M SOFR + 4.50%, 4.50% Floor (10.00%) | 01/29/2019 | 06/14/2024 | 6,093 | 6,090 | 5,411 |
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity | Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Research
Now Group, Inc. 5800 Tennyson Parkway Suite 600 Plano, TX 75024 |
Internet Media | 1st Lien, Secured Revolver - Unfunded | 6 | 0.50% | 01/29/2019 | 06/14/2024 | 3,907 | — | (438 | ) | |||||||||||||||||
Research
Now Group, Inc. 5800 Tennyson Parkway Suite 600 Plano, TX 75024 |
Internet Media | 2nd Lien, Secured Loan | 2, 6 | 3M SOFR + 9.50%, 10.50% Floor (14.80%) | 05/20/2019 | 12/20/2025 | 8,000 | 7,971 | 4,897 | ||||||||||||||||||
Ruby
Tuesday Operations LLC 333 E. Broadway Avenue Maryville, TN 37804 |
Restaurants | 1st Lien, Secured Loan | 2, 6, 7 | 1M SOFR + 12.00%, 13.25% Floor (17.26%), (11.26% cash + 6.00% PIK) | 02/24/2021 | 02/24/2025 | 2,180 | 2,180 | 2,114 | ||||||||||||||||||
Ruby
Tuesday Operations LLC 333 E. Broadway Avenue Maryville, TN 37804 |
Restaurants | 1st Lien, Secured Loan | 2, 6, 7 | 1M SOFR + 16.00%, 17.25% Floor (21.26%) | 01/31/2023 | 02/24/2025 | 537 | 537 | 537 | ||||||||||||||||||
Ruby
Tuesday Operations LLC 333 E. Broadway Avenue Maryville, TN 37804 |
Restaurants | Warrants | 6, 8 | n/a | 02/24/2021 | n/a | 311,697 | — | 832 | 2.81 | % | ||||||||||||||||
SCIH
Salt Holdings Inc. 1875 Century Park East, Suite 320 Los Angeles, CA 90067 |
Food & Staples | 1st Lien, Secured Loan | 2 | 1M L + 4.00%, 4.75% Floor (9.15%) | 06/21/2023 | 03/16/2027 | 1,994 | 1,959 | 1,962 | ||||||||||||||||||
Sterling
Commercial Credit, LLC 10153 Grand River Rd Brighton, MI 48116 |
Specialty Finance | Subordinated Note | 4, 6, 7 | 11.00% | 02/03/2022 | 05/03/2025 | 8,733 | 8,733 | 8,733 | ||||||||||||||||||
Sterling
Commercial Credit, LLC 10153 Grand River Rd Brighton, MI 48116 |
Specialty Finance | Common Equity | 4, 6 | n/a | 02/03/2022 | n/a | 3,280,000 | 7,842 | 5,844 | 80.00 | % | ||||||||||||||||
Stone
Ridge Opportunities Fund L.P. One Vanderbilt Ave., 65th Floor New York, NY 10017 |
Insurance | Private Fund | 12 | n/a | 12/15/2022 | n/a | 3,000,000 | 3,000 | 3,415 | ||||||||||||||||||
Summit
Midstream Holdings, LLC 910 Louisiana Street, Suite 4200 Houston, TX 77002 |
Energy Midstream | Unsecured Bond | 5.75% | 08/10/2022 | 04/15/2025 | 386 | 340 | 351 | |||||||||||||||||||
Summit
Midstream Holdings, LLC 910 Louisiana Street, Suite 4200 Houston, TX 77002 |
Energy Midstream | 2nd Lien, Secured Bond | 9.00% | 10/19/2021 | 10/15/2026 | 4,000 | 3,833 | 3,885 | |||||||||||||||||||
Target
Hospitality Corp. 2170 Buckthorne Place, Suite 440 The Woodlands, TX 77380 |
Hospitality | Secured Bond | 10 | 9.50% | 05/13/2021 | 03/15/2024 | 3,331 | 3,321 | 3,338 | ||||||||||||||||||
Traeger
Inc. 1215 E Wilmington Ave. Suite 200 Salt Lake City, UT 84106 |
Consumer Products | 1st Lien, Secured Loan | 2, 10 | 1M L + 3.25%, 4.00% Floor (8.45%) | 03/30/2023 | 06/29/2028 | 3,240 | 2,579 | 2,697 | ||||||||||||||||||
TRU
Taj Trust 505 Park Avenue, 2nd Floor New York, NY 10022 |
Retail | Common Equity | 6, 8 | n/a | 07/21/2017 | n/a | 16,000 | 611 | 44 | 2.75 | % | ||||||||||||||||
United
Insurance Holdings Corp. 800 2nd Avenue S. Saint Petersburg, FL 33701 |
Insurance | Unsecured Bond | 7.25% | 12/20/2022 | 12/15/2027 | 17,500 | 8,707 | 12,950 | |||||||||||||||||||
Universal
Fiber Systems 640 State Street Bristol, TN 37620 |
Chemicals | Term Loan B | 2, 6, 7 | 3M SOFR + 13.06%, 14.06% Floor (18.28%), (9.28% cash + 9.00% PIK) | 09/30/2021 | 09/29/2026 | 7,472 | 7,385 | 7,547 | ||||||||||||||||||
Universal
Fiber Systems 640 State Street Bristol, TN 37620 |
Chemicals | Term Loan C | 2, 6, 7 | 3M SOFR + 13.06%, 14.06% Floor (18.28%), (9.28% cash + 9.00% PIK) | 09/30/2021 | 09/29/2026 | 2,881 | 2,838 | 2,694 |
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity | Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Universal
Fiber Systems 640 State Street Bristol, TN 37620 |
Chemicals | Warrants | 6, 8 | n/a | 09/30/2021 | n/a | 3,383 | — | 1,579 | 1.50 | % | ||||||||||||||||
Vantage
Specialty Chemicals, Inc. 1751 Lake Cook Rd., Suite 550 Deerfield, IL 60015 |
Chemicals | 1st Lien, Secured Loan | 2 | 1M SOFR + 4.75%, 5.25% Floor (9.90%) | 03/03/2023 | 10/26/2026 | 4,975 | 4,836 | 4,823 | ||||||||||||||||||
Vector
Group Ltd. 4400 Biscayne Blvd Miami, FL 33137 |
Food & Staples | Unsecured Bond | 10 | 10.50% | 07/08/2022 | 11/01/2026 | 750 | 718 | 750 | ||||||||||||||||||
W&T
Offshore, Inc. 5718 Westheimer Road, Suite 700 Houston, TX 77057 |
Oil & Gas Exploration & Production | 2nd Lien, Secured Bond | 10 | 11.75% | 01/12/2023 | 02/01/2026 | 6,000 | 6,000 | 5,984 | ||||||||||||||||||
Investments in Special Purpose Acquisition Companies (SPAC) & De-SPAC Companies | |||||||||||||||||||||||||||
AdTheorent
Holding Company, Inc 330 Hudson Street, 13th Floor New York, NY 10013 |
Internet Media | Warrants | 8, 10 | n/a | 02/26/2021 | n/a | 4,166 | 3 | — | * | |||||||||||||||||
Allego
N.V. Industriepark Kleefse Waard Westervoortsedijk 73 KB 6827 AV Arnhem, The Netherlands |
Transportation Equipment Manufacturing | Warrants | 8, 10 | n/a | 03/17/2021 | n/a | 8,000 | 9 | 2 | * | |||||||||||||||||
Apollo
Strategic Growth Capital II 9 West 57th Street, 43rd Floor New York, NY 10019 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/10/2021 | n/a | 500 | 1 | — | * | |||||||||||||||||
Ares
Acquisition Corp 245 Park Avenue, 44th Floor New York, NY 10167 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/02/2021 | n/a | 20,000 | 18 | 16 | * | |||||||||||||||||
BigBear.ai
Holdings, Inc. 6811 Benjamin Franklin Dr, Suite 200 Columbia, MD 21046 |
IT Services | Warrants | 8, 10 | n/a | 02/09/2021 | n/a | 8,333 | 6 | 2 | * | |||||||||||||||||
Catcha
Investment Corp Level 42, Suntec Tower Three, 8 Temasek Blvd, Singapore 038988 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/12/2021 | n/a | 166 | — | — | * | |||||||||||||||||
CC
Neuberger Principal Holdings III 200 Park Avenue, 58th Floor New York, NY 10166 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/03/2021 | n/a | 500 | 1 | — | * | |||||||||||||||||
CF
Acquisition Corp VIII 110 East 59th Street New York, NY 10022 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/12/2021 | n/a | 1,000 | 1 | — | * | |||||||||||||||||
Compute
Health Acquisition Corp. 1105 North Market Street, 4th Floor Wilmington, DE 19890 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/05/2021 | n/a | 125 | — | — | * | |||||||||||||||||
Core
Scientific, Inc. 210 Barton Springs Road Austin, Texas 78704 |
Technology | Warrants | 8, 10 | n/a | 02/10/2021 | n/a | 1,250 | 2 | — | * | |||||||||||||||||
Dave
Inc. 750 N. San Vicente Blvd. 900W West Hollywood, CA 90069 |
Consumer Finance | Warrants | 8, 10 | n/a | 03/05/2021 | n/a | 10,000 | 7 | — | * |
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity | Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Digital
Transformation Opportunities Corp. 10207 Cleatis Court Los Angeles, CA 90077 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/10/2021 | n/a | 2,500 | 2 | — | * | |||||||||||||||||
FAST
Acquisition Corp II 109 Old Branchville Road Ridgefield, CT 06877 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/16/2021 | n/a | 5,000 | 7 | 3 | * | |||||||||||||||||
Fathom
Digital Manufacturing Corporation 1050 Walnut Ridge Drive Hartland, WI 53029 |
Industrial | Warrants | 8, 10 | n/a | 02/05/2021 | n/a | 125 | — | — | * | |||||||||||||||||
FinServ
Acquisition Corp II 1345 Avenue of the Americas New York, NY 10105 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/18/2021 | n/a | 125 | — | — | * | |||||||||||||||||
Forest
Road Acquisition Corp. II 1177 Avenue of the Americas, 5th Floor New York, NY 10036 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/10/2021 | n/a | 80 | — | — | * | |||||||||||||||||
Forum
Merger IV Corp 1615 South Congress Avenue, Suite 103 Delray Beach, FL 33445 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/18/2021 | n/a | 5,000 | 9 | — | * | |||||||||||||||||
Freedom
Acquisition I Corp 14 Wall Street, 20th Floor New York, NY 10005 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/26/2021 | n/a | 625 | 1 | — | * | |||||||||||||||||
Fusion
Acquisition Corp II 667 Madison Avenue, 5th Floor New York, NY 10065 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/26/2021 | n/a | 1,666 | 1 | — | * | |||||||||||||||||
Ginko
Bioworks Holdings, Inc. 27 Drydock Avenue, 8th Floor Boston, MA 02210 |
Biotechnology | Warrants | 8, 10 | n/a | 02/24/2021 | n/a | 5,000 | 13 | 1 | * | |||||||||||||||||
Grove
Collaborative Holdings, Inc. 1301 Sansome Street San Francisco, CA 94111 |
Household & Personal Products | Warrants | 8, 10 | n/a | 03/23/2021 | n/a | 5,000 | 7 | — | * | |||||||||||||||||
Iris
Acquisition Corp 2700 19th Street San Francisco, CA 94110 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/05/2021 | n/a | 500 | 1 | — | * | |||||||||||||||||
Jaws
Mustang Acquisition Corporation 1601 Washington Avenue, Suite 800 Miami Beach, FL 33139 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/02/2021 | n/a | 6,250 | 7 | — | * | |||||||||||||||||
Kismet
Acquisition Two Corp. 850 Library Avenue, Suite 204 Newark, DE 19715 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/18/2021 | n/a | 326 | — | — | * | |||||||||||||||||
L
Catterton Asia Acquisition C 8 Marina View Asia Square Tower 1, No 41-03 Singapore, 018960 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/11/2021 | n/a | 5,933 | 6 | 3 | * | |||||||||||||||||
Lanvin
Group Holdings Ltd Building S2, Bund Finance Center, No. 600, Zhongshan East 2nd Road Huangpu District, Shanghai, China |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/19/2021 | n/a | 5,000 | 6 | 2 | * | |||||||||||||||||
M3-Brigade
Acquisition II Corp. 1700 Broadway, 19th Floor New York, NY 10019 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/04/2021 | n/a | 3,333 | 4 | — | * | |||||||||||||||||
Movella
Holdings Inc. 3535 Executive Terminal Dr. Suite 110 Henderson, NV 89052 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/17/2021 | n/a | 1,000 | 1 | — | * |
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity | Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Northern
Star Investment Corp. II The Chrysler Building 405 Lexington Avenue New York, NY 10174 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 01/26/2021 | n/a | 100 | — | — | * | |||||||||||||||||
Northern
Star Investment Corp. III The Chrysler Building 405 Lexington Avenue New York, NY 10174 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/02/2021 | n/a | 66 | — | — | * | |||||||||||||||||
Northern
Star Investment Corp. IV The Chrysler Building 405 Lexington Avenue New York, NY 10174 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/02/2021 | n/a | 66 | — | — | * | |||||||||||||||||
Pear
Therapeutics, Inc. 200 State Street, 13th Floor Boston, MA 02109 |
Technology | Warrants | 8, 10 | n/a | 02/02/2021 | n/a | 1,666 | 2 | — | * | |||||||||||||||||
Pivotal
Investment Corp III The Chrysler Building 405 Lexington Avenue, 11th Floor New York, NY 10174 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/09/2021 | n/a | 100 | — | — | * | |||||||||||||||||
Planet
Labs PBC 645 Harrison Street, 4th Floor San Francisco, CA 94107 |
Communications Equipment | Warrants | 8, 10 | n/a | 03/05/2021 | n/a | 400 | — | — | * | |||||||||||||||||
Plum
Acquisition Corp. I 2021 Fillmore Street, #2089 San Francisco, CA 94115 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/16/2021 | n/a | 1,600 | 2 | — | * | |||||||||||||||||
Polestar
Automotive Holding UK PLC Assar Gabrielssons Väg 9 405 31 Göteborg, Sweden |
Auto Manufacturer | Warrants | 8, 10 | n/a | 03/23/2021 | n/a | 2,000 | 5 | 1 | * | |||||||||||||||||
RMG
Acquisition Corp. III 57 Ocean, Suite 403 5775 Collins Avenue Miami Beach, FL 33140 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/05/2021 | n/a | 3,333 | 5 | — | * | |||||||||||||||||
Ross
Acquisition Corp II 1 Pelican Lane Palm Beach, FL 33480 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 03/12/2021 | n/a | 6,666 | 7 | 1 | * | |||||||||||||||||
Rumble
Inc. 444 Gulf of Mexico Drive Longboat Key, FL 34228 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 05/10/2021 | n/a | 1,250 | 1 | 3 | * | |||||||||||||||||
Slam
Corp. 55 Hudson Yards, 47th Floor, Suite C New York, NY 10001 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 04/26/2021 | n/a | 1,250 | 1 | — | * | |||||||||||||||||
Sonder
Holdings Inc. 101 15th Street San Francisco, CA 94103 |
Hospitality | Warrants | 8, 10 | n/a | 03/19/2021 | n/a | 500 | 1 | — | * | |||||||||||||||||
Sustainable
Development Acquisition I Corp. 5701 Truxtun Avenue, Suite 201 Bakersfield, CA 90036 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 02/05/2021 | n/a | 1,250 | 1 | — | * | |||||||||||||||||
Terran
Orbital Corporation 6800 Broken Sound Pkwy NW, Suite 200 Boca Raton, FL 33487 |
Communications Equipment | Warrants | 8, 10 | n/a | 02/19/2021 | n/a | 3,333 | 3 | 1 | * | |||||||||||||||||
TLG
Acquisition One Corp. 515 North Flagler Drive, Suite 520 West Palm Beach, FL 33401 |
Special Purpose Acquisition Company | Warrants | 8, 10 | n/a | 01/28/2021 | n/a | 5,000 | 3 | — | * |
Portfolio Company | Industry | Security(1) | Notes | Interest Rate(2) | Initial Acquisition Date | Maturity | Par Amount / Quantity | Cost | Fair Value | Percentage
of Class(3) |
|||||||||||||||||
Tritium
DCFC Ltd 23 Archimedes Place Murarrie, QLD Australia |
Transportation Equipment Manufacturing | Warrants | 8, 10 | n/a | 02/04/2021 | n/a | 5,000 | 6 | 2 | * | |||||||||||||||||
Total Investments in Special Purpose Acquisition Companies | 150 | 37 | |||||||||||||||||||||||||
Total Investments excluding Short-Term Investments (254.64% of Net Assets) | 257,879 | 236,431 | |||||||||||||||||||||||||
Short-Term Investments | |||||||||||||||||||||||||||
United States Treasury | Short-Term Investments | Treasury Bill | 0.00% | 06/30/2023 | 08/01/2023 | 70,000,000 | 69,734 | 69,715 | |||||||||||||||||||
GS Financial Square Treasury Obligations Fund | Short-Term Investments | Money Market | 0.00% | 06/30/2022 | n/a | 8,424,039 | 8,424 | 8,424 | |||||||||||||||||||
Total Short-Term Investments (84.16% of Net Assets) | 78,158 | 78,139 | |||||||||||||||||||||||||
TOTAL INVESTMENTS (338.80% of Net Assets) | 13 | $ | 336,037 | $ | 314,570 | ||||||||||||||||||||||
Other Liabilities in Excess of Net Assets (238.79% of Net Assets) | $ | (221,720 | ) | ||||||||||||||||||||||||
NET ASSETS | $ | 92,850 |
(1) | The Company’s investments are generally acquired in private transactions exempt from registration under the Securities Act and, therefore, are generally subject to limitations on resale, and may be deemed to be “restricted securities” under the Securities Act. |
(2) | Certain of the Company’s variable rate debt investments bear interest at a rate that is determined by reference to LIBOR ("L"), prime rate (“Prime”), or SOFR which are reset periodically. For each debt investment, the Company has provided the interest rate in effect as of period end. A floor is the minimum rate that will be applied in calculating an interest rate. A cap is the maximum rate that will be applied in calculating an interest rate. The one-month (“1M”) LIBOR as of period end was 5.22%. The three-month (“3M”) LIBOR as of period end was 5.55%. The six-month (“6M”) LIBOR as of period end was 5.76%. The prime rate as of period end was 8.25%. The SOFR as of period end was 5.09%. |
(3) | Percentage of class held refers only to equity held, if any, calculated on a fully diluted basis. |
(4) | “Controlled Investments” are investments in those companies over which we exercise “control”, as defined in the Investment Company Act. A company is deemed to be a "Controlled Investment” of the Company if the Company owns more than 25% of the voting securities of such company. |
(5) | “Affiliate Investments” are investments in those companies that are “Affiliated Companies” of the Company, as defined in the Investment Company Act, which are not “Controlled Investments.” A company is deemed to be an “Affiliate” of the Company if the Company owns 5% or more, but less than 25%, of the voting securities of such company. |
(6) | Investments classified as Level 3 whereby fair value was determined by the Company's board of directors (the “Board”). |
(7) | Security pays, or has the option to pay, some or all of its interest in kind. As of June 30, 2023, the Avation Capital SA secured bond, New Wilkie Energy Pty Limited secured loan, Nice-Pak Products, Inc. secured loan B, Ruby Tuesday Operations, LLC secured loans and each of the Universal Fiber Systems term loans pay all or a portion of their interest in-kind and the rates above reflect the PIK interest rates. As of June 30, 2023, each of the Avanti Space Limited secured debt pay in kind and the rates above reflect the PIK interest rates, however, each position is on non-accrual. |
(8) | Non-income producing security. |
(9) | Investment was on non-accrual status as of period end. |
(10) | Indicates assets that the Company believes do not represent “qualifying assets” under Section 55(a) of the Investment Company Act. Qualifying assets must represent at least 70% of the Company’s total assets at the time of acquisition of any additional non-qualifying assets. Of the Company’s total assets, 24.21% were non-qualifying assets as of period end. |
(11) | Security exempt from registration pursuant to Rule 144A under the Securities Act. Such security may be sold in certain transactions (normally to qualified institutional buyers) and remain exempt from registration. |
(12) | As a practical expedient, the Company uses NAV to determine the fair value of this investment. |
(13) | As of period end, the aggregate gross unrealized appreciation for all securities in which there was an excess of value over tax cost was $15,906; the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over value was $37,373; the net unrealized depreciation was $21,467; the aggregate cost of securities for Federal income tax purposes was $336,037. |
* | Represents less than 1%. |
Portfolio and Investment Activity
The following is a summary of our investment activity for the years ended December 31, 2022 and 2021 and the six months ended June 30, 2023:
(in thousands) | Acquisitions(1) | Dispositions(2) | Weighted
Average Yield End of Period(3) | ||||||
Quarter ended March 31, 2021 | $ 58,429 | $ (28,268) | 10.91% | ||||||
Quarter ended June 30, 2021 | 49,904 | (35,583) | 11.10% | ||||||
Quarter ended September 30, 2021 | 72,340 | (31,640) | 11.27% | ||||||
Quarter ended December 31, 2021 | 34,184 | (40,270) | 10.81% | ||||||
For the Year Ended December 31, 2021 | 214,857 | (135,761) | |||||||
Quarter ended March 31, 2022 | $ 27,578 | $ (29,723) | 10.38% | ||||||
Quarter ended June 30, 2022 | 44,750 | (34,014) | 10.27% | ||||||
Quarter ended September 30, 2022 | 40,212 | (28,430) | 11.59% | ||||||
Quarter ended December 31, 2022 | 37,588 | (20,461) | 12.43% | ||||||
For the Year Ended December 31, 2022 | 150,128 | (112,628) | |||||||
Quarter ended March 31, 2023 | 53,293 | (57,175) | 13.06% | ||||||
Quarter ended June 30, 2023 | 23,042 | (15,975) | 13.47% | ||||||
For the Six Months Ended June 30, 2023 | $ 76,335 | $ (73,150) |
(1) | Includes new investments, additional fundings (inclusive of those on revolving credit facilities), refinancings and capitalized PIK income. Investments in short-term securities, including U.S. Treasury Bills and money market mutual funds, were excluded. |
(2) | Includes scheduled principal payments, prepayments, sales, and repayments (inclusive of those on revolving credit facilities). Investments in short-term securities, including U.S. Treasury Bills and money market mutual funds, were excluded. |
(3) | Weighted average yield is based upon the stated coupon rate and fair value of outstanding debt securities at the measurement date. Debt securities on non-accrual status are included in the calculation and are treated as having 0% as their applicable interest rate for purposes of this calculation, unless such debt securities are valued at zero. |
Portfolio Reconciliation
The following is a reconciliation of the investment portfolio for the six months ended June 30, 2023 and the years ended December 31, 2022 and 2021. Investments in short-term securities, including U.S. Treasury Bills and money market mutual funds, are excluded from the table below.
For
the Six Months Ended June 30, 2023 |
For
the Year Ended December 31, |
||||||||
(in thousands) | 2022 | 2021 | |||||||
Beginning Investment Portfolio, at fair value | $ 224,957 | $ 212,149 | $ 151,648 | ||||||
Portfolio Investments acquired(1) | 76,335 | 150,128 | 214,857 | ||||||
Amortization of premium and accretion of discount, net | 1,121 | 1,328 | 3,958 | ||||||
Portfolio Investments repaid or sold(2) | (73,150) | (112,628) | (135,761) | ||||||
Net change in unrealized appreciation (depreciation) on investments | 4,774 | 100,016 | (12,922) | ||||||
Net realized gain (loss) on investments | 2,394 | (126,036) | (9,631) | ||||||
Ending Investment Portfolio, at fair value | $ 236,431 | $ 224,957 | $ 212,149 |
(1) | Includes new investments, additional fundings (inclusive of those on revolving credit facilities), refinancings, and capitalized PIK income. |
(2) | Includes scheduled principal payments, prepayments, sales, and repayments (inclusive of those on revolving credit facilities). |
Portfolio Classification
The following table shows the fair value of our portfolio of investments by industry as of June 30, 2023 and December 31, 2022 and 2021 (in thousands):
June 30, 2023 | December 31, 2022 | December 31, 2021 | |||||||||||||||||
Industry | Investments at Fair Value |
Percentage of Fair Value |
Investments at Fair Value |
Percentage of Fair Value |
Investments at Fair Value |
Percentage of Fair Value |
|||||||||||||
Specialty Finance | $ 54,208 | 22.93 | % | $ 58,250 | 25.89 | % | $ 47,952 | 22.60 | % | ||||||||||
Chemicals | 26,172 | 11.07 | % | 31,702 | 14.09 | % | 15,058 | 7.10 | % | ||||||||||
Insurance | 16,365 | 6.92 | % | 2,340 | 1.04 | % | — | — | % | ||||||||||
Transportation Equipment Manufacturing | 16,041 | 6.79 | % | 11,803 | 5.25 | % | 6,030 | 2.84 | % | ||||||||||
Shipping | 14,066 | 5.95 | % | 7,206 | 3.20 | % | — | — | % | ||||||||||
Oil & Gas Exploration & Production | 13,262 | 5.61 | % | 15,136 | 6.74 | % | 9,849 | 4.64 | % | ||||||||||
Consumer Products | 11,951 | 5.05 | % | 8,413 | 3.74 | % | — | — | % | ||||||||||
Metals & Mining | 10,938 | 4.63 | % | 6,046 | 2.69 | % | 13,711 | 6.46 | % | ||||||||||
Internet Media | 9,870 | 4.17 | % | 12,247 | 5.44 | % | 11,870 | 5.60 | % | ||||||||||
Energy Services | 9,647 | 4.08 | % | 2,877 | 1.28 | % | — | — | % | ||||||||||
Casinos & Gaming | 9,332 | 3.95 | % | 9,301 | 4.13 | % | 5,291 | 2.49 | % | ||||||||||
Closed-End Fund | 7,738 | 3.27 | % | 5,825 | 2.59 | % | — | — | % | ||||||||||
Food & Staples | 7,657 | 3.24 | % | 3,660 | 1.63 | % | 2,724 | 1.28 | % | ||||||||||
Energy Midstream | 6,327 | 2.68 | % | 22,559 | 10.03 | % | 31,815 | 15.00 | % | ||||||||||
Industrial | 6,014 | 2.54 | % | 5,498 | 2.44 | % | 7,551 | 3.56 | % | ||||||||||
Aircraft | 4,015 | 1.70 | % | 3,577 | 1.59 | % | — | — | % | ||||||||||
Oil & Gas Refining | 3,917 | 1.66 | % | 5,388 | 2.40 | % | 3,030 | 1.43 | % | ||||||||||
Restaurants | 3,483 | 1.47 | % | 3,110 | 1.38 | % | 8,310 | 3.92 | % | ||||||||||
Hospitality | 3,338 | 1.41 | % | 4,988 | 2.22 | % | 4,085 | 1.93 | % | ||||||||||
Apparel | 2,013 | 0.85 | % | 2,371 | 1.05 | % | 2,929 | 1.38 | % | ||||||||||
Retail | 44 | 0.02 | % | 5 | 0.00 | % | 4,267 | 2.01 | % | ||||||||||
Special Purpose Acquisition Company | 28 | 0.01 | % | 19 | 0.01 | % | 3,044 | 1.43 | % | ||||||||||
IT Services | 2 | 0.00 | % | — | — | % | 7 | 0.01 | % | ||||||||||
Auto Manufacturer | 1 | 0.00 | % | 2 | 0.00 | % | — | — | % | ||||||||||
Communications Equipment | 1 | 0.00 | % | — | — | % | 1,057 | 0.50 | % | ||||||||||
Biotechnology | 1 | 0.00 | % | 1 | 0.00 | % | 11 | 0.01 | % | ||||||||||
Technology | — | — | % | (365) | (0.16 | )% | (158) | (0.07 | )% | ||||||||||
Household & Personal Products | — | — | % | 1 | 0.00 | % | — | — | % | ||||||||||
Wireless Telecommunications Services | — | — | % | 2,997 | 1.33 | % | 8,137 | 3.84 | % | ||||||||||
Construction Materials Manufacturing | — | — | % | — | — | % | 10,461 | 4.93 | % | ||||||||||
Home Security | — | — | % | — | — | % | 5,590 | 2.63 | % | ||||||||||
Commercial Printing | — | — | % | — | — | % | 2,025 | 0.95 | % | ||||||||||
Healthcare Supplies | — | — | % | — | — | % | 2,869 | 1.35 | % | ||||||||||
Consumer Services | — | — | % | — | — | % | 2,640 | 1.24 | % | ||||||||||
Software Services | — | — | % | — | — | % | 1,994 | 0.94 | % | ||||||||||
Total | $ 236,431 | 100.00 | % | $ 224,957 | 100.00 | % | $ 212,149 | 100.00 | % |
Results of Operations
Investment Income
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Year Ended December 31, | ||||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2022 | 2021 | |||||||||||||||||||||
In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(3) | In Thousands | Per Share(3) | |||||||||||||||
Total Investment Income | $ 8,977 | $ 1.18 | $ 5,513 | $ 1.06 | $ 17,387 | $ 2.29 | $ 11,071 | $ 2.27 | $ 24,429 | $ 3.91 | $ 25,254 | $ 6.20 | ||||||||||||||
Interest income | 7,081 | 0.93 | 3,734 | 0.72 | 13,711 | 1.80 | 7,775 | 1.59 | 18,684 | 2.99 | 19,917 | 4.89 | ||||||||||||||
Dividend income | 1,027 | 0.14 | 1,389 | 0.27 | 1,961 | 0.26 | 2,656 | 0.54 | 4,354 | 0.70 | 4,347 | 1.07 | ||||||||||||||
Other income | 869 | 0.11 | 390 | 0.08 | 1,715 | 0.23 | 640 | 0.13 | 1,391 | 0.22 | 990 | 0.24 |
(1) | The per share amounts are based on a weighted average of 7,601,958 outstanding common shares for the three and six months ended June 30, 2023. |
(2) | The per share amounts are based on a weighted average of 5,194,910 and 4,878,439 outstanding common shares for the three and six months ended June 30, 2022, respectively. These weighted average share amounts have been retroactively adjusted for the reverse stock split effected on February 28, 2022. |
(3) | The per share amounts are based on a weighted average of 6,251,391 outstanding common shares for the year ended December 31, 2022 and a weighted average of 4,073,454 outstanding common shares for the year ended December 31, 2021. These weighted average share amounts have been retroactively adjusted for the 6-for-1 reverse stock split effected on February 28, 2022. |
Investment income consists of interest income, including net amortization of premium and accretion of discount on loans and debt securities, dividend income and other income, which primarily consists of amendment fees, commitment fees and funding fees on loans. For the years ended December 31, 2022 and 2021, income includes non-cash PIK income of $1.3 million and $5.5 million, respectively.
Interest income increased for the three and six months ended June 30, 2023 as compared to the corresponding periods in the prior year primarily due to growth of the portfolio and rising interest rates. As of June 30, 2023, the debt investment portfolio had an average coupon rate of 12.3% on approximately $217.5 million of principal as compared to 9.8% on approximately $161.0 million of principal as of June 30, 2022, excluding positions on non-accrual in each period.
Dividend income for the three and six months ended June 30, 2023 decreased as compared to the corresponding periods in the prior year due to lower quarterly distributions from our investments in specialty finance portfolio companies and exits from certain preferred equity positions.
The increase in other income for the three and six months ended June 30, 2023 as compared to the three and six months ended June 30, 2022 is attributable to earning approximately $0.8 million per quarter in fees in connection with the extensions of certain revolver commitments.
The decrease in interest income for the year ended December 31, 2022 as compared to the year ended December 31, 2021 is primarily attributable to our investments in Avanti Communications which were put on non-accrual status at the end of fiscal year 2021 and in early fiscal year 2022 and subsequently restructured in April 2022. As a result, we recognized only $0.1 in interest income on our investments in Avanti Communications for the year ended December 31, 2022 as compared to $6.2 million for the year ended December 31, 2021. This decrease was partially offset by interest income earned on new positions in the portfolio.
Other income increased for the year ended December 31, 2022 as compared to the year ended December 31, 2021 as a result of earning approximately $1.2 million in fees in connection with the extensions of certain revolver commitments. This increase was partially offset by a decrease of $0.8 million in other funding and consent fees earned in the year ended December 31, 2022 as compared to the year ended December 31, 2021.
Expenses
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Year Ended December 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2022 | 2021 | |||||||||||||||||||
In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(3) | In Thousands | Per Share(3) | |||||||||||||
Total Expenses | $ 5,609 | $ 0.74 | $ 4,325 | $ 0.83 | $ 11,152 | $ 1.47 | $ 3,828 | $ 0.78 | $ 13,716 | $ 2.19 | $ 12,921 | $ 3.17 | ||||||||||||
Management fees | 884 | 0.12 | 771 | 0.15 | 1,753 | 0.23 | 1,551 | 0.32 | 3,205 | 0.51 | 3,182 | 0.78 | ||||||||||||
Incentive fees | 842 | 0.11 | — | — | 1,552 | 0.20 | — | — | 565 | 0.10 | (4,323) | (1.06) | ||||||||||||
Incentive fee waiver | — | — | — | — | — | — | (4,854) | (0.99) | (4,854) | (0.78) | — | — | ||||||||||||
Total advisory and management fees | $ 1,726 | $ 0.23 | $ 771 | $ 0.15 | $ 3,305 | $ 0.43 | $ (3,303) | $ (0.68) | (1,084) | (0.17) | (1,141) | (0.28) | ||||||||||||
Administration fees | 341 | 0.04 | 262 | 0.05 | 636 | 0.08 | 483 | 0.10 | 938 | 0.15 | 673 | 0.17 | ||||||||||||
Directors’ fees | 53 | 0.01 | 44 | 0.01 | 105 | 0.01 | 107 | 0.02 | 215 | 0.03 | 233 | 0.06 | ||||||||||||
Interest expense | 2,769 | 0.36 | 2,667 | 0.51 | 5,590 | 0.74 | 5,337 | 1.09 | 10,690 | 1.71 | 10,428 | 2.56 | ||||||||||||
Professional services | 434 | 0.06 | 373 | 0.07 | 970 | 0.13 | 791 | 0.16 | 1,967 | 0.31 | 1,937 | 0.48 | ||||||||||||
Custody fees | 21 | 0.00 | 14 | 0.00 | 43 | 0.01 | 28 | 0.01 | 53 | 0.01 | 54 | 0.01 | ||||||||||||
Other | 265 | 0.04 | 194 | 0.04 | 503 | 0.07 | 385 | 0.08 | 937 | 0.15 | 737 | 0.17 | ||||||||||||
Income Tax Expense | ||||||||||||||||||||||||
Excise tax | — | — | — | — | 28 | 0.00 | 101 | 0.02 | 252 | 0.04 | 48 | 0.01 |
(1) | The per share amounts are based on a weighted average of 7,601,958 outstanding common shares for the three and six months ended June 30, 2023. |
(2) | The per share amounts are based on a weighted average of 5,194,910 and 4,878,439 outstanding common shares for the three and six months ended June 30, 2022, respectively. These weighted average share amounts have been retroactively adjusted for the reverse stock split effected on February 28, 2022. |
(3) | The per share amounts are based on a weighted average of 6,251,391 outstanding common shares for the year ended December 31, 2022 and a weighted average of 4,073,454 outstanding common shares for the year ended December 31, 2021. These weighted average share amounts have been retroactively adjusted for the 6-for-1 reverse stock split effected on February 28, 2022. |
Expenses are largely comprised of advisory fees and administration fees paid to GECM and interest expense on our outstanding notes payable. See “—Liquidity and Capital Resources.” Advisory fees include management fees and incentive fees calculated in accordance with the Investment Management Agreement, and administration fees include direct costs reimbursable to GECM under the Administration Agreement and fees paid for sub-administration services.
Incentive fees increased for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 due to increased pre-incentive net investment income over the same periods. In addition, GECM waived all accrued and unpaid incentive fees pursuant to the Investment Management Agreement as of March 31, 2022. As of March 31, 2022, there were approximately $4.9 million of accrued and unpaid incentive fees held on our balance sheet. In connection with the incentive fee waiver, we recognized the reversal of these accrued and unpaid incentive fees during the period ended March 31, 2022, resulting in a corresponding increase in NAV in such period. The incentive fee waiver is not subject to recapture.
Professional services costs increased for the three and six months ended June 30, 2023 as compared to the corresponding periods in the prior year, primarily due to increased legal expenses associated with specific transaction matters, as well as general rate increases for professional services including legal and accounting costs.
Overall expenses for the year ended December 31, 2022 increased as compared to the year ended December 31, 2021 primarily driven by increases in administration fees and other expenses. The $0.3 million increase in administration fees for the year ended December 31, 2022 as compared to the year ended December 31, 2021 is attributable to increased allocation of personnel costs from GECM as a result of additional resource time spent on GECC matters.
Other expenses include costs for insurance, transfer agent fees, shareholder materials and other compliance related expenses. The $0.2 million increase in other expenses for the year ended December 31, 2022 as compared to the year ended December 31, 2021 was primarily driven by increased costs associated with systems, travel and diligence expenses and a settlement payment related to a former investment.
For the year ended December 31, 2022, GECC recognized $0.6 million in incentive fees which was offset by $4.9 million in previously recognized incentive fees which were waived by GECM as of March 31, 2022 resulting in a net reversal of $4.3 million for incentive fees for the year. For the year ended December 31, 2021, GECC recognized $1.2 million in incentive fees which were offset by the reversal of $5.3 million in previously recognized incentive fees as a result of income reversals, realized losses where proceeds did not cover the amortized cost basis, and the determination that previously recognized incentive fees earned on certain non-accrual positions with significant write-downs should not be recognized as a liability.
Realized Gains (Losses)
The following table summarizes our realized gains (losses) resulting from investment activity and purchase accounting.
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Year Ended December 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2022 | 2021 | |||||||||||||||||||
In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(3) | In Thousands | Per Share(3) | |||||||||||||
Net Realized Gain (Loss) | $ 542 | $ 0.07 | $ (109,751) | $ (21.13) | $ 2,387 | $ 0.31 | $ (129,684) | $ (26.58) | $ (126,046) | $ (20.16) | $ (9,639) | $ (2.37) | ||||||||||||
Gross realized gain | 600 | 0.08 | 1,678 | 0.32 | 2,502 | 0.33 | 2,470 | 0.51 | 6,207 | 0.99 | 8,128 | 2.00 | ||||||||||||
Gross realized loss | (58) | (0.01) | (111,429) | (21.45) | (115) | (0.02) | (132,153) | (27.09) | (132,253) | (21.15) | (17,767) | (4.37) |
(1) | The per share amounts are based on a weighted average of 7,601,958 outstanding common shares for the three and six months ended June 30, 2023. |
(2) | The per share amounts are based on a weighted average of 5,194,910 and 4,878,439 outstanding common shares for the three and six months ended June 30, 2022, respectively. These weighted average share amounts have been retroactively adjusted for the reverse stock split effected on February 28, 2022. |
(3) | The per share amounts are based on a weighted average of 6,251,391 outstanding common shares for the year ended December 31, 2022 and a weighted average of 4,073,454 outstanding common shares for the year ended December 31, 2021. These weighted average share amounts have been retroactively adjusted for the 6-for-1 reverse stock split effected on February 28, 2022. |
For the three months ended June 30, 2023, net realized gains were primarily driven by the sales of our investments in the Perforce Software, Inc. (“Perforce”) first lien secured revolver and Equitrans Midstream Corp. preferred equity on which we realized gains of $0.3 million and $0.2 million, respectively. During the six months ended June 30, 2023, net realized gains were primarily driven by sales of our investments in Crestwood Equity Partners LP preferred equity, the paydown of our investment in Par Petroleum, LLC first lien secured bond and the sale of our investment in the Perforce first lien secured revolver resulting in realized gains of $0.7 million, $0.4 million, and $0.3 million, respectively.
During the three months ended June 30, 2022, net realized losses were primarily driven by the restructuring of our investment in Avanti Communications which included the write off of our investments in the Avanti Communications second lien bonds, 1.5 lien loan and common equity resulting in realization of $110 million in previously recognized unrealized losses. Gross realized gains include $0.9 million and $0.6 million realized on the refinancing of our investment in Tensar Corporation 2nd lien secured loan and the sale of the GAC Holdco Inc. warrants, respectively.
During the six months ended June 30, 2022, gross realized losses included the losses recognized as a result of the Avanti Communications restructuring discussed above along with additional losses of $15.9 million and $4.2 million recognized on the sale of our positions in Tru (UK) Asia Limited (“Tru Taj”) common stock and California Pizza Kitchen, Inc. (“CPK”) common stock, respectively.
During the year ended December 31, 2022, net realized losses on investments were primarily driven by the restructuring of Avanti Communications on which we realized approximately $111 million of previously recognized unrealized losses as a result of the April 2022 restructuring. In addition, we realized approximately $15.9 million and $4.2 million of previously recognized unrealized losses as a result of the sales of our positions in Tru Taj common stock and CPK common stock, respectively. Such realized losses are offset by the relief of those previously recognized unrealized losses as discussed under “—Changes in Unrealized Appreciation (Depreciation) on Investments” below.
During the year ended December 31, 2022, gross realized gains included approximately $2.2 million on sales of our investment in Crestwood preferred stock, $1.0 million on the sale of our investment in GAC HoldCo Inc. warrants and $0.9 million on the refinancing of our investment in Tensar Corporation 2nd Lien secured loan.
During the year ended December 31. 2021, net realized losses on investments were primarily driven by exits from our investments in Davidzon Radio, Inc. (“Davidzon”), OPS Acquisitions Limited and Ocean Protection Services Limited (“OPS”), Boardriders, Inc. and Best Western Luling, on which we recognized $5.7 million, $4.2 million, $2.9 million and $1.3 million, respectively, in realized losses. We recognized realized gains of $4.0 million on sales of our investment in Crestwood and $1.2 million and $0.4 million, respectively, on paydowns of our investments in Subcom, LLC revolver and CPK 1st Lien secured loan.
Change in Unrealized Appreciation (Depreciation) on Investments
The following table summarizes the significant unrealized appreciation (depreciation) of our investment portfolio.
For the Three Months Ended June 30, | For the Six Months Ended June 30, | For the Year Ended December 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2022 | 2021 | |||||||||||||||||||
In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(1) | In Thousands | Per Share(2) | In Thousands | Per Share(3) | In Thousands | Per Share(3) | |||||||||||||
Net change in unrealized appreciation/ (depreciation) | $ 1,292 | $ 0.17 | $ 104,045 | $ 20.03 | $ 4,768 | $ 0.63 | $ 112,915 | $ 23.15 | $ 100,002 | $ 16.00 | $ (12,921) | $ (3.17) | ||||||||||||
Unrealized appreciation | 5,453 | 0.72 | 112,487 | 21.65 | 11,005 | 1.45 | 123,327 | 25.28 | 130,699 | 20.91 | 54,377 | 13.35 | ||||||||||||
Unrealized depreciation | (4,161) | (0.55) | (8,442) | (1.63) | (6,237) | (0.82) | (10,413) | (2.13) | (30,697) | (4.91) | (67,298) | (16.52) |
(1) | The per share amounts are based on a weighted average of 7,601,958 outstanding common shares for the three and six months ended June 30, 2023. |
(2) | The per share amounts are based on a weighted average of 5,194,910 and 4,878,439 outstanding common shares for the three and six months ended June 30, 2022, respectively. These weighted average share amounts have been retroactively adjusted for the reverse stock split effected on February 28, 2022. |
(3) | The per share amounts are based on a weighted average of 6,251,391 outstanding common shares for the year ended December 31, 2022 and a weighted average of 4,073,454 outstanding common shares for the year ended December 31, 2021. These weighted average share amounts have been retroactively adjusted for the 6-for-1 reverse stock split effected on February 28, 2022. |
For the three months ended June 30, 2023, net unrealized appreciation was primarily driven by increases in the fair value of our investment in American Coastal Insurance Corporation (formerly known as United Insurance Holding Corp.) (“ACIC”) unsecured bonds, Maverick Gaming, LLC term loan, and Nice-Pak Products, Inc. promissory notes on which recognized appreciation of $1.3 million, $0.7 million, and $0.5 million, respectively. These gains were partially offset by unrealized depreciation of $1.7 million, $0.6 million and $0.5 million due to decreases in the fair value of our investments in Lenders Funding common equity, Research Now Group, Inc. (“Research Now”) second lien secured loan and Research Now revolver, respectively.
Net unrealized appreciation for the six months ended June 30, 2023 was primarily driven by increases in the fair value of our investment in ACIC unsecured bonds, Prestige Capital Finance, LLC common equity, and Blackstone Secured Lending common equity on which recognized appreciation of $4.4 million, $1.2 million, and $1.0 million, respectively. These gains were partially offset by unrealized depreciation of $2.0 million, $0.7 million and $0.7 million due to decreases in fair value of our investment in Lenders Funding common equity, Research Now second lien secured loan and First Brands, Inc. second lien secured loan, respectively.
During the three months ended June 30, 2022, gross unrealized appreciation primarily due to the realization of previously recognized unrealized losses on our investments in the Avanti Communications 2nd lien bonds, 1.5 lien notes and common equity as discussed under Realized Gains (Losses) above, resulting in the reversal of approximately $110 million in previously recognized unrealized depreciation. For the six months ended June 30, 2022, unrealized appreciation also includes approximately $15.3 million and $4.2 million in reversals of previously recognized unrealized depreciation as a result of the sales of our investments in Tru Taj common equity and CPK common equity. Unrealized depreciation for the three and six months ended June 30, 2022 also includes approximately $6.8 million of loss on our investments in Avanti Space Limited E2, F and G junior priority notes.
For the year ended December 31, 2022, net unrealized appreciation was attributable to the relief of previously recognized unrealized depreciation as a result of sales of our investments in Tru Taj and CPK and the restructuring of our investments in Avanti Communications, as discussed under Realized Gains (Losses) above.
Unrealized depreciation for the year ended December 31, 2022 includes approximately $7.0 million in decrease in fair value of our investment in Avanti Space Limited junior priority notes received in the April 2022 restructuring of Avanti Communications and $5.1 million in decrease in fair value of our equity investment in Lenders Funding.
For the year ended December 31, 2021, net unrealized depreciation was largely driven by decreases in portfolio company valuations as compared to the prior year end. Most notably, we recognized unrealized depreciation of $32.0 million on our investments in Avanti Communications and approximately $5.9 million on our investments in PFS Holdings Corp. These were offset by unrealized appreciation of $6.0 million, $5.2 million, and $4.2 million on the investments in CPK common equity, Davidzon and OPS 1st lien secured loan, respectively, due to exits from these positions resulting in reversing previously recognized unrealized depreciation.
Please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for a discussion of fiscal year 2020.
Liquidity and Capital Resources
We generate liquidity through our operations with cash received from investment income and sales and paydowns on investments. Such proceeds are generally reinvested in new investment opportunities, distributed to shareholders in the form of dividends, or used to pay operating expenses. We also receive proceeds from our issuances of notes payable and our revolving credit facility and from time to time may raise additional equity capital. See “—Revolver” and “—Notes Payable” below for more information regarding our outstanding credit facility and notes.
At June 30, 2023, we had approximately $3.4 million of cash and cash equivalents and approximately $8.4 million of money market fund investments at fair value. At June 30, 2023, we had investments in 50 debt instruments across 41 companies, totaling approximately $198.8 million at fair value and 60 equity investments in 60 companies, totaling approximately $37.6 million at fair value.
In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of June 30, 2023, we had approximately $11.9 million in unfunded loan commitments, subject to our approval in certain instances, to provide debt financing to certain of our portfolio companies. We had sufficient cash and other liquid assets on our June 30, 2023 balance sheet to satisfy the unfunded commitments.
For the six months ended June 30, 2023, net cash provided by operating activities was approximately $13.1 million, reflecting the purchases and repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash provided by purchases and proceeds from sales of investments was approximately $5.4 million, reflecting payments for additional investments of $68.1 million, offset by proceeds from principal repayments and sales of $73.5 million. Such amounts include draws and repayments on investments in revolving credit facilities.
For the six months ended June 30, 2023, net cash used in financing activities was $10.3 million, consisting of $5.0 million in net repayments on the revolving credit facility and $5.3 million in distributions to stockholders.
At December 31, 2022, we had approximately $0.6 million of cash and cash equivalents and approximately $6.3 million of money market fund investments at fair value. At December 31, 2022, we had investments in 52 debt instruments across 42 companies, totaling approximately $185.0 million at fair value and 89 equity investments in 88 companies, totaling approximately $40.0 million at fair value.
In the normal course of business, we may enter into investment agreements under which we commit to make an investment in a portfolio company at some future date or over a specified period of time. As of December 31, 2022, we had approximately $19.9 million in unfunded loan commitments to provide debt financing to certain of our portfolio companies. We had sufficient cash and other liquid assets on our December 31, 2022 balance sheet to satisfy the unfunded commitments.
For the year ended December 31, 2022, net cash used in operating activities was approximately $41.8 million, reflecting the purchases and repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash used in purchases and proceeds from sales of investments was approximately $36.5 million, reflecting payments for additional investments of $149.5 million, offset by proceeds from principal repayments and sales of $113.0 million. Such amounts include draws and repayments on revolving credit facilities.
For the year ended December 31, 2021, net cash used in operating activities was approximately $58.5 million, reflecting the purchases and repayments of investments offset by net investment income, including non-cash income related to accretion of discount and PIK income and proceeds from sales of investments and principal payments received. Net cash used in purchases and proceeds from sales of investments was approximately $56.9 million, reflecting payments for additional investments of $191.9 million, offset by proceeds from principal repayments and sales of $135.0 million. Such amounts include draws and repayments on revolving credit facilities.
For the year ended December 31, 2022, cash provided by financing activities was $33.2 million, which consisted of $37.5 million in proceeds from issuance of common stock and $10.0 million in borrowings under credit facility offset by $13.0 million in distributions and $1.3 million in payments of deferred financing costs. For the year ended December 31, 2021, cash provided by financing activities was $14.5 million, which consisted of $55.2 million in proceeds from the issuance of the GECCO Notes offset by $30.3 million in repayment on the GECCL Notes and payment of $9.9 million in distributions.
We believe we have sufficient liquidity available to meet our short-term and long-term obligations for at least the next 12 months and for the foreseeable future thereafter.
Contractual Obligations and Cash Requirements
A summary of our material contractual payment obligations and cash obligations as of June 30, 2023 is as follows:
(in thousands) | Total | Less
than 1 year |
1-3 years | 3-5 years | More
than 5 years | ||||||||||
Contractual and Other Cash Obligations | |||||||||||||||
GECCM Notes | 45,610 | — | 45,610 | — | — | ||||||||||
GECCN Notes | 42,823 | 42,823 | — | — | — | ||||||||||
GECCO Notes | 57,500 | — | 57,500 | — | — | ||||||||||
Revolving Credit Facility | 5,000 | 5,000 | — | — | — | ||||||||||
Total | $150,933 | $47,823 | $103,110 | $ — | $ — |
See “—Revolver” and “—Notes Payable” below for more information regarding our outstanding credit facility and notes.
We have certain contracts under which we have material future commitments. Under the Investment Management Agreement, GECM provides investment advisory services to us. For providing these services, we pay GECM a fee, consisting of two components: (1) a base management fee based on the average value of our total assets and (2) an incentive fee based on our performance. On August 1, 2022, our stockholders approved an amendment to the Investment Management Agreement to eliminate $163.2 million of realized and unrealized losses incurred prior to April 1, 2022 from the calculation of future capital gains incentive fees and reset the capital gain incentive fee and mandatory deferral periods in Sections 4.4 and 4.5, respectively, of the Investment Management Agreement to begin on April 1, 2022.
We are also party to the Administration Agreement with GECM. Under the Administration Agreement, GECM furnishes us with, or otherwise arranges for the provision of, office facilities, equipment, clerical, bookkeeping, finance, accounting, compliance and record keeping services at such office facilities and other such services as our administrator.
If any of the contractual obligations discussed above are terminated, our costs under any new agreements that we enter into may increase. In addition, we would likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement and our Administration Agreement. Any new investment management agreement would also be subject to approval by our stockholders.
Both the Investment Management Agreement and the Administration Agreement may be terminated by either party without penalty upon no fewer than 60 days’ written notice to the other.
Reference
Rate Increase (Decrease) |
| |
Increase
(decrease) of Net
Investment
Income
(in
thousands)(1) |
3.00% |
| |
$4,262 |
2.00% |
| |
2,841 |
1.00% |
| |
1,409 |
(1.00)% |
| |
(1,421) |
(2.00)% |
| |
(2,841) |
(3.00)% |
| |
(4,259) |
(1) |
Several
of our debt investments with variable rates contain a reference rate floor. The actual increase (decrease) of net investment income
reflected in the table above takes into account such floors to the extent applicable. |
American Coastal Insurance Corporation (f/k/a United Insurance Holdings Corp.)
ACIC is the holding company for American Coastal Insurance Company, Interboro Insurance Company and affiliated companies. ACIC is primarily engaged in sourcing, writing and servicing personal and commercial residential property and casualty insurance policies in the United States, primarily in Florida and New York. ACIC’s most significant line of business is in providing commercial multi-peril property insurance for residential condominium associations and apartments in Florida. American Coastal Insurance Company has the #1 market share of commercial residential property insurance for condominium associations in Florida (commercial lines). All of the commercial lines business is administered through an exclusive agreement with an outside managing general underwriter, AmRisc, LLC, a Truist Financial Corporation (NYSE: TFC) subsidiary. Given ACIC’s concentration to the Florida property and casualty market, it is subject to various risks including fluctuations in inflation impacting loss estimates, judicial decisions, legislative changes, regulatory oversight, and changes in claims handling procedures.
First Brands, Inc.
First Brands, Inc. (“First Brands”) is a global automotive parts company that develops, markets and sells premium products through a portfolio of market-leading brands, offering best-in-class technology, industry-leading engineering capabilities and superior customer service. First Brands manufactures automotive and industrial components for the automotive aftermarket, original equipment and industrial markets and has built long standing relationships with key aftermarket customers including multiple national retail chains and automotive and industrial equipment makers. First Brands stands as a market leader in the expansive and stable automotive aftermarket industry, consistently securing either the #1 or #2 position across its core product categories. First Brands’ Brake Component segment leads the market with its Centric, Raybestos, Specialty and private label offerings, capturing around 26% of the aftermarket brake components market. First Brands’ Filter Products segment also holds a leading market position, thanks to its FRAM and Champion Laboratory and private label brands, which together hold a 30% market share. First Brands’ Wiper Segment is the top supplier of aftermarket wiper blades, boasting a commanding 37% market share through its Trico, ANCO, Michelin and private label products.
Prestige Capital Finance, LLC
Prestige is a commercial finance company specializing in providing invoice financing services. Prestige provides clients with an opportunity to sell individual accounts receivable for an upfront payment. Prestige serves clients across a wide range of industries with between $100 thousand and $10 million of accounts receivable. Prestige has been in business for over 30 years and factored over $6 billion in transactions during that time.
Sterling Commercial Credit, LLC
Sterling is a specialty finance company providing asset based loans between $2 and $30 million. Sterling is an industry-leading commercial lending partner for growth-minded entrepreneurs, private equity firms and M&A professionals. Sterling focuses on providing capital for growth, acquisitions and corporate repositioning strategies.
Universal Fiber Systems
Universal Fiber Systems (“Universal Fiber”) is a global leader in the production of uniquely colored and high-quality, solution-dyed synthetic filament-based fibers. Universal Fiber serves customers in the flooring, automotive, transportation, medical and industrial fiber industries. Universal Fiber’s product offering consists of synthetic fibers extruded from a variety of polymers in a wide range of color combinations, sizes and chemical formulations. Universal Fiber’s ability to produce a broad range of fiber types including Nylon 6,6, Nylon 6, polyethylene terephthalate and polytrimethylene terephthalate, among others, allows it to shift production based on customer or market demand. However, Universal Fiber focuses the majority of its production capabilities on Nylon 6,6, which is produced by only a few other manufacturers in the market due to the complexity involved in working with the raw material. UFI is Universal Fiber’s largest division representing 65-70% of total sales and this segment supplies the commercial carpet, automotive carpet and residential carpet markets with a 50% and 40% market share within the North American independent fiber producer market for commercial and automotive carpets, respectively. Universal Fiber sells to a diverse set of customers across the world with no single customer responsible for greater than 17% of its sales. Universal Fiber generates about 70% of its sales in North America with 15% coming from both Europe and Asia, respectively.
• |
analysis of the credit documents
by GECM’s investment team (including the members of the team with legal training and years of professional experience). GECM will
engage outside counsel when necessary as well; |
• |
review of historical and
prospective financial information; |
• |
research relating to the
prospective portfolio company’s management, industry, markets, customers, products and services and competitors and customers; |
• |
verification of collateral
or assets; |
• |
interviews with management,
employees, customers and vendors of the prospective portfolio company; and |
• |
informal or formal background
and reference checks. |
• |
determines the composition
of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes; |
• |
identifies, evaluates and
negotiates the structure of our investments (including performing due diligence on our prospective portfolio companies); |
• |
closes and monitors our
investments; and |
• |
determines the securities
and other assets that we purchase, retain or sell. |
• |
no incentive fee in any
calendar quarter in which the pre-incentive fee net investment income does not exceed the hurdle rate; |
• |
100% of our pre-incentive
fee net investment income with respect to that portion of such pre-incentive fee net investment income, if any, that exceeds the hurdle
rate, but is less than 2.1875% in any calendar quarter (8.75% annualized). We refer to this portion of our pre-incentive fee net investment
income as the “catch up” provision. The “catch up” is meant to provide GECM with 20% of the pre-incentive fee
net investment income as if a hurdle rate did not apply if our net investment income exceeds 2.1875% in any calendar quarter; and |
• |
20% of the amount of our
pre-incentive fee net investment income, if any, that exceeds 2.1875% in any calendar quarter (8.75% annualized). |
|
| |
Assumption
1 |
| |
Assumption
2 |
| |
Assumption
3 |
Investment
income(1) |
| |
4.94% |
| |
6.09% |
| |
6.94% |
Hurdle
rate (7% annualized) |
| |
1.75% |
| |
1.75% |
| |
1.75% |
“Catch
up” provision (8.75% annualized) |
| |
2.19% |
| |
2.19% |
| |
2.19% |
Pre-incentive
fee net investment income(2) |
| |
1.00% |
| |
2.15% |
| |
3.00% |
Incentive
fee |
| |
—%(3) |
| |
0.40%(4) |
| |
0.60%(5) |
(1) |
Investment
income includes interest income, dividends and other fee income. |
(2) |
Pre-incentive
fee net investment income is net of management fees and other expenses and excludes organizational and offering expenses.
In these examples, management fees are 0.38% (1.50% annualized) of net assets and other expenses are assumed to be 3.57% of
net assets. |
(3) |
The
pre-incentive fee net investment income is below the hurdle rate and thus no incentive fee is earned. |
(4) |
The
pre-incentive fee net investment income ratio of 2.15% is between the hurdle rate and the top of the “catch up” provision;
thus the corresponding incentive fee is calculated as 100% X (2.15% — 1.75%). |
(5) |
The
pre-incentive fee net investment income ratio of 3.00% is greater than both the hurdle rate and the “catch up” provision;
thus the corresponding incentive fee is calculated as (i) 100% X (2.1875% — 1.75%) or 0.4375%
(the “catch up”); plus (ii) 20% X (3.00% — 2.1875%). |
|
| |
In
millions | |||
|
| |
Assumption
1 |
| |
Assumption
2 |
Year
1 |
| |
|
| |
|
Investment
in Company A |
| |
$20.0 |
| |
$20.0 |
Investment
in Company B |
| |
30.0 |
| |
30.0 |
Investment
in Company C |
| |
— |
| |
25.0 |
Year
2 |
| |
|
| |
|
Proceeds
from sale of investment in Company A |
| |
50.0 |
| |
50.0 |
Fair
market value (“FMV”) of investment in Company B |
| |
32.0 |
| |
25.0 |
FMV
of investment in Company C |
| |
— |
| |
25.0 |
Year
3 |
| |
|
| |
|
Proceeds
from sale of investment in Company C |
| |
— |
| |
30.0 |
FMV
of investment in Company B |
| |
25.0 |
| |
24.0 |
Year
4 |
| |
|
| |
|
Proceeds
from sale of investment in Company B |
| |
31.0 |
| |
— |
FMV
of investment in Company B |
| |
— |
| |
35.0 |
Year
5 |
| |
|
| |
|
Proceeds
from sale of investment in Company B |
| |
— |
| |
20.0 |
Capital
Gains Incentive Fee: |
| |
|
| |
|
Year
1 |
| |
—(1) |
| |
—(1) |
Year
2 |
| |
6.0(2) |
| |
5.0(6) |
Year
3 |
| |
—(3) |
| |
0.8(7) |
Year
4 |
| |
0.2(4) |
| |
1.2(8) |
Year
5 |
| |
—(5) |
| |
—(9) |
(1) |
There
is no Capital Gains Incentive Fee in Year 1 as there have been no realized capital gains. |
(2) |
Aggregate
realized capital gains are $30.0 million. There are no aggregate realized capital losses or aggregate unrealized capital depreciation.
Capital Gains Incentive Fee is calculated as $30.0 million x 20%. |
(3) |
Aggregate
realized capital gains are $30.0 million. There are no aggregate realized capital losses and there is $5.0 million in aggregate
unrealized capital depreciation. Capital Gains Incentive Fee is calculated as the greater of (i) zero
and (ii) ($30.0 million - $5.0 million) x 20% less $6.0 million (aggregate Capital
Gains Incentive Fee paid in prior years). |
(4) |
Aggregate
realized capital gains are $31.0 million. There are no aggregate realized capital losses or aggregate unrealized capital depreciation.
Capital Gains Incentive Fee is calculated as the greater of (i) zero and (ii) $31.0 million x 20% less $6.0 million (aggregate
Capital Gains Incentive Fee paid in prior years). |
(5) |
There
is no Capital Gains Incentive Fee in Year 5 as there are no aggregate realized capital gains for which Capital Gains Incentive Fee has
not already been paid in prior years. |
(6) |
Aggregate
realized capital gains are $30.0 million. There are no aggregate realized capital losses and there is $5.0 million in aggregate
unrealized capital depreciation. Capital Gains Incentive Fee is calculated as the greater of (i) zero
and (ii) ($30.0 million - $5.0 million) x 20%. There have been no Capital Gains Incentive
Fees paid in prior years. |
(7) |
Aggregate
realized capital gains are $35.0 million. There are no aggregate realized capital losses and there is $6.0 million in aggregate
unrealized capital depreciation. Capital Gains Incentive Fee is calculated as the greater of (i) zero
and (ii) ($35.0 million - $6.0 million) x 20% less $5.0 million (aggregate Capital
Gains Incentive Fee paid in prior years). |
(8) |
Aggregate
realized capital gains are $35.0 million. There are no aggregate realized capital losses or aggregate unrealized capital depreciation.
Capital Gains Incentive Fee is calculated as the greater of (i) zero and (ii) $35.0 million x 20% less $5.8 million (aggregate
Capital Gains Incentive Fee paid in prior years). |
(9) |
Aggregate
realized capital gains are $35.0 million. Aggregate realized capital losses are $10.0 million. There is no aggregate unrealized
capital depreciation. Capital Gains Incentive Fee is calculated as the greater of (i) zero and
(ii) ($35.0 million - $10.0 million) x 20% less $7.0 million (aggregate Capital Gains
Incentive Fee paid in prior years). |
• |
our organizational expenses; |
• |
fees and expenses, including
reasonable travel expenses, actually incurred by GECM or payable to third parties related to our investments, including, among others,
professional fees (including the fees and expenses of counsel, consultants and experts) and fees and expenses relating to, or associated
with, evaluating, monitoring, researching and performing due diligence on investments and prospective investments (including payments
to third party vendors for financial information services); |
• |
out-of-pocket fees and expenses,
including reasonable travel expenses, actually incurred by GECM or payable to third parties related to the provision of managerial assistance
to our portfolio companies that we agree to provide such services to under the Investment Company Act (exclusive of the compensation of
any investment professionals of GECM); |
• |
interest or other costs
associated with debt, if any, incurred to finance our business; |
• |
fees and expenses incurred
in connection with our membership in investment company organizations; |
• |
brokers’ commissions; |
• |
investment advisory and
management fees; |
• |
fees and expenses associated
with calculating our NAV (including the costs and expenses of any independent valuation firm); |
• |
fees and expenses relating
to offerings of our common stock and other securities; |
• |
legal, auditing or accounting
expenses; |
• |
federal, state and local
taxes and other governmental fees; |
• |
the fees and expenses of
GECM, in its role as the administrator, and any sub-administrator, our transfer agent or sub-transfer agent, and any other amounts payable
under the Administration Agreement, or any similar administration agreement or sub-administration agreement to which we may become a party; |
• |
the cost of preparing stock
certificates or any other expenses, including clerical expenses of issue, redemption or repurchase of our securities; |
• |
the expenses of and fees
for registering or qualifying our common stock for sale and of maintaining our registration and registering us as a broker or a dealer; |
• |
the fees and expenses of
our directors who are not interested persons (as defined in the Investment Company Act); |
• |
the cost of preparing and
distributing reports, proxy statements and notices to stockholders, the SEC and other governmental or regulatory authorities; |
• |
costs of holding stockholders’
meetings; |
• |
listing fees; |
• |
the fees or disbursements
of custodians of our assets, including expenses incurred in the performance of any obligations enumerated by our bylaws or amended and
restated articles of incorporation insofar as they govern agreements with any such custodian; |
• |
our allocable portion of
the fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums; |
• |
our allocable portion of
the costs associated with maintaining any computer software, hardware or information technology services (including information systems,
Bloomberg or similar terminals, cyber security and related consultants and email retention) that are used by us or by GECM or its respective
affiliates on our behalf (which allocable portion shall exclude any such costs related to investment professionals of GECM providing services
to us); |
• |
direct costs and expenses
incurred by us or GECM in connection with the performance of administrative services on our behalf, including printing, mailing, long
distance telephone, cellular phone and data service, copying, secretarial and other staff, independent auditors and outside legal costs; |
• |
all other expenses incurred
by us or GECM in connection with administering our business (including payments under the Administration Agreement) based upon our allocable
portion of GECM’s overhead in performing its obligations under the Administration Agreement, including rent and the allocable portion
of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs (including reasonable travel expenses);
and |
• |
costs incurred by us in
connection with any claim, litigation, arbitration, mediation, government investigation or dispute in connection with our business and
the amount of any judgment or settlement paid in connection therewith, or the enforcement of our rights against any person and indemnification
or contribution expenses payable by us to any person and other extraordinary expenses not incurred in the ordinary course of our business. |
• |
the nature, quality and
extent of the advisory and other services to be provided to us by GECM; |
• |
the investment performance
of us and GECM; |
• |
the extent to which economies
of scale would be realized as we grow, and whether the fees payable under the Investment Management Agreement reflect these economies
of scale for the benefit of our stockholders; |
• |
comparative data with respect
to advisory fees or similar expenses paid by other BDCs with similar investment objectives; |
• |
our projected operating
expenses and expense ratio compared to BDCs with similar investment objectives; |
• |
existing and potential sources
of indirect income to GECM from its relationship with us and the profitability of those income sources; |
• |
information about the services
to be performed and the personnel performing such services under the Investment Management Agreement; |
• |
the organizational capability
and financial condition of GECM and its affiliates; and |
• |
the possibility of obtaining
similar services from other third party service providers or through an internally managed structure. |
• |
67% or more of such company’s
voting securities present at a meeting if more than 50% of the outstanding voting securities of such company are present or represented
by proxy, or |
• |
more than 50% of the outstanding
voting securities of such company. |
• |
in connection with a rights
offering to our existing stockholders, |
• |
with the consent of the
majority of our common stockholders, or |
• |
under such other circumstances
as the SEC may permit. |
• |
securities purchased in
transactions not involving any public offering, the issuer of which is an eligible portfolio company; |
• |
securities received in exchange
for or distributed with respect to securities described in the bullet above or pursuant to the exercise of options, warrants or rights
relating to such securities; and |
• |
cash, cash items, government
securities or high quality debt securities (within the meaning of the Investment Company Act), maturing in one year or less from the time
of investment. |
• |
does not have a class of
securities with respect to which a broker may extend margin credit at the time the acquisition is made; |
• |
is controlled by the BDC
and has an affiliate of the BDC on its board of directors; |
• |
does not have any class
of securities listed on a national securities exchange; |
• |
is a public company that
lists its securities on a national securities exchange with a market capitalization of less than $250.0 million; or |
• |
meets such other criteria
as may be established by the SEC. |
• |
our investment company taxable
income (which includes, among other items, dividends, interest and the excess of any net short-term capital gain over net long-term capital
loss and other taxable income (other than any net capital gain), reduced by deductible expenses) determined without regard to the deduction
for dividends and distributions paid; and |
• |
net tax exempt interest
income (which is the excess of our gross tax exempt interest income over certain disallowed deductions) (the “Annual Distribution
Requirement”). |
• |
at least 98% of our ordinary
income (not taking into account any capital gains or losses) for the calendar year; |
• |
at least 98.2% of the amount
by which our capital gains exceed our capital losses (adjusted for certain ordinary losses) for a one-year period generally ending on
October 31 of the calendar year (unless an election is made by us to use our taxable year); and |
• |
certain undistributed amounts
from previous years on which we paid no U.S. federal income tax (the “Excise Tax Avoidance Requirement”). |
• |
disallow, suspend or otherwise
limit the allowance of certain losses or deductions, including the dividends received deduction, net capital losses, business interest
expense and certain underwriting and similar fees; |
• |
convert lower taxed long-term
capital gain and qualified dividend income into higher taxed, short-term capital gain or ordinary income; |
• |
convert ordinary loss or
a deduction into capital loss (the deductibility of which is more limited); |
• |
cause us to recognize income
or gain without a corresponding receipt of cash; |
• |
adversely affect the time
as to when a purchase or sale of stock or securities is deemed to occur; |
• |
adversely alter the characterization
of certain complex financial transactions; and |
• |
produce income that will
not qualify as “good income” for purposes of the 90% annual gross income requirement described above. |
Name,
Address and
Age |
| |
Position(s)
Held
with
GECC |
| |
Term
of
Office
(Length
of
Time
Served) |
| |
Principal
Occupation(s)
During
Past 5 Years |
| |
Number
of
Portfolios
in Fund
Complex
Overseen
by
Director |
| |
Other
Directorships
Held
by
Director During
Past
5 Years |
Mark
Kuperschmid (61) |
| |
Director |
| |
Until
2026 (since inception) |
| |
Managing
Member – Benmark Investments LLC |
| |
N/A |
| |
None |
Richard
M. Cohen (72) |
| |
Director |
| |
Until
2026 (since 2022) |
| |
President
– Richard M. Cohen Consultants |
| |
N/A |
| |
Direct
Digital Holdings Ondas Network Smart For Life |
Chad
Perry (51) |
| |
Director |
| |
Until
2025 (since 2022) |
| |
Executive
Vice President and General Counsel – RLJ Lodging Trust; Executive Vice President and General Counsel – Tanger Factory Outlet
Centers, Inc. |
| |
N/A |
| |
DWS
Fund Complex |
Name,
Address and
Age |
| |
Position(s)
Held
with
GECC |
| |
Term
of
Office
(Length
of
Time
Served) |
| |
Principal
Occupation(s)
During
Past 5 Years |
| |
Number
of
Portfolios
in Fund
Complex
Overseen
by
Director |
| |
Other
Directorships
Held
by
Director During
Past
5 Years |
Matthew
A. Drapkin (50)(1) |
| |
Chairman
of the Board |
| |
Until
2024 (since 2022) |
| |
Chief
Executive Officer – Northern Right |
| |
N/A |
| |
Northern
Right GEG PRGX Intevac |
Erik
A. Falk (53)(2) |
| |
Director |
| |
Until
2024 (since 2021) |
| |
Head
of Strategy – Magnetar Capital |
| |
N/A |
| |
None |
(1) |
Mr. Drapkin
is an interested person of the Company due to his and Northern Right Capital Management, L.P.’s (“Northern Right”) ownership
of GEG’s common stock and GEG’s Senior Convertible PIK Notes due 2030 (“GEG PIK Notes”). Mr. Drapkin is also
the managing member of the general partner of BC Advisors, LLC (“BCA”), the General Partner
of Northern Right. Northern Right is the general partner of Northern Right Capital (QP), L.P. (“Northern
Right QP”) and NRC Partners I, LP (“NRC”). Therefore, Northern Right has control
of both entities. Northern Right also has investment management agreements with two separately managed accounts giving
Northern Right the power to vote, acquire or dispose of securities. |
(2) |
Mr. Falk
is an interested person of the Company due to his ownership of GEG PIK Notes. |
Name,
Address and Age |
| |
Position(s)
Held with
GECC |
| |
Term
of Office
(Length
of Time
Served) |
| |
Principal
Occupation(s) During Past 5 Years |
Matt
Kaplan (36) |
| |
President
and Chief Executive Officer |
| |
Since
March 2022 |
| |
President
and Chief Executive Officer – GECC Portfolio Manager – GECM
Managing
Director – ICAM
Analyst
– Citadel LLC |
Keri
A. Davis (39) |
| |
Chief
Financial Officer and Treasurer |
| |
Since
March 2019 |
| |
Chief
Financial Officer – GEG
SEC
Reporting Manager – GECM |
Adam
M. Kleinman (48) |
| |
Chief
Compliance Officer and Secretary |
| |
Since
October 2017 |
| |
President,
General Counsel and Chief Compliance Officer – GECM
President,
General Counsel and Chief
Compliance
Officer – GEG |
Name |
| |
Fees
Earned or
Paid
in Cash |
| |
All
Other Name
Fees
Earned or Paid
in
Cash
Compensation(1) |
| |
Total |
Independent
Directors |
| |
|
| |
|
| |
|
Mark
Kuperschmid |
| |
$65,153 |
| |
$ — |
| |
$65,153 |
Richard
Cohen |
| |
$53,806 |
| |
$— |
| |
$53,806 |
Chad
Perry |
| |
$51,820 |
| |
$— |
| |
$51,820 |
Randall
Revell Horsey(2) |
| |
$11,375 |
| |
$— |
| |
$11,375 |
Michael
C. Speller(3) |
| |
$11,375 |
| |
$— |
| |
$11,375 |
|
| |
|
| |
|
| |
|
Interested
Directors |
| |
|
| |
|
| |
|
Peter
A. Reed(4) |
| |
$— |
| |
$— |
| |
$— |
Matthew
A. Drapkin |
| |
$— |
| |
$— |
| |
$— |
Erik
A. Falk |
| |
$7,875 |
| |
$— |
| |
$7,875 |
(1) |
In
fiscal year 2022, we did not maintain a stock or option plan, non-equity incentive plan or pension plan or other retirement benefits for
our directors. |
(2) |
Mr. Horsey
resigned from the Board in March 2022. |
(3) |
Mr. Speller
resigned from the Board in March 2022. |
(4) |
Mr. Reed
resigned from the Board in March 2022. |
Name
of Investment
Committee
Voting Member |
| |
Type
of Accounts |
| |
Total
No. of
Other
Accounts
Managed |
| |
Total
Other
Assets
(in
millions) |
| |
No.
of Other
Accounts
where
Advisory
Fee
is
Based on
Performance |
| |
Total
Assets
in
Other
Accounts
where
Advisory
Fee
is
Based on
Performance
(in
millions) |
Matt
Kaplan |
| |
Registered
Investment Companies: |
| |
None |
| |
None |
| |
None |
| |
None |
|
| |
Other
Pooled Investment Vehicles: |
| |
1 |
| |
$7.7 |
| |
1 |
| |
$7.7 |
|
| |
Other
Accounts: |
| |
None |
| |
None |
| |
None |
| |
None |
• |
each of the directors and
executive officers; |
• |
all of our current executive
officers and directors as a group; and |
• |
each person known by us
to be beneficial owners of 5% or more of our outstanding common stock. |
|
| |
Shares
Beneficially
Owned |
| |
Percent
of
Class |
Interested
Directors |
| |
|
| |
|
Erik
A. Falk |
| |
— |
| |
* |
Matthew
Drapkin(1) |
| |
860,088 |
| |
11.3% |
Independent
Directors |
| |
|
| |
|
Mark
Kuperschmid(2) |
| |
16,972 |
| |
* |
Richard
Cohen |
| |
— |
| |
* |
Chad
Perry |
| |
— |
| |
* |
Executive
Officers |
| |
|
| |
|
Matt
Kaplan |
| |
12,000 |
| |
* |
Adam
Kleinman |
| |
20,558 |
| |
|
Keri
Davis |
| |
9,034 |
| |
* |
Directors
and executive officers as a group (8 persons) |
| |
918,652 |
| |
12.1% |
5%
Beneficial Owners |
| |
|
| |
|
Great
Elm Group, Inc.(3) |
| |
1,532,519 |
| |
20.2% |
Entities
affiliated with Northern Right Capital Management, L.P.(4) |
| |
798,471 |
| |
10.5% |
Entities
affiliated with Imperial Capital Asset Management, LLC(5) |
| |
743,230 |
| |
9.8% |
* |
Less than one percent. |
(1) |
Includes
the 798,471 shares identified in footnote (4) below. |
(2) |
Includes
13,972 shares held by Benmark Investments LLC (1568 Columbus Ave., Burlingame, California 94010). Mr. Kuperschmid disclaims
beneficial ownership of these shares except to the extent of his pecuniary interest therein. |
(3) |
Based
on information provided to the Company and furnished in a Form 4 filed with the SEC on May 23, 2023 by GEG, who reported sole
voting and dispositive power over 1,569,787 shares of our common stock. The address for Great Elm Group, Inc. is 800 South Street,
Suite 230, Waltham, Massachusetts 02453. |
(4) |
Based
on information provided to the Company and furnished in a Schedule 13G/A filed with the SEC on June 21, 2022, jointly by Northern
Right, Northern Right QP, NRC, BCA and Matthew Drapkin. Each of Northern Right, BCA and Mr. Drapkin reported shared voting
and dispositive power over 798,471 shares of our common stock; Northern Right QP reported shared voting and dispositive power
over 220,399 shares of our common stock; and NRC reported shared voting and dispositive power over 208,932 shares of our common
stock. On March 1, 2023, NRC transferred 208,932 shares of our common stock to Northern Right QP, and, as a result, Northern
Right QP shares voting and dispositive power over 429,331 shares of our common stock. The address for Northern Right is 9 Old
Kings Hwy S., 4th Floor, Darien, CT 06820. |
(5) |
Based
on information provided to the Company and furnished in a Schedule 13G/A filed with the SEC on February 17, 2023, jointly by
ICAM, Long Ball Partners, LLC (“Long Ball”), IC Leverage Income Fund, LLC (“IC Leverage”), Imperial Capital Group
Holdings II, LLC (“Imperial Holdings II”), and Jason Reese. ICAM and Long Ball reported
shared voting and dispositive power over 145,189 shares of our common stock; IC Leverage reported
shared voting and dispositive power over 198,979 shares of our common stock; Imperial Holdings II
reported shared voting and dispositive power over 399,062 shares of our common stock; and Mr. Reese reported
shared voting and dispositive power over 743,230 shares of our common stock. The address for ICAM is 3801 PGA Boulevard,
Suite 603, Palm Beach Gardens, FL 33410. |
Name
of Director |
| |
Dollar
Range of Equity
Securities
of GECC(1)(2) |
Independent
Directors |
| |
|
Mark
Kuperschmid |
| |
$50,001
— $100,000 |
Richard
Cohen |
| |
None |
Chad
Perry |
| |
None |
Interested
Directors |
| |
|
Matthew
Drapkin |
| |
Over
$100,000 |
Erik
A. Falk |
| |
None |
(1) |
Dollar
ranges are as follows: None, $1-$10,000, $10,001-$50,000, $50,001-$100,000, or over $100,000. |
(2) |
The
dollar range of equity securities beneficially owned is based on the closing price for our common stock of $8.29 on December 30,
2022. |
• |
an individual who is a citizen
or resident of the United States; |
• |
a corporation (including
an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States,
any state therein or the District of Columbia; |
• |
an estate, the income of
which is subject to U.S. federal income taxation regardless of its source; or |
• |
a trust if (a) a court within
the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority
to control all substantial decisions of the trust or (b) a valid election is in place under applicable U.S. Treasury regulations to treat
such trust as a United States person. |
• |
the Non-U.S. Holder is a
“10-percent shareholder” of us within the meaning of 871(h)(3) of the Code; |
• |
the Non-U.S. Holder is a
“controlled foreign corporation” for U.S. federal income tax purposes that is related to us (directly or indirectly) through
stock ownership; |
• |
the Non-U.S. Holder is a
bank extending credit under a loan agreement in the ordinary course of its trade or business; or |
• |
the Non-U.S. Holder does
not satisfy the certification requirements described below. |
• |
the gain is not effectively
connected with the conduct of a trade or business within the United States, or a permanent establishment maintained in the United States
if certain tax treaties apply; |
• |
in the case of a Non-U.S.
Holder that is an individual, the Non-U.S. Holder is not present in the United States for 183 days or more in the taxable year of the
sale, exchange, or other disposition of the Notes; and |
• |
the Non-U.S. Holder is not
subject to tax pursuant to certain provisions of U.S. federal income tax law applicable to certain expatriates. |
Title
of Class |
| |
Amount
Authorized |
| |
Amount
Held
by
GECC or for
GECC’s
Account |
| |
Amount
Outstanding
Exclusive
of
Amounts
Shown in
the
Adjacent
Column |
|
| |
|
| |
— |
| |
|
|
| |
|
| |
— |
| |
$ million |
|
| |
|
| |
— |
| |
$ million |
|
| |
|
| |
— |
| |
$ million |
• |
amendments to the provisions
of our Charter relating to the classification of our Board, the power of our Board to fix the number of directors and to fill vacancies
on our Board, the vote required to elect or remove a director, the vote required to approve our dissolution, amendments to our Charter
and extraordinary transactions and our Board exclusive power to amend our Bylaws; |
• |
Charter amendments that
would convert us from a closed-end company to an open-end company or make our common stock a redeemable security (within the meaning of
the Investment Company Act); |
• |
our liquidation or dissolution
or any amendment to our Charter to effect any such liquidation or dissolution; |
• |
any merger, consolidation,
conversion, share exchange or sale or exchange of all or substantially all of our assets that the Maryland General Corporation Law requires
be approved by our stockholders; or |
• |
any transaction between
us, on the one hand, and any person or group of persons acting together that is entitled to exercise or direct the exercise, or acquire
the right to exercise or direct the exercise, directly or indirectly (other than solely by virtue of a revocable proxy), of one-tenth
or more of the voting power in the election of our directors generally, or any person controlling, controlled by or under common control
with, employed by or acting as an agent of, any such person or member of such group, on the other hand. |
• |
one-tenth or more but less
than one-third; |
• |
one-third or more but less
than a majority; or |
• |
a majority or more of all
voting power. |
• |
any person who beneficially
owns 10% or more of the voting power of the corporation’s outstanding voting stock; or |
• |
an affiliate or associate
of the corporation who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more
of the voting power of the then outstanding voting stock of the corporation. |
• |
80% of the votes entitled
to be cast by holders of outstanding shares of voting stock of the corporation; and |
• |
two-thirds of the votes
entitled to be cast by holders of voting stock of the corporation other than common stock held by the interested stockholder with whom
or with whose affiliate the business combination is to be effected or held by an affiliate or associate of the interested stockholder. |
Underwriters |
| |
Principal
Amount of
Notes |
Ladenburg
Thalmann & Co. Inc. |
| |
|
Janney Montgomery Scott LLC |
| |
|
Oppenheimer & Co. Inc. |
| |
|
Total |
| |
$ |
|
| |
Per
Note |
| |
Without
Over-
allotment
Option |
| |
With
Over-
allotment
Option |
Public
offering price |
| |
$ |
| |
$ |
| |
$ |
Underwriting
discounts and commissions ( % of public offering price) |
| |
$ |
| |
$ |
| |
$ |
Proceeds
(before expenses) |
| |
$ |
| |
$ |
| |
$ |
• |
The GECC financial statements contained
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (File
No. 814-01211), which includes the Financial Highlights for years ended December 31, 2022, 2021,
2020, 2019, 2018, 2017, and 2016, filed on March 2,
2023; and |
• |
The GECC financial statements contained
in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 (File No. 814-01211), which includes
the Financial Highlights for the six months ended June 30, 2023 and 2022,
filed on August 3,
2023. |
Ladenburg
Thalmann |
| |
Janney Montgomery Scott |
| |
Oppenheimer & Co. |
Item 25. |
Financial
Statements and Exhibits Financial Statements |
Exhibit
Number |
| |
Description |
| |
Amended
and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on November 7,
2016) | |
| |
Amendment
to Amended and Restated Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 to the Form 8-K filed on
March 2, 2022) | |
| |
Bylaws
of the Registrant (incorporated by reference to Exhibit 2 to the Registration Statement on Form N-14 (File No. 333-212817) filed on August 1,
2016) | |
| |
Form
of global certificate for the Notes (incorporated by reference to Exhibit (d)(1) to the Registration
Statement on Form N-2 (File No. 333-272790) filed on June 16, 2023) | |
| |
Indenture,
dated as of September 18, 2017, by and between the Registrant and Equiniti Trust Company,
LLC (formerly known as American Stock Transfer & Trust Company, LLC), as trustee (the “Trustee”) (incorporated by reference to Exhibit 4.1 to the Form 8-K/A filed on
September 21, 2017) | |
| |
Form
of Fifth Supplemental Indenture, by and between the Registrant and the Trustee (incorporated by reference to Exhibit (d)(3) to the pre-effective amendment no. 1 to the Registration Statement on Form N-2 (File No. 333-272790) filed on July 24, 2023) | |
| |
Form
T-1 of the Trustee (incorporated by reference to Exhibit (d)(4) to the pre-effective amendment no. 1 to the Registration Statement on Form N-2 (File No. 333-272790) filed on July 24, 2023) | |
| |
Form
of certificate of the Registrant’s common stock (incorporated by reference to Exhibit 5 to the Registration Statement on Form N-14
(File No. 333-212817) filed on August 1, 2016) | |
| |
Global
Note (6.75% Notes due 2025), dated January 19, 2018 (incorporated by reference to Exhibit (d)(1) to the post-effective amendment
to the Registration Statement on Form N-2 (File No. 333-221882) filed on January 19, 2018) | |
| |
Second
Supplemental Indenture, dated as of January 19, 2018, by and between the Registrant and the Trustee (incorporated by reference to
Exhibit (d)(3) to the post-effective amendment to the Registration Statement on Form N-2 (File No. 333-221882) filed on January 19,
2018) | |
| |
Global
Note (6.50% Notes due 2024), dated June 18, 2019 (incorporated by reference to Exhibit (d)(1) to the post-effective amendment
to the Registration Statement on Form N-2 (File No. 333-227605) filed on June 18, 2019) | |
| |
Third
Supplemental Indenture, dated as of June 18, 2019, by and between the Registrant and the Trustee (incorporated by reference to Exhibit
(d)(3) to the post-effective amendment to the Registration Statement on Form N-2 (File No. 333-22706) filed on June 18, 2019) | |
| |
Global
Note (5.875% Notes due 2026), dated as of June 23, 2021 (incorporated by reference to Exhibit 4.1 to the Form 8-K filed on June 23,
2021) | |
| |
Fourth
Supplemental Indenture, dated as of June 23, 2021 by and between the Registrant and the Trustee (incorporated by reference to Exhibit
4.1 to the Form 8-K filed on June 23, 2021) | |
| |
Description
of Registered Securities (incorporated by reference to Exhibit 4.9 to the Annual Report on Form 10-K filed on March 4, 2022) | |
| |
Form
of Dividend Reinvestment Plan (incorporated by reference to Exhibit 13(d) to the pre-effective amendment to the Registration Statement
on Form N-14 (File No. 333-212817) filed on September 26, 2016) | |
| |
Amended
and Restated Investment Management Agreement (incorporated by reference to Exhibit (g) to
the Registration Statement on Form N-2 (File No. 333-272790) filed on June 16, 2023) | |
| |
Form
of Underwriting Agreement (incorporated by reference to Exhibit (h) to the pre-effective amendment no. 1 to the Registration Statement on Form N-2 (File No. 333-272790) filed on July 24, 2023) | |
| |
Custody
Agreement, dated as of January 2, 2020, by and between the Registrant and U.S. Bank National Association (incorporated by reference
to Exhibit 10.1 to the Form 10-Q filed on May 11, 2020) |
Exhibit
Number |
| |
Description |
| |
Administration
Agreement, dated as of September 27, 2016, by and between the Registrant and GECM (incorporated by reference to Exhibit 10.2 to the
Form 8-K filed on November 7, 2016) | |
| |
Form
of Indemnification Agreement (incorporated by reference to Exhibit 10.4 to the Form 8-K filed on November 7, 2016) | |
| |
Loan,
Guarantee and Security Agreement, dated May 5, 2021, between the Registrant and City National Bank (incorporated by reference to
Exhibit 10.1 to the Form 8-K filed on May 6, 2021) | |
| |
Opinion
of Jones Day (incorporated by reference to Exhibit (l)(1) to the Registration Statement on
Form N-2 (File No. 333-272790) filed on June 16, 2023) | |
| |
Opinion
of Venable LLP (incorporated by reference to Exhibit (l)(2) to the Registration Statement
on Form N-2 (File No. 333-272790) filed on June 16, 2023) | |
| |
Consent
of Deloitte & Touche LLP, Registered Independent Accounting Firm | |
| |
Consent
of Jones Day (included in Exhibit (l)(1)) | |
| |
Consent
of Venable LLP (included in Exhibit (l)(2)) | |
| |
Power
of Attorney (incorporated by reference to the signature page to the Registration Statement
on Form N-2 (File No. 333-272790) filed on June 16, 2023) | |
| |
Code
of Ethics of Registrant (incorporated by reference to Exhibit 14.1 to the Form 10-K filed on March 30, 2017) | |
| |
Code
of Ethics of GECM (incorporated by reference to Exhibit 14.2 to the Form 10-K filed on March 30, 2017) | |
| |
Calculation
of Filing Fee Table | |
101.INS |
| |
Inline
XBRL Instance Document |
101.SCH |
| |
Inline
XBRL Taxonomy Extension Schema Document |
101.CAL |
| |
Inline
XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
| |
Inline
XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
| |
Inline
XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
| |
Inline
XBRL Taxonomy Extension Presentation Linkbase Document |
104 |
| |
Cover
Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* |
Filed herewith |
Item 26. |
Marketing
Arrangements |
Item 27. |
Other
Expenses of Issuance and Distribution** |
SEC
registration fee |
| |
$5,069 |
Nasdaq
Global Select Additional Listing Fees |
| |
39,500 |
Accounting
fees and expenses |
| |
47,500 |
Legal
fees and expenses |
| |
325,000 |
Printing
and engraving |
| |
22,000 |
Miscellaneous
fees and expenses |
| |
67,000 |
Total |
| |
$506,069 |
** |
These amounts (other than
the SEC registration fee and Nasdaq fee) are estimates. |
Item 28. |
Persons
Controlled by or Under Common Control |
Entity |
| | Ownership |
| | Jurisdiction
of Organization |
Great
Elm Healthcare Finance, LLC |
| | 87.5% |
| | Delaware |
Prestige
Capital Finance, LLC |
| | 80% |
| | Delaware |
Sterling
Commercial Credit, LLC |
| | 87.5% |
| | Delaware |
Item 29. |
Number
of Holders of Securities |
Title
of Class |
| |
Number
of Record Holders |
Common
Stock, par value $0.01 per share |
| |
9 |
6.75%
Notes due 2025 |
| |
1 |
6.50%
Notes due 2024 |
| |
1 |
5.875%
Notes due 2026 |
| |
1 |
Item 30. |
Indemnification |
Item 31. |
Business
and Other Connections of Investment Adviser |
Item 32. |
Location
of Accounts and Records |
1. |
the Registrant, 800 South
Street, Suite 230, Waltham, Massachusetts 02453; |
2. |
the Transfer Agent, Equiniti
Trust Company, LLC, 6201 15th Avenue, Brooklyn, New York 11219; |
3. |
the Custodian, U.S. Bank
National Association, One Federal Street, Third Floor, Boston, Massachusetts 02110; and |
4. |
GECM, 800 South Street,
Suite 230, Waltham, Massachusetts 02453. |
Item 33. |
Management
Services |
Item 34. |
Undertakings |
1. |
Not applicable. |
2. |
Not applicable. |
3. |
Not applicable. |
4. |
(a) for the purpose of determining
any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant under Rule 424(b)(1) under the Securities Act
shall be deemed to be part of this registration statement as of the time it was declared effective; and (b) for the purpose of determining
any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial
bona fide offering thereof. |
5. |
Not applicable. |
6. |
Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
7. |
The Registrant hereby undertakes
to send by first class mail or other means designed to ensure equally prompt delivery, within two business days of receipt of a written
or oral request, any prospectus or Statement of Additional Information. |
|
| |
GREAT
ELM CAPITAL CORP. | |||
|
| |
By: |
| |
/s/
Matt Kaplan |
|
| |
Name: |
| |
Matt
Kaplan |
|
| |
Title: |
| |
President
and Chief Executive Officer |
Name |
| |
Capacity |
/s/
Matt Kaplan |
| |
President
and Chief Executive Officer (Principal Executive Officer) |
Matt
Kaplan |
| ||
|
| |
|
/s/
Keri Davis |
| |
Chief
Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) |
Keri
Davis |
| ||
|
| |
|
* |
| |
Director |
Mark
Kuperschmid |
| ||
|
| |
|
* |
| |
Director |
Matthew
Drapkin |
| ||
|
| |
|
* |
| |
Director |
Richard
Cohen |
| ||
|
| |
|
* |
| |
Director |
Chad
Perry |
| ||
|
| |
|
* |
| |
Director |
Erik
A. Falk |
|
*By: | /s/ Matt Kaplan | |
Matt Kaplan | ||
Attorney-in-fact |
Exhibit (n)(1)
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in this Pre-Effective Amendment No. 2 Registration Statement No. 333-272790 on Form N-2 of our report dated March 2, 2023, relating to the financial statements and financial highlights of Great Elm Capital Corp. appearing in the Annual Report on Form 10-K of Great Elm Capital Corp. for the year ended December 31, 2022, and to the references to us under the headings “Financial Highlights”, “Senior Securities”, and "Independent Registered Public Accounting Firm" in the Prospectus, which is part of such Registration Statement.
/s/ Deloitte & Touche LLP
Boston, MA
August 7, 2023
Exhibit (s)
Calculation of Filing Fees Tables
Form N-2
(Form Type)
Great Elm Capital Corp.
(Exact Name of Registrant as Specified in its Charter)
Table 1: Newly Registered Securities
Security Type | Security Class Title |
Fee Calculation or Carry Forward Rule |
Amount Registered |
Proposed Maximum Offering Price Per Security |
Maximum Aggregate Offering Price(1)(2) |
Fee Rate | Amount of Registration Fee(3) | |
Fees to be Paid | Debt | % Notes due 2028 | 457(a) | $ 0 | - | $ 0 | 0.00011020 | $ 0 |
Fee Previously Paid | Debt | % Notes due 2028 | 457(a) | 57,500,000 | - | 57,500,000 | 0.00011020 | 6,336.50 |
Total Offering Amount | $ 57,500,000 | $ 6,336.50 | ||||||
Total Fees Previously Paid Net Fee Due | $ 6,336.50 | |||||||
Net Fee Due | $ 0 |
(1) Estimated solely for purposes of calculating the registration fee per Rule 457(a).
(2) Includes Notes that may be issued pursuant to the underwriter’s over-allotment option.
(3) The registrant previously paid $6,336.50 in connection with the registrant’s registration statement on Form N-2 (File No. 333-272790) as filed with the Securities and Exchange Commission on June 16, 2023.
N-2 - USD ($) |
Aug. 07, 2023 |
Jun. 30, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
Dec. 31, 2019 |
Dec. 31, 2018 |
Dec. 31, 2017 |
Dec. 31, 2016 |
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Cover [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Central Index Key | 0001675033 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Amendment Flag | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Inv Company Type | N-2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Securities Act File Number | 333-272790 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Document Type | N-2/A | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Document Registration Statement | true | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-Effective Amendment | true | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Pre-Effective Amendment Number | 2 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment Company Act Registration | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Registrant Name | GREAT ELM CAPITAL CORP. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Address, Address Line One | 800 South Street | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Address, Address Line Two | Suite 230 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Address, City or Town | Waltham | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Address, State or Province | MA | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Address, Postal Zip Code | 02453 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
City Area Code | 617 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Local Phone Number | 375-3006 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Approximate Date of Commencement of Proposed Sale to Public | As soon as practicable after the effective date of this Registration Statement. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividend or Interest Reinvestment Plan Only | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Delayed or Continuous Offering | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Primary Shelf [Flag] | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective Upon Filing, 462(e) | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Securities Effective, 413(b) | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effective when Declared, Section 8(c) | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New Effective Date for Previous Filing | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Additional Securities. 462(b) | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
No Substantive Changes, 462(c) | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exhibits Only, 462(d) | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Registered Closed-End Fund [Flag] | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Development Company [Flag] | true | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interval Fund [Flag] | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Primary Shelf Qualified [Flag] | true | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Well-known Seasoned Issuer | No | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Entity Emerging Growth Company | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
New CEF or BDC Registrant [Flag] | false | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities [Table Text Block] |
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Senior Securities, Note [Text Block] | SENIOR
SECURITIES
Information
about our senior securities is shown in the following table as of the end of the audited fiscal years ended December 31, 2022, 2021,
2020, 2019, 2018, 2017 and 2016 and for the most recent quarter ended June 30, 2023. The report of Deloitte & Touche LLP,
our independent registered public accounting firm, related to our consolidated statements of assets and liabilities, including the
consolidated schedules of investments, as of December 31, 2022 and 2021, and the related consolidated statements of operations,
changes in net assets, and cash flows for each of the three years in the period ended December 31, 2022, and financial highlights for
each of the five years in the period then ended, and the related notes, which include the senior securities table in “Note 5 - Debt”, is incorporated by reference
in this prospectus under the heading “Independent Registered Public Accounting Firm.” This information about our senior securities
should be read in conjunction with our audited financial statements and related notes thereto and “Management’s Discussion
and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. Dollar amounts are
presented in thousands.
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Senior Securities Averaging Method, Note [Text Block] | The average market value per unit for the notes, as applicable, is based on the average daily prices of such notes and is expressed per $1 of indebtedness. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Description of Registrant [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk Factors [Table Text Block] | RISK
FACTORS
Investing
in our securities involves a number of significant risks. Before you invest in the Notes, you should be aware of various risks, including
those described below. You should carefully consider these risk factors, together with all of the other information included in this prospectus,
before you decide whether to make an investment in the Notes. These are not the only risks we face. The risks described below, as well
as additional risks and uncertainties presently unknown by us or currently not deemed significant, could negatively affect our business,
financial condition and results of operations and the value of the Notes and our ability to perform our obligations under the Notes. Additional
risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance.
If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and
adversely affected. In such case, our net asset value (“NAV”) and the trading price of our securities could decline, and you
may lose all or part of your investment.
Risk
Factors Related to the Notes and the Offering
The
Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur
in the future.
The
Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated
to any secured indebtedness we or our subsidiaries have currently incurred or may incur in the future, including under the Loan Agreement,
and any indebtedness that is initially unsecured to which we subsequently grant security, to the extent of the value of the assets securing
such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future
secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness
in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of
the Notes. As of June 30, 2023, there were $5.0 million in borrowings outstanding under the Loan Agreement.
The
Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The
Notes are obligations exclusively of GECC and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and
the Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future. Any assets of our subsidiaries will
not be directly available to satisfy the claims of our creditors, including holders of the Notes. Except to the extent we are a creditor
with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests
in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries.
Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any
security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to
our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries
and any subsidiaries that we may in the future acquire or establish. Although our subsidiaries currently do not have any indebtedness
outstanding, they may incur substantial indebtedness in the future, all of which would be structurally senior to the Notes.
The
indenture under which the Notes will be issued contains limited protection for holders of the Notes.
The
indenture under which the Notes will be issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes
do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions,
circumstances or events that could have an adverse impact on your investment in the Notes. The indenture and the Notes will not place
any restrictions on our or our subsidiaries’ ability to:
would
be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of
our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A)
as modified by Sections 61(a)(1) and (2) of the Investment Company Act or any successor provisions;
Notwithstanding
the restrictions on indebtedness and dividends described above, the indenture under which the Notes will be issued may not prohibit us
from paying distributions to our stockholders if we incur indebtedness in excess of the limits set forth in Sections 61(a)(1) and (2)
of the Investment Company Act or any successor provision if we determine that such indebtedness, which may include indebtedness under
a bank credit facility, is not a “senior security” for purposes of determining asset coverage under the Investment Company
Act.
In
addition, the indenture will not require us to offer to purchase the Notes in connection with a change of control or any other event.
Furthermore,
the terms of the indenture and the Notes do not protect holders of the Notes if we experience changes (including significant adverse changes)
in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any
financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity other than as described under “Description
of the Notes—Events of Default.” Any such changes could affect the terms of the Notes.
Our
ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have
important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect
to the Notes or negatively affecting the trading value of the Notes.
Other
debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional
covenants and events of default. The indenture under which the Notes will be issued does not contain cross-default provisions. The issuance
or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes. An
active trading market for the Notes may not develop, which could limit the market price of the Notes or your ability to sell them.
The
Notes are a new issue of debt securities for which there currently is no trading market. We intend to list the Notes on Nasdaq within
30 days of the original issue date under the symbol “GECCZ.” We cannot assure you that the Notes will be listed or that
an active trading market will develop for the Notes or that you will be able to sell your Notes. If the Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar
securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. Certain
of the underwriters have advised us that they intend to make a market in the Notes, but they are not obligated to do so. Such underwriters
may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading
market will develop for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you
sell will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be
harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.
If
we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Any
default under the agreements governing our indebtedness, including our current indebtedness, which is composed of the GECCM Notes, the
GECCN Notes, the GECCO Notes and borrowings under the Loan Agreement, and any future indebtedness under the Loan Agreement or other agreements
to which we may be a party, that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could
make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes.
If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal,
premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and
operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing
such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder
to be due and payable, together with accrued and unpaid interest, the lenders under other debt we may incur in the future could elect
to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced
into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required
lenders under other debt that we may incur in the future to avoid being in default. If we breach our covenants under other debt and seek
a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the other debt,
the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to
repay debt, lenders having secured obligations could proceed against the collateral securing the debt. Because any future credit facilities
would likely have customary cross-default provisions, if we have a default under the terms of the Notes, the obligations under any future
credit facility may be accelerated and we may be unable to repay or finance the amounts due.
We
may be subject to certain corporate-level taxes which could adversely affect our cash flow and consequently adversely affect our ability
to make payments on the Notes.
We
currently are a RIC under Subchapter M of the Code for U.S. federal income tax purposes and intend to continue to qualify each year as
a RIC. In order to qualify for tax treatment as a RIC, we generally must satisfy certain source-of-income, asset diversification and distribution
requirements. As long as we so qualify, we will not be subject to U.S. federal income tax to the extent that we distribute investment
company taxable income and net capital gain on a timely basis.
We
may, nonetheless, be subject to certain corporate-level taxes regardless of whether we continue to qualify as a RIC. Additionally, should
we fail to qualify as a RIC, we would be subject to corporate-level taxes on all of our taxable income. The imposition of corporate-level
taxes could adversely affect our cash flow and consequently adversely affect our ability to make payments on the Notes. A
downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or our securities, if any, could cause the
liquidity or market value of the Notes to decline significantly.
Our
credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes
in our credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of
risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy, sell or hold any security,
and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes
any obligation to maintain our credit ratings or to advise holders of Notes of any changes in our credit ratings. Private rating agencies
may rate the Notes. An explanation of the significance of ratings may be obtained from any such rating agency. Generally, rating agencies
base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate.
Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of Notes of any changes in
our credit ratings. There can be no assurance that our credit ratings will remain for any given period of time or that such credit ratings
will not be lowered or withdrawn entirely by the rating agency if in their judgment future circumstances relating to the basis of the
credit ratings, such as adverse changes in our company, so warrant.
The
optional redemption provision may materially adversely affect your return on the Notes.
The
Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option on or after ,
2025. We may choose to redeem the Notes at times when prevailing interest rates are lower than the interest rate paid on the Notes. In
this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high
as the Notes being redeemed.
Our
redemption right also may adversely impact your ability to sell the Notes as the optional redemption date or period approaches.
Risks
Relating to Our Investments
Our
portfolio companies may experience financial distress and our investments in such companies may be restructured.
Our
portfolio companies may experience financial distress from time to time. Debt investments in such companies may cease to be income-producing,
may require us to bear certain expenses to protect our investment and may subject us to uncertainty as to when, in what manner and for
what value such distressed debt will eventually be satisfied, including through liquidation, reorganization or bankruptcy. Any restructuring
can fundamentally alter the nature of the related investment, and restructurings may not be subject to the same underwriting standards
that GECM employs in connection with the origination of an investment. In addition, we may write-down the value of our investment in any
such company to reflect the status of financial distress and future prospects of the business. Any restructuring could alter, reduce or
delay the payment of interest or principal on any investment, which could delay the timing and reduce the amount of payments made to us.
For example, if an exchange offer is made or plan of reorganization is adopted with respect to the debt securities we currently hold,
there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization
will have a value or income potential similar to what we anticipated when our original investment was made or even at the time of restructuring.
Restructurings of investments might also result in extensions of the term thereof, which could delay the timing of payments made to us,
or we may receive equity securities, which may require significantly more of our management’s time and attention or carry restrictions
on their disposition.
As
an example, during the year ended December 31, 2022, we wrote down the value of our investments in Avanti Communications Group plc
(“Avanti Communications”) and our net realized losses on investments were primarily driven by the April 2022 restructuring
of Avanti Communications on which we realized approximately $111 million of previously recognized unrealized losses. We cannot assure
you that we will not have to restructure any of our other investments, or that any particular restructuring strategy will recover value
equal to our original investment cost. We
face increasing competition for investment opportunities. Limited availability of attractive investment opportunities in the market could
cause us to hold a larger percentage of our assets in liquid securities until market conditions improve.
We
compete for investments with other BDCs and investment funds (including specialty finance companies, private equity funds, mezzanine funds
and small business investment companies), as well as traditional financial services companies such as commercial banks and other sources
of funding. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources
than we do. For example, some competitors have a lower cost of capital and access to funding sources that are not available to us, including
from the Small Business Administration. In addition, increased competition for attractive investment opportunities allows debtors to demand
more favorable terms and offer fewer contractual protections to creditors. Some of our competitors have higher risk tolerances or different
risk assessments than we do. These characteristics could allow our competitors to consider a wider variety of investments, establish more
relationships and offer better pricing and more flexible structuring than we are able to offer. We may lose investment opportunities if
we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and
structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant
part of our competitive advantage stems from the fact that the market for investments in lower middle-market companies is underserved
by traditional commercial banks and other financing sources. A significant increase in the number and/or the size of our competitors in
this target market would force us to accept less attractive investment terms. GECM may, at its discretion, decide to pursue such opportunities
if it believes that they are in our best interest; however, GECM may decline to pursue available investment opportunities that, although
otherwise consistent with our investment policies and objectives, in GECM’s view present unacceptable risk/return profiles. Under
such circumstances, we may hold a larger percentage of our assets in liquid securities until market conditions improve in order to avoid
having assets remain uninvested. Furthermore, many of our competitors have greater experience operating under, or are not subject to,
the regulatory restrictions that the Investment Company Act imposes on us as a BDC. We believe that competitors will make first and second
lien loans with interest rates and returns that are lower than the rates and returns that we target. Therefore, we do not seek to compete
solely on the interest rates and returns offered to prospective portfolio companies.
We
are invested in a limited number of portfolio companies which may subject us to a risk of significant loss if one or more of these companies
defaults on its obligations under any of its debt instruments.
Our
portfolio is likely to hold a limited number of portfolio companies. Beyond the asset diversification requirements associated with qualifying
as a RIC, we do not have fixed guidelines for diversification, and our investments are likely to be concentrated in relatively few companies.
As our portfolio is less diversified than the portfolios of some funds, we are more susceptible to failure if a single investment fails.
Similarly, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or
if we need to write down the value of any one investment.
Our
portfolio is subject to change over time and may be concentrated in a limited number of industries, which subjects us to a risk of significant
loss if there is a downturn in a particular industry in which a number of our investments are concentrated.
Our
portfolio is likely to be concentrated in a limited number of industries. A downturn in any particular industry in which we are invested
could significantly impact our aggregate realized returns.
In
addition, we may from time to time invest a relatively significant percentage of our portfolio in industries in which GECM does not necessarily
have extensive historical research coverage. If an industry in which we have significant investments suffers from adverse business or
economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely,
which, in turn, could adversely affect our financial position and results of operations.
Any
unrealized losses we experience in our portfolio may be an indication of future realized losses, which could reduce our income available
for distribution.
As
a BDC, we are required to carry our investments at fair value as determined in good faith by our Board. Decreases in the fair values of
our investments are recorded as unrealized depreciation. Any unrealized losses in our portfolio could be an indication of a portfolio
company’s inability to meet its repayment obligations to us with
respect to the affected investments. This could result in realized losses in the future and ultimately in reductions of our income available
for distribution in future periods.
Prepayments
of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our returns on equity.
We
are subject to the risk that investments intended to be held over long periods are, instead, repaid prior to maturity. When this occurs,
we will generally reinvest these proceeds in temporary investments, repay debt or repurchase our common stock, depending on expected future
investment opportunities. These temporary investments will typically have substantially lower yields than the debt being prepaid and we
could experience significant delays in reinvesting these amounts. Any future investment may also be at lower yields than the debt that
was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elects
to prepay amounts owed by them.
We
are not in a position to exercise control over certain of our portfolio companies or to prevent decisions by management of such portfolio
companies that could decrease the value of our investments.
Although
we may be deemed, under the Investment Company Act, to control certain of our portfolio companies because we own more than 25% of the
common equity of those portfolio companies, we generally do not hold controlling equity positions in our portfolio companies.
As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and that the management
and/or stockholders of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack
of liquidity of the debt and equity investments that we hold in certain of our portfolio companies, we may not be able to dispose of
such investments if we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of such investments.
We
have made, and in the future intend to pursue additional, investments in specialty finance businesses, which may require reliance on the
management teams of such businesses.
We
have made, and may make additional, investments in companies and operating platforms that originate and/or service commercial specialty
finance businesses, including factoring, equipment finance, inventory leasing, merchant cash advance and hard money real estate lending
and may also invest directly (including via participation) in the investments made by such businesses. The form of investment may vary
and may require reliance on management teams to provide the resources necessary to originate new receivables, manage portfolios of performing
receivables, and work-out portfolios of stressed or non-performing receivables.
Defaults
by our portfolio companies may harm our operating results.
A
portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and,
potentially, termination of our investments and foreclosure on our secured assets, which could trigger cross-defaults under other agreements
and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur
expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of financial covenants,
with a defaulting portfolio company. If any of these occur, it could materially and adversely affect our operating results and cash flows.
If
we invest in companies that experience significant financial or business difficulties, we may be exposed to certain distressed lending
risks.
As
part of our lending activities, we may purchase notes or loans from companies that are experiencing significant financial or business
difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Although the terms of such
financing may result in significant financial returns to us, they involve a substantial degree of risk. The level of analytical sophistication,
both financial and legal, necessary for successful financing to companies experiencing significant business and financial difficulties
is unusually high. We cannot assure you that we will correctly evaluate the value of the assets collateralizing our investments or the
prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to a portfolio company,
we may lose all or part of the amounts advanced to the borrower or may be required to accept collateral with a value less than the amount
of the investment advanced by us to the borrower. Certain
of the companies in which we invest may have difficulty accessing the capital markets to meet their future capital needs, which may limit
their ability to grow or to repay their outstanding indebtedness upon maturity.
Senior
Secured Loans and Notes. There is a risk that the collateral securing our loans and notes may decrease
in value over time, may be difficult to sell in a timely manner, may be difficult to appraise
and may fluctuate in value based upon the success of the business and market conditions, including
as a result of the inability of the portfolio company to raise additional capital, and, in some
circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration
in a portfolio company’s financial condition and prospects, including its inability to
raise additional capital, may be accompanied by deterioration in the value of the collateral
for the loan or note. Consequently, the fact that a loan or note is secured does not guarantee that we will
receive principal and interest payments according to the loan’s or note’s terms, or at all, or that we will be able
to collect on the loan or note should we be forced to enforce our remedies.
Mezzanine
Loans. Our mezzanine debt investments will be generally subordinated to senior loans and will be generally
unsecured. As such, other creditors may rank senior to us in the event of an insolvency, which could likely
result in a substantial or complete loss on such investment in the case of such insolvency. This may result in
an above average amount of risk and loss of principal.
Unsecured
Loans and Notes. We may invest in unsecured loans and notes. If the issuer defaults or has an event
of insolvency, other creditors may rank senior, be structurally senior or have lien protection
that effectively renders their claim superior to our rights under our unsecured notes or loans,
which could likely result in a substantial or complete loss on such investment in the case of
such insolvency. This may result in an above average amount of risk and loss of principal.
Unfunded
Commitments. From time to time, we purchase revolving credit loans with unfunded commitments in the
ordinary course of business. In the event multiple borrowers of such revolving credit loans were to draw these
commitments at the same time, including during a market downturn, it could have an adverse impact on our
cash reserves and liquidity position at a time when it may be more difficult for us to sell other assets.
Equity
Investments. When we invest in senior secured loans or mezzanine loans, we may acquire equity securities,
including warrants, as well. In addition, we may invest directly in the equity securities of portfolio companies.
The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly,
we may not be able to realize gains from our equity interests, and any gains that we realize on the disposition
of any equity interests may not be sufficient to offset any other losses we experience.
In
addition, investing in middle-market companies involves a number of significant risks, including:
Investing
in middle-market companies involves a high degree of risk and our financial results may be affected adversely if one or more of our portfolio
investments defaults on its loans or notes or fails to perform as we expect.
A
portion of our portfolio consists of debt and equity investments in privately owned middle-market companies. Investing in middle-market
companies involves a number of significant risks. Compared to larger publicly owned companies, these middle-market companies may be in
a weaker financial position and experience wider variations in their operating results, which may make them more vulnerable to economic
downturns and other business disruptions. Typically, these companies need more capital to compete; however, their access to capital is
limited and their cost of capital is often higher than that of their competitors. Our portfolio companies face intense competition from
larger companies with greater financial, technical and marketing resources and their success typically depends on the managerial talents
and efforts of an individual or a small group of persons.
Therefore,
the loss of any of their key employees, as well as increased competition in the labor market, could affect a portfolio company’s
ability to compete effectively and harm its financial condition. Further, some of these companies conduct business in regulated industries
that are susceptible to regulatory changes. These factors could impair the cash flow of our portfolio companies and result in other events,
such as bankruptcy. These events could limit a portfolio company’s ability to repay its obligations to us. Deterioration in a borrower’s
financial condition and prospects may be accompanied by deterioration in the value of the loan’s collateral and the fair market
value of the loan. Most of the loans in which we invest are not structured to fully amortize during their lifetime. In order to create
liquidity to pay the final principal payment, borrowers typically must raise additional capital or sell their assets, which could potentially
result in the collateral being sold for less than its fair market value. If they are unable to raise sufficient funds to repay us, the
loan will go into default, which will require us to foreclose on the borrower’s assets, even if the loan was otherwise performing
prior to maturity. This will deprive us from immediately obtaining full recovery on the loan and prevent or delay the reinvestment of
the loan proceeds in other, more profitable investments. Moreover, there are no assurances that any recovery on such loan will be obtained.
Most of these companies cannot obtain financing from public capital markets or from traditional credit sources, such as commercial banks.
Accordingly, loans made to these types of companies pose a higher default risk than loans made to companies that have access to traditional
credit sources.
An
investment strategy that includes privately held companies presents challenges, including the lack of available information about these
companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic
downturns.
We
invest in privately held companies. Generally, little public information exists about these companies, and we are required to rely on
GECM’s or our specialty finance partners’ ability to obtain adequate information to evaluate the potential returns from investing
in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment
decision, and may lose money on our investments. Also, privately held companies frequently have less diverse product lines and smaller
market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing
primarily in the securities of public companies.
We
are exposed to risks relating to our specialty finance products.
There is no guarantee that our controls to monitor and detect fraud with respect to our specialty finance business will be effective and, as a result, we could face
exposure to the credit risk associated with such products. With respect to our asset-based loans, we generally limit our lending to a
percentage of the customer’s borrowing base assets that we believe can be readily liquidated in the event of financial distress of the
borrower. With respect to our factoring products, we purchase the underlying invoices of our customers and become the direct payee under
such invoices, thus transferring the credit risk in such transactions from our customers to the underlying account debtors on such invoices.
In the event one or more of our customers fraudulently represents the existence or valuation of borrowing base assets in the case of an
asset-based loan, or the existence or validity of an invoice we purchase in the case of a factoring transaction, we may advance more funds
to such customer than we otherwise would and lose the benefit of the structural protections of our products with respect to such advances.
In such event we could be exposed to material additional losses with respect to such loans or factoring products.
Our
portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
Our
portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or in some cases senior to, the debt in
which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before
the dates on which we are entitled to receive payments with respect to the debt instruments in which we invested. Also, in insolvency,
liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment
in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such
senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt
ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors
holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
There
may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability
claims.
Even
though we may have structured investments as secured investments, if one of our portfolio companies were to go bankrupt, depending on
the facts and circumstances, and based upon principles of equitable subordination as defined by existing case law, a bankruptcy court
could subordinate all or a portion of our claim to that of other creditors and transfer any lien securing such subordinated claim to the
bankruptcy estate. The principles of equitable subordination defined by case law have generally indicated that a claim may be subordinated
only if its holder is guilty of misconduct or where the senior investment is re-characterized as an equity investment and the senior lender
has actually provided significant managerial assistance to the bankrupt debtor. We may also be subject to lender liability claims for
actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible
that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering managerial assistance
or actions to compel and collect payments from the borrower outside the ordinary course of business. To the extent GECC provides significant
managerial assistance to the portfolio companies, this risk is exacerbated.
Second
priority liens on collateral securing loans and notes that we invest in may be subject to control by senior creditors with first priority
liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and
us.
We
may purchase loans or notes that are secured by a second priority security interest in the same collateral pledged by a portfolio company
to secure senior debt owed by the portfolio company to commercial banks or other traditional lenders. Often the senior lender has procured
covenants from the portfolio company prohibiting the incurrence of additional secured debt without the senior lender’s consent.
Prior to and as a condition of permitting the portfolio company to borrow money from us secured by the same collateral pledged to the
senior lender, the senior lender will require assurances that it will control the disposition of any collateral in the event of bankruptcy
or other default. In many such cases, the senior lender will require us or the indenture trustee to enter into an “intercreditor
agreement” prior to permitting the portfolio company to borrow. Typically the intercreditor agreements expressly subordinate our
second lien debt instruments to those held by the senior lender and further provide that the senior lender shall control: (1) the commencement
of foreclosure or other proceedings to liquidate and collect on the collateral; (2) the nature, timing and conduct of foreclosure or other
collection proceedings; (3) the amendment of any collateral document; (4) the release of the security interests in respect of any collateral;
and (5) the waiver of defaults under any security agreement. Because of the control we may cede to senior lenders under intercreditor
agreements we may enter, we may be unable to realize the proceeds of any collateral securing some of our loans and notes. The
reference rates for our loans may be manipulated or changed.
Actions
by market participants or by government agencies, including central banks, may affect prevailing interest rates and the reference rates
for loans to our portfolio companies. Actions by governments may create inflation in asset prices that over-state the value of our portfolio
companies and their assets and drive cycles of capital market activities (like mergers and acquisitions) at a rate and at prices in excess
of those that would prevail in an unaffected market.
We
cannot assure you that actions by market participants or by government agencies will not materially adversely affect trading markets or
our portfolio companies or us or our and our portfolio companies’ respective business, prospects, financial condition or results
of operations.
The discontinuation of the London Interbank Offered Rate (“LIBOR”)
may adversely affect the value of the floating rate debt securities in our portfolio or the cost of our borrowings.
We expect that a substantial portion of our future floating rate investments
will be linked to the Secured Overnight Financing Rate (“SOFR”). The Alternative Reference Rates Committee has recommended
SOFR as an alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight United States treasury market.
LIBOR and SOFR have significant differences: LIBOR was an unsecured lending rate and SOFR is a secured lending rate, and SOFR is an overnight
rate while LIBOR was a forward-looking rate that reflected term rates at different maturities. There can be no assurance that rates linked
to SOFR or associated changes related to the adoption of SOFR will be as favorable to us as LIBOR. The transition from LIBOR may disrupt
the overall financial markets and adversely affect the market for securities, including our portfolio of floating rate debt securities,
and may also result in an effective increase in the applicable interest rate on our current or future debt obligations.
We
may mismatch the interest rate and maturity exposure of our assets and liabilities.
Our
net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest
those funds. We cannot assure you that a significant change in market interest rates will not have a material adverse effect on our net
investment income. In periods of rising interest rates, our cost of
funds could increase, which could reduce our net investment income. Typically, our fixed-rate investments are financed primarily with
equity and/or long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate
fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the Investment Company Act.
If we do not implement these techniques properly, we could experience losses on our hedging positions, which could be material.
If
interest rates fall, our portfolio companies are likely to refinance their obligations to us at lower interest rates. Our proceeds from
these refinancings are likely to be reinvested at lower interest rates than our refinanced loans resulting in a material decrease in our
net investment income.
We
may not realize gains from our equity investments.
Our
portfolio may include common stock, warrants or other equity securities. We may also take back equity securities in exchange for our debt
investments in workouts of troubled investments. Investments in equity securities involve a number of significant risks, including the
risk of further dilution as a result of additional issuances, inability to access additional capital and failure to pay current distributions.
Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited
voting rights. In addition, we may from time to time make non-control, equity investments in portfolio companies. The equity interests
we invest in may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our
equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other
losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale
of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We may seek puts or
similar rights to give it the right to sell our equity securities back to the portfolio company. We may be unable to exercise these put
rights if the issuer is in financial distress or otherwise lacks sufficient liquidity to purchase the underlying equity investment.
Investments
in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our
investment strategy contemplates investments in debt securities of foreign companies. Investing in foreign companies may expose us to
additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations,
political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than
is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less
developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater
price volatility. Such investments will generally not represent “qualifying assets” under Section 55(a) of the Investment
Company Act.
Any
investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation
to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest
rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation,
and political developments. We may employ hedging techniques to minimize these risks, but we offer no assurance that we will, in fact,
hedge currency risk, or that if it does, such strategies will be effective.
We
may hold a significant portion of our portfolio assets in cash, cash equivalents, money market mutual funds, U.S. government securities,
repurchase agreements and high-quality debt instruments maturing in one year or less, which may have a negative impact on our business
and operations.
We
may hold a significant portion of our portfolio assets in cash, cash equivalents, money market mutual funds, U.S. government securities,
repurchase agreements and high-quality debt instruments maturing in one year or less for many reasons, including, among others:
We
may also be required to hold higher levels of cash, money market mutual funds or other short-term securities in order to pay our expenses
or make distributions to stockholders in the ordinary course of business given the relatively high percentage of our total investment
income represented by non-cash income, including PIK income and accretion of original issue discount (“OID”). During periods
when we maintain exposure to cash, money market mutual funds, or other short-term securities, we may not participate in market movements
to the same extent that it would if we were fully invested, which may have a negative impact on our business and operations and, accordingly,
our returns may be reduced.
Risks
Relating to Our Business and Structure
Capital
markets experience periods of disruption and instability. These market conditions have historically materially and adversely affected
debt and equity capital markets in the United States and abroad, which had, and may in the future have, a negative impact on our business
and operations.
The
global capital markets are subject to disruption, which may result from, among other things, a lack of liquidity in the debt capital markets,
significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market or the
failure of major financial institutions. Despite actions of the U.S. federal government and foreign governments, such events have historically materially and adversely impacted the broader financial and credit markets
and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. Equity capital may be difficult to raise because, as a BDC,
we are generally not able to issue additional shares of our common stock at a price less than NAV. In addition, our ability to incur indebtedness
or issue preferred stock is limited by applicable regulations such that our asset coverage, as defined in the Investment Company Act,
must equal at least 150% immediately after each time we incur indebtedness or issue preferred stock. The debt capital that may be available,
if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have
a negative effect on our business, financial condition and results of operations.
Market
conditions may in the future make it difficult to extend the maturity of or refinance our existing indebtedness, and any failure to do
so could have a material adverse effect on our business. The expected illiquidity of our investments may make it difficult for us to sell
such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments.
In
addition, significant changes in the capital markets, including recent volatility and disruption, have had, and may in the future have,
a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability
to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business,
financial condition and results of operations.
We
may experience fluctuations in our quarterly results.
Our
quarterly operating results will fluctuate due to a number of factors, including the level of expenses, variations in and the timing of
the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic
conditions. Our quarterly operating results will also fluctuate due to a number of other factors, including the interest rates payable
on the debt investments we make and the default rates on such investments. As a result of these factors, results for any period should
not be relied upon as being indicative of performance in future periods.
Our
success depends on the ability of our investment adviser to attract and retain qualified personnel in a competitive environment.
Our
growth requires that GECM retain and attract new investment and administrative personnel in a competitive market. GECM’s ability
to attract and retain personnel with the requisite credentials, experience and skills depends on several factors, including, but not limited
to, its ability to offer competitive wages, benefits and professional growth opportunities. Many of the entities, including investment
funds (such as private equity funds and mezzanine funds) and traditional financial services companies, which compete for experienced personnel
with GECM, have greater resources than GECM. Our
ability to grow depends on our ability to raise equity capital and/or access debt financing.
We
intend to periodically access the capital markets to raise cash to fund new investments. We expect to continue to elect to be treated
as a RIC and operate in a manner so as to qualify for the U.S. federal income tax treatment applicable to RICs. Among other things, in
order to maintain our RIC status, we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of
our investment company taxable income (as defined by the Code), and, as a result, such distributions will not be available to fund new
investments. As a result, we must borrow from financial institutions or issue additional securities to fund our growth. Unfavorable economic
or capital market conditions, including interest rate volatility, may increase our funding costs, limit our access to the capital markets
or could result in a decision by lenders not to extend credit to us. There has been and will continue to be uncertainty in the financial
markets in general. An inability to successfully access the capital or credit markets for either equity or debt could limit our ability
to grow our business and fully execute our business strategy and could decrease our earnings, if any.
If
the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the Investment
Company Act or our lenders. Any such failure, or a tightening or general disruption of the credit markets, would affect our ability to
issue senior securities, including borrowings, and pay dividends or other distributions, which could materially impair our business.
In
addition, with certain limited exceptions we are only allowed to borrow or issue debt securities or preferred stock such that our asset
coverage, as defined in the Investment Company Act, equals at least 150% immediately after such borrowing, which, in certain circumstances,
may restrict our ability to borrow or issue debt securities or preferred stock. The amount of leverage that we may employ will depend
on GECM’s and our Board’s assessments of market and other factors at the time of any proposed borrowing or issuance of debt
securities or preferred stock. We cannot assure you that we will be able to obtain lines of credit at all or on terms acceptable to us.
Economic
recessions or downturns could impair our portfolio companies and harm our operating results.
The
economy is subject to periodic downturns that, from time to time, result in recessions or more serious adverse macroeconomic events. Our
portfolio companies are susceptible to economic slowdowns or recessions and may be unable to repay loans or notes during these periods.
Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required
to record the market value of our investments. Adverse economic conditions may also decrease the value of collateral securing some of
our investments and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio
and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access
to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments
and harm our operating results.
A
portfolio company’s failure to satisfy financial or operating covenants in its agreements with us or other lenders could lead to
defaults and, potentially, acceleration of the time when the debt obligations are due and foreclosure on its secured assets, which could
trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt
that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a
defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances,
including the extent to which we actually provided significant managerial assistance to that portfolio company, a bankruptcy court might
re-characterize our debt holding and subordinate all or a portion of our claim to that of other creditors.
Global
economic, political and market conditions may adversely affect our business, results of operations and financial condition, including
our revenue growth and profitability.
The
condition of the global financial market, as well as various social and political tensions in the United States and around the world,
may contribute to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, may cause economic
uncertainties or deterioration in the United States and worldwide, and may subject our investments to heightened risks.
These
heightened risks could also include to: increased risk of default; greater social, trade, economic and political instability (including
the risk of war or terrorist activity); greater governmental involvement in the economy;
greater governmental supervision and regulation of the securities markets and market participants resulting in increased expenses related
to compliance; greater fluctuations in currency exchange rates; controls or restrictions on foreign investment and/or trade, capital controls
and limitations on repatriation of invested capital and on the ability to exchange currencies; inability to purchase and sell investments
or otherwise settle transactions (i.e., a market freeze); and unavailability of hedging techniques. During times of political uncertainty
and/or change, global markets often become more volatile. Markets experiencing political uncertainty and/or change could have substantial,
and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates typically have
negative effects on such countries’ economies and markets. Tax laws could change materially, and any changes in tax laws could have
an unpredictable effect on us, our investments and our investors.
Our
debt investments may be risky, and we could lose all or part of our investments.
Our
debt portfolios, including those held by our specialty finance companies, are subject to credit and interest rate risk. “Credit
risk” refers to the likelihood that an issuer will default in the payment of principal and/or interest on an instrument. Financial
strength and solvency of an issuer are the primary factors influencing credit risk. In addition, subordination, lack or inadequacy of
collateral or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an instrument,
and securities which are rated by rating agencies are often reviewed and may be subject to downgrade. “Interest rate risk”
refers to the risks associated with market changes in interest rates. Factors that may affect market interest rates include, without limitation,
inflation, slow or stagnant economic growth or recession, unemployment, money supply and the monetary policies of the Federal Reserve
Board and central banks throughout the world, international disorders and instability in domestic and foreign financial markets. The Federal
Reserve Board has since raised the federal funds rate and has indicated it may continue to raise the federal funds rate in the near future.
These developments, along with domestic and international debt and credit concerns, could cause interest rates to be volatile, which may
negatively impact our ability to access the debt markets on favorable terms. Interest rate changes may also affect the value of a debt
instrument indirectly (especially in the case of fixed rate securities) and directly (especially in the case of instruments whose rates
are adjustable). In general, rising interest rates will negatively impact the price of a fixed-rate debt instrument and falling interest
rates will have a positive effect on price. Adjustable rate instruments may also react to interest rate changes in a similar manner although
generally to a lesser degree (depending, however, on the characteristics of the reset terms, including, among other factors, the index
chosen, frequency of reset and reset caps or floors). Interest rate sensitivity is generally more pronounced and less predictable in instruments
with uncertain payment or prepayment schedules. We expect that we will periodically experience imbalances in the interest rate sensitivities
of our assets and liabilities and the relationships of various interest rates to each other. In a changing interest rate environment,
we may not be able to manage this risk effectively, which in turn could adversely affect our performance.
We
may acquire other funds, portfolios of assets or pools of debt and those acquisitions may not be successful.
We
may acquire other funds, portfolios of assets or pools of debt investments. Any such acquisition program has a number of risks, including
among others:
Our
failure to maintain our status as a BDC would reduce our operating flexibility.
We
elected to be regulated as a BDC under the Investment Company Act. The Investment Company Act imposes numerous constraints on the operations
of BDCs and their external advisers. For example, BDCs are required to invest at least 70% of their gross assets in specified types of
securities, primarily in private companies or illiquid U.S. public companies below a certain market capitalization, cash, cash equivalents,
U.S. government securities and other high-quality debt investments that mature in one year or less. Furthermore, any failure to comply
with the requirements imposed on BDCs by the Investment Company Act could cause the SEC to bring an enforcement action against us and/or
expose us to claims of private litigants. In addition, upon approval of a majority of our voting securities (as defined under the Investment
Company Act), we may elect to withdraw our status as a BDC. If we decide to withdraw our BDC election, or if we otherwise fail to qualify,
or to maintain our qualification, as a BDC, we may be subject to substantially greater regulation under the Investment Company Act as
a closed-end management investment company. Compliance with such regulations would significantly decrease our operating flexibility and
would significantly increase our costs of doing business.
Regulations
governing our operations as a BDC affect our ability to raise additional capital and the way in which we do so. As a BDC, the necessity
of raising additional capital may expose us to risks, including the typical risks associated with leverage.
We
may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, referred to collectively
as “senior securities,” up to the maximum amount permitted under the Investment Company Act. Under the provisions of the Investment
Company Act applicable to BDCs, we are permitted to issue senior securities (e.g., notes and preferred stock) in amounts such that our
asset coverage ratio, as defined in the Investment Company Act, equals at least 150% of gross assets less all liabilities and indebtedness
not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable
to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage,
repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness
would not be available for distributions to our stockholders. Furthermore, as a result of issuing senior securities, we would also be
exposed to typical risks associated with leverage, including an increased risk of loss.
Our
Board may change our investment objectives, operating policies and strategies without prior notice or stockholder approval, the effects
of which may be adverse.
Our
Board has the authority to modify or waive our investment objectives, current operating policies, investment criteria and strategies without
prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies, investment
criteria and strategies would have on our business, NAV and operating results.
We
may have difficulty paying our required distributions under applicable tax rules if we recognize income before or without receiving cash
representing such income.
For
U.S. federal income tax purposes, we may be required to include in income certain amounts before our receipt of the cash attributable
to such amounts, such as OID, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances,
or PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. For example, such
OID or increases in loan balances as a result of PIK interest will be included in income before we receive any corresponding cash payments.
Also, we may be required to include in income other amounts that we will not receive in cash, including, for example, non-cash income
from PIK securities, deferred payment securities and hedging and foreign currency transactions. In addition, we intend to seek debt investments
in the secondary market that represent attractive risk-adjusted returns, taking into account both stated interest rates and current market
discounts to par value. Such market discount may be included in income before we receive any corresponding cash payments. Certain of our
debt investments earn PIK interest.
Since
we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the U.S. federal income
tax requirement to distribute generally an amount equal to at least 90% of our investment company taxable income to maintain our status
as a RIC. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt
or equity capital or
reduce new investment originations to meet these distribution requirements. If we are not able to obtain cash from other sources, we may
fail to qualify as a RIC and thus be subject to additional corporate-level income taxes.
However,
in order to satisfy the Annual Distribution Requirement for a RIC, we may, but have no current intention to, declare a large portion of
a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion may
be as low as 20% of such dividend, or 10% with respect to distributions declared on or before June 30, 2022) and certain requirements
are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes.
We
may expose ourselves to risks associated with the inclusion of non-cash income prior to receipt of cash.
To
the extent we invest in OID instruments, including PIK loans, zero coupon bonds, and debt securities with attached warrants, investors
will be exposed to the risks associated with the inclusion of such non-cash income in taxable and accounting income prior to receipt of
cash.
The
deferred nature of payments on PIK loans creates specific risks. Interest payments deferred on a PIK loan are subject to the risk that
the borrower may default when the deferred payments are due in cash at the maturity of the loan. Since the payment of PIK income does
not result in cash payments to us, we may also have to sell some of our investments at times we would not consider advantageous, raise
additional debt or equity capital or reduce new investment originations (and thus hold higher cash or cash equivalent balances, which
could reduce returns) to pay our expenses or make distributions to stockholders in the ordinary course of business, even if such loans
do not default. An election to defer PIK interest payments by adding them to principal increases our gross assets and, thus, increases
future base management fees to GECM and, because interest payments will then be payable on a larger principal amount, the PIK election
also increases GECM’s future Income Incentive Fees at a compounding rate. The deferral of interest on a PIK loan increases its loan-to-value
ratio, which is a measure of the riskiness of a loan.
More
generally, market prices of OID instruments are more volatile because they are impacted to a greater extent by interest rate changes than
instruments that pay interest periodically in cash. Ordinarily, OID would also create the risk of non-refundable cash payments to GECM
based on non-cash accruals that may never be realized; however, this risk is mitigated since the Investment Management Agreement requires
GECM to defer any incentive fees on Accrued Unpaid Income (as defined below), the effect of which is that Income Incentive Fees otherwise
payable with respect to Accrued Unpaid Income become payable only if, as, when and to the extent cash is received by us or our consolidated
subsidiaries in respect thereof.
Additionally,
we may be required to make distributions of non-cash income to stockholders without receiving any cash so as to satisfy certain requirements
necessary to maintain our RIC status for U.S. federal income tax purposes. Such required cash distributions may have to be paid from the
sale of our assets without investors being given any notice of this fact. The required recognition of non-cash income, including PIK and
OID interest, for U.S. federal income tax purposes may have a negative impact on liquidity because it represents a non-cash component
of our taxable income that must, nevertheless, be distributed to investors to avoid us being subject to corporate level taxation.
We
may choose to pay distributions in our own stock, in which case stockholders may be required to pay tax in excess of the cash they receive.
We
may distribute a portion of our taxable distributions in the form of shares of our stock. In accordance with certain applicable U.S. Treasury
regulations and other related administrative pronouncements issued by the Internal Revenue Service, a RIC may be eligible to treat a distribution
of its own stock as fulfilling its RIC distribution requirements if each stockholder is permitted to elect to receive his or her entire
distribution in either cash or stock of the RIC, subject to the satisfaction of certain guidelines. If too many stockholders elect to
receive cash, each stockholder electing to receive cash must receive a pro rata amount of cash (with the balance of the distribution paid
in stock). If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the distribution paid
in stock generally will be equal to the amount of cash that could have been received instead of stock. Taxable stockholders receiving
such distributions will be required to include the full amount of the distribution as ordinary income (or as long-term capital gain to
the extent such distribution is properly reported as a capital gain dividend) to the extent of their share of our current and accumulated
earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be subject to tax with
respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receives as a distribution in order
to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the
market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold
U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. In
addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions,
such sales may put downward pressure on the trading price of our stock.
We
may expose our self to risks if we engage in hedging transactions.
If
we engage in hedging transactions, we may expose our self to risks associated with such transactions. We may utilize instruments such
as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the
relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline
in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent
losses if the values of such positions decline. Such hedging transactions may also limit the opportunity for gain if the values of the
underlying portfolio positions increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is
generally anticipated because we may not be able to enter into a hedging transaction at an acceptable price. Moreover, for a variety of
reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged.
Any
such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be
possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies
because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.
We
will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under the Code.
No
assurance can be given that we will be able to qualify for and maintain RIC status. To maintain RIC tax treatment under the Code, we must
meet certain annual distribution, source of income and asset diversification requirements.
The
Annual Distribution Requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our
net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we may
use debt financing, we may be subject to asset coverage ratio requirements under the Investment Company Act and financial covenants under
loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution
requirement. If we are unable to make the required distributions, we could fail to qualify for RIC tax treatment and thus become subject
to corporate-level U.S. federal income tax.
The
source of income requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from
the sale of stock or securities or similar sources.
The
asset diversification requirement will be satisfied if we meet asset diversification requirements at the end of each quarter of our taxable
year. Failure to meet the asset diversification requirements could result in us having to dispose of investments quickly in order to prevent
the loss of RIC status. Because most of our investments will be relatively illiquid, any such dispositions could be made at disadvantageous
prices and could result in substantial losses. Further, the illiquidity of our investments may make them difficult or impossible to dispose
of in a timely manner.
If
we fail to qualify for RIC tax treatment for any reason and become subject to corporate U.S. federal income tax, the resulting corporate
taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions and
the value of our shares of common stock.
We
cannot predict how tax reform legislation will affect us, our investments, or our stockholders, and any such legislation could adversely
affect our business.
Legislative
or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly
under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Recent
legislation has made many changes to the Code,
including significant changes to the taxation of business entities, the deductibility of interest expense, and the tax treatment of capital
investment. We cannot predict with certainty how any changes in the tax laws might affect us, our stockholders, or our portfolio investments.
New legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could
significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us
and our stockholders of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax adviser
regarding tax legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our
securities.
The
incentive fee structure and the formula for calculating the management fee may incentivize GECM to pursue speculative investments, advise
us to use leverage when it may be unwise to do so, or advise us to refrain from reducing debt levels when it would otherwise be appropriate
to do so.
The
incentive fee payable by us to GECM creates an incentive for GECM to pursue investments on our behalf that are riskier or more speculative
than would be the case in the absence of such a compensation arrangement. The incentive fee payable to GECM is calculated based on a percentage
of our return on invested capital. In addition, GECM’s base management fee is calculated on the basis of our gross assets, including
assets acquired through the use of leverage. This may encourage GECM to use leverage to increase the aggregate amount of and the return
on our investments, even when it may not be appropriate to do so, and to refrain from reducing debt levels when it would otherwise be
appropriate to do so. The use of leverage increases our likelihood of default, which would impair the value of our securities. In addition,
GECM will receive the incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive
fee based on income, there will be no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result,
GECM may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing
securities. Such a practice could result in us investing in more speculative securities than would otherwise be the case, which could
result in higher investment losses, particularly during economic downturns.
We
may invest in the securities and instruments of other investment companies, including private funds, and we will bear our ratable share
of any such investment company’s expenses, including management and performance fees. We will also remain obligated to pay management
and incentive fees to GECM with respect to the assets invested in the securities and instruments of other investment companies. With respect
to each of these investments, each of our stockholders will bear its share of the management and incentive fee payable to GECM, as well
as indirectly bearing the management and performance fees and other expenses of any investment companies in which we invest.
In
addition, if we purchase our debt instruments and such purchase results in our recording a net gain on the extinguishment of debt for
financial reporting and tax purposes, such net gain will be included in our pre-incentive fee net investment income for purposes of determining
the Income Incentive Fee payable to GECM under the Investment Management Agreement.
Finally,
the incentive fee payable by us to GECM also may create an incentive for GECM to invest on our behalf in instruments that have a deferred
interest feature, such as investments with PIK provisions. Under these investments, we would accrue the interest over the life of the
investment but would typically not receive the cash income from the investment until the end of the term or upon the investment being
called by the issuer. Our net investment income used to calculate the income portion of our incentive fee, however, includes accrued interest.
The portion of the incentive fee that is attributable to deferred interest, such as PIK, will not be paid to GECM until we receive such
interest in cash. Even though such portion of the incentive fee will be paid only when the accrued income is collected, the accrued income
is capitalized and included in the calculation of the base management fee. In other words, when deferred interest income (such as PIK)
is accrued, a corresponding Income Incentive Fee (if any) is also accrued (but not paid) based on that income. After the accrual of such
income, it is capitalized and added to the debt balance, which increases our total assets and thus the base management fee paid following
such capitalization. If any such interest is reversed in connection with any write-off or similar treatment of the investment, we will
reverse the Income Incentive Fee accrual and an Income Incentive Fee will not be payable with respect to such uncollected interest. If
a portfolio company defaults on a loan, it is possible that accrued interest previously used in the calculation of whether GECM met the
hurdle rate to earn the incentive fee will become uncollectible. A
general increase in interest rates will likely have the effect of making it easier for GECM to receive incentive fees, without necessarily
resulting in an increase in our net earnings.
Given
the structure of the Investment Management Agreement, any general increase in interest rates will likely have the effect of making it
easier for GECM to meet the quarterly hurdle rate for payment of Income Incentive Fees under the Investment Management Agreement without
any additional increase in relative performance on the part of GECM. In addition, in view of the catch-up provision applicable to Income
Incentive Fees under the Investment Management Agreement, GECM could potentially receive a significant portion of the increase in our
investment income attributable to such a general increase in interest rates. If that were to occur, our increase in net earnings, if any,
would likely be significantly smaller than the relative increase in GECM’s Income Incentive Fee resulting from such a general increase
in interest rates.
GECM
has the right to resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in
a disruption in our operations that could adversely affect our financial condition, business and results of operations.
GECM
has the right, under the Investment Management Agreement, to resign at any time upon not more than 60 days’ written notice, whether
we have found a replacement or not. If GECM resigns, we may not be able to find a new investment adviser or hire internal management with
similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable
to do so quickly, our operations are likely to experience a disruption; our financial condition, business and results of operations, as
well as our ability to pay distributions, are likely to be adversely affected; and the market price of our common stock may decline. In
addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach
an agreement with a single institution or group of executives having the expertise possessed by our investment adviser and its affiliates.
Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of
familiarity with our investment objective and current investment portfolio may result in additional costs and time delays that may adversely
affect our financial condition, business and results of operations.
We
incur significant costs as a result of being a publicly traded company.
As
a publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements
applicable to a company whose securities are registered under Exchange Act, as well as additional corporate governance requirements, including
requirements under the Sarbanes-Oxley Act, the Dodd-Frank Act and other rules implemented by our government.
Changes
in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
We
and our portfolio companies are subject to applicable local, state and federal laws and regulations. New legislation may be enacted or
new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make,
any of which could harm us and you, potentially with retroactive effect. Additionally, any changes to the laws and regulations governing
our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourself of new or different
opportunities. Such changes could result in material differences to the strategies and plans and may result in our investment focus shifting
from the areas of expertise of GECM to other types of investments in which the investment committee may have less expertise or little
or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations.
In
October 2020, the SEC adopted a revised version of Rule 18f-4, which is designed to modernize the regulation of the use of derivatives
by registered investment companies and BDCs. Among other things, Rule 18f-4 limits a fund’s derivatives exposure through a value-at-risk
test and requires the adoption and implementation of a derivatives risk management program subject to certain exceptions. Additionally,
subject to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users and are not subject
to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC also eliminated the asset segregation and
cover framework arising from prior SEC guidance for covering derivatives and certain financial instruments. Rule 18f-4 could limit our
ability to engage in certain derivatives and other transactions and/or increase the costs of such transactions, which could adversely
affect our value or performance. There
is, and will be, uncertainty as to the value of our portfolio investments.
Under
the Investment Company Act, we are required to carry our portfolio investments at market value or, if there is no readily available market
value, at fair value as determined by us in accordance with our written valuation policy, with our Board having final responsibility for
overseeing, reviewing and approving, in good faith, our estimate of fair value. Often, there will not be a public market for the securities
of the privately held companies in which we invest. As a result, we will value these securities on a quarterly basis at fair value based
on input from management, third-party independent valuation firms and our audit committee, with the oversight, review and approval of
our Board. We consult with an independent valuation firm in valuing all securities in which we invest classified as “Level 3,”
other than investments which are less than 1% of NAV as of the applicable quarter end. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Valuation of Portfolio Investments.”
The
determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are subjective and dependent
on a valuation process approved and overseen by our Board. Factors that may be considered in determining the fair value of our investments
include, among others, estimates of the collectability of the principal and interest on our debt investments and expected realization
on our equity investments, as well as external events, such as private mergers, sales and acquisitions involving comparable companies.
Because such valuations, and particularly valuations of private securities and private companies and small cap public companies, are inherently
uncertain, they may fluctuate over short periods of time and may be based on estimates. Our determinations of fair value may differ materially
from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations
may cause our NAV on a given date to materially misstate the value that we may ultimately realize on one or more of our investments. As
a result, investors purchasing our securities based on an overstated NAV would pay a higher price than the value of our investments might
warrant. Conversely, investors selling securities during a period in which the NAV understates the value of our investments will receive
a lower price for their securities than the value of our investments might otherwise warrant.
Our
financial condition and results of operations depend on our ability to effectively manage and deploy capital.
Our
ability to achieve our investment objective depends on our ability to effectively manage and deploy capital, which depends, in turn, on
GECM’s ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria.
Accomplishing
our investment objective on a cost-effective basis is largely a function of GECM’s handling of the investment process, its ability
to provide competent, attentive and efficient services and its access to investments offering acceptable terms. In addition to monitoring
the performance of our existing investments, GECM may also be called upon, from time to time, to provide managerial assistance to some
of our portfolio companies. These demands on their time may distract them or slow the rate of investment.
Even
if we are able to grow and build out our investment operations, any failure to manage our growth effectively could have a material adverse
effect on our business, financial condition, results of operations and prospects. Our results of operations will depend on many factors,
including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial
markets and economic conditions.
We
may hold assets in cash or short-term treasury securities in situations where we or GECM expects downward pricing in the high yield market.
Our strategic decision not to be fully invested may, from time to time, reduce funds available for distribution and cause downward pressure
on the price of our common stock.
The
failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity
planning, could impair our ability to conduct business effectively.
The
occurrence of a disaster such as a cyber-attack, a natural catastrophe, an epidemic or pandemic, an industrial accident, a terrorist attack
or war, events anticipated or unanticipated in our disaster recovery systems, or a failure in externally provided data systems, could
have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those
events affect our computer-based data processing,
transmission, storage and retrieval systems or destroy data. Our ability to effectively conduct our business could be severely compromised.
The financial markets we operate in are dependent upon third-party data systems to link buyers and sellers and provide pricing information.
We
depend heavily upon computer systems to perform necessary business functions. Our computer systems could be subject to cyber-attacks and
unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we expect to experience
threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. These
failures and disruptions may be more likely to occur as a result of employees working remotely. If one or more of these events occurs,
it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through,
our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to
our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss, respectively.
Terrorist
attacks, acts of war, natural disasters or an epidemic or pandemic may affect the market for our securities, impact the businesses in
which we invest and harm our business, operating results and financial condition.
Terrorist
acts, acts of war, natural disasters or an epidemic or pandemic may disrupt our operations, as well as the operations of the businesses
in which we invest. Such acts, including, for example, Russia’s February 2022 invasion of Ukraine, have created, and continue to
create, economic and political uncertainties and have contributed to global economic instability. Additionally, a public health epidemic
or pandemic, including, for example, COVID-19, poses the risk that we, GECM, our portfolio companies or other business partners may be
prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated
by governmental authorities. While it is not possible at this time to estimate the impact that any such event could have on our business,
the continued occurrence thereof and the measures taken by the governments of countries affected in response thereto could disrupt the
supply chain and the manufacture or shipment of products and adversely impact our business, financial condition or results of operations.
Future
terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create
additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have
a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks and natural disasters
are generally uninsurable.
There
are significant potential conflicts of interest that could impact our investment returns.
Certain
of our executive officers and directors, and members of the investment committee of GECM, serve or may serve as officers, directors or
principals of other entities, including ICAM or funds managed by ICAM, and affiliates of GECM and investment funds managed by our affiliates.
Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in our or our stockholders’
best interests or that may require them to devote time to services for other entities, which could interfere with the time available to
provide services to us. For example, Matt Kaplan, our President and Chief Executive Officer, is a portfolio manager at GECM and a member
of its investment committee.
Although
funds managed by GECM may have different primary investment objectives than we do, they may from time to time invest in asset classes
similar to those targeted by us. GECM is not restricted from raising an investment fund with investment objectives similar to ours. Any
such funds may also, from time to time, invest in asset classes similar to those targeted by us. It is possible that we may not be given
the opportunity to participate in certain investments made by investment funds managed by investment managers affiliated with GECM. GECC’s
participation in any negotiated co-investment opportunities (other than those in which the only term negotiated is price) with investment
funds managed by investment managers under common control with GECM is subject to compliance with the SEC order dated May 12, 2020
(Release No. 33864).
We
will pay management and incentive fees to GECM and will reimburse GECM for certain expenses it incurs. In addition, investors in our common
stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in, among other things, a lower
rate of return than one might achieve through direct investments. GECM’s
management fee is based on a percentage of our total assets (other than cash or cash equivalents but including assets purchased with borrowed
funds) and GECM may have conflicts of interest in connection with decisions that could affect our total assets, such as decisions as to
whether to incur indebtedness.
The
part of the incentive fee payable by us that relates to our pre-incentive fee net investment income is computed and paid on income that
may include interest that is accrued but not yet received in cash. If a portfolio company defaults on a loan or note that is structured
to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become
uncollectible.
The
Investment Management Agreement renews for successive annual periods if approved by our Board or by the affirmative vote of the holders
of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested
persons. However, both we and GECM have the right to terminate the agreement without penalty upon 60 days’ written notice to the
other party. Moreover, conflicts of interest may arise if GECM seeks to change the terms of the Investment Management Agreement, including,
for example, the terms for compensation.
Pursuant
to the Administration Agreement, we pay GECM our allocable portion of overhead and other expenses incurred by GECM in performing its obligations
under the Administration Agreement, including our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer
and their respective staffs.
As
a result of the arrangements described above, there may be times when our management team has interests that differ from those of our
stockholders, giving rise to a conflict.
Our
stockholders may have conflicting investment, tax and other objectives with respect to their investments in us. The conflicting interests
of individual stockholders may relate to or arise from, among other things, the nature of our investments, the structure or the acquisition
of our investments, and the timing of disposition of our investments. As a consequence, conflicts of interest may arise in connection
with decisions made by GECM, including with respect to the nature or structuring of our investments, that may be more beneficial for one
stockholder than for another stockholder, especially with respect to stockholders’ individual tax situations. In selecting and structuring
investments appropriate for us, GECM will consider the investment and tax objectives of us and our stockholders, as a whole, not the investment,
tax or other objectives of any stockholder individually.
Risks
Relating to Indebtedness
We
may borrow additional money, which would magnify the potential for loss on amounts invested and may increase the risk of investing with
us.
We
have existing indebtedness and may in the future borrow additional money, including borrowings under the Loan Agreement, each of which
magnifies the potential for loss on amounts invested and may increase the risk of investing with us. Our ability to service our existing
and potential future debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive
pressures. The amount of leverage that we could employ at any particular time will depend on GECM’s and our Board’s assessment
of market and other factors at the time of any proposed borrowing.
Borrowings,
also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with
investing in our securities. Holders of such debt securities would have fixed dollar claims on our consolidated assets that would be superior
to the claims of our common stockholders or any preferred stockholders.
If
the value of our consolidated assets decreases while we have debt outstanding, leveraging would cause our NAV to decline more sharply
than it otherwise would have had we not leveraged. Similarly, any decrease in our consolidated income while we have debt outstanding would
cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to
make common stock distributions. We cannot assure you that our leveraging strategy will be successful.
Illustration.
The following tables illustrate the effect of leverage on returns from an investment in our common stock
assuming various annual returns, net of expenses. The first table assumes the actual amount of senior securities
outstanding as of December 31, 2022. The second table assumes the maximum amount of senior securities
outstanding as permitted under our asset coverage ratio of 150%. The calculations in the tables below are
hypothetical and actual returns may be higher or lower than those appearing below. Table
1
Table
2
Incurring
additional indebtedness could increase the risk in investing in our Company.
In
2018, our stockholders approved of the reduction of our required minimum asset coverage ratio from 200% to 150%, permitting us to incur
additional leverage. The use of leverage magnifies the potential for gain or loss on amounts invested. The use of leverage is generally
considered a speculative investment technique and increases the risks associated with investing in our securities.
As
June 30, 2023, we had approximately $150.9 million of total outstanding indebtedness in the aggregate under the Loan Agreement
and three series of senior securities (unsecured notes)—the GECCM Notes, the GECCN Notes and the GECCO Notes—and our asset
coverage ratio was 161.5%.
On
May 5, 2021, we entered into the Loan Agreement, which provides for a senior secured revolving line of credit of up to $25 million
(subject to a borrowing base). As of June 30, 2023, there were $5.0 million in borrowings outstanding under the revolving line.
We may request to increase the revolving line in an aggregate amount not to exceed $25 million, which increase is subject to the
sole discretion of CNB.
If
we are unable to meet the financial obligations under any of the Loan Agreement or any series of our outstanding unsecured notes, the
holders of such indebtedness would have a superior claim to our assets over our common stockholders, and the lender or noteholders may
seek to recover against our assets in the event of a default by us. If the value of our assets decreases, leveraging would cause NAV to
decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses. Similarly, any decrease in our revenue
or income will cause our net income to decline more sharply than it would have had we not borrowed. Such a decline would also negatively
affect our ability to make distributions with respect to our common stock. Our ability to service any debt depends largely on our financial
performance and is subject to prevailing economic conditions and competitive pressures. Moreover, as the base management fee payable to
GECM, our investment advisor, is payable based on the average value of our total assets, including those assets acquired through the use
of leverage, GECM will have a financial incentive to incur leverage, which may not be consistent with our stockholders’ interests.
In addition, our common stockholders bear the burden of any increase in our fees or expenses as a result of our use of leverage, including
interest expenses and any increase in the base management fee payable to GECM.
If
our asset coverage ratio falls below the required limit, we will not be able to incur additional debt until we are able to comply with
the asset coverage ratio applicable to us. This could have a material adverse effect on our operations, and we may not be able to make
distributions to stockholders. The actual amount of leverage that we employ will depend on GECM’s and our Board’s assessment
of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or
on terms acceptable to us. Incurring
additional leverage may magnify our exposure to risks associated with changes in interest rates, including fluctuations in interest rates
which could adversely affect our profitability.
If
we incur additional leverage, including through the offering of Notes hereby, general interest rate fluctuations may have a more significant
negative impact on our financial condition and results of operations than they would have absent such additional incurrence, and, accordingly,
may have a material adverse effect on our investment objectives and rate of return on investment capital. A portion of our income will
depend upon the difference between the rate at which we borrow funds and the interest rate on the debt securities in which we invest.
Because we may borrow money to make investments and may issue debt securities, preferred stock or other securities, our net investment
income is dependent upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities,
preferred stock or other securities and the rate at which we invest these borrowed funds.
We
expect that a majority of our investments in debt will continue to be at floating rates with a floor. As a result, significant increase
in market interest rates could result in an increase in our non-performing assets and a decrease in the value of our portfolio because
our floating-rate loan portfolio companies may be unable to meet higher payment obligations. In periods of rising interest rates, our
cost of funds would increase, resulting in a decrease in our net investment income. Incurring additional leverage will magnify the impact
of an increase to our cost of funds. In addition, a decrease in interest rates may reduce net income, because new investments may be made
at lower rates despite the increased demand for our capital that the decrease in interest rates may produce. To the extent our additional
borrowings are in fixed-rate instruments, we may be required to invest in higher-yield securities in order to cover our interest expense
and maintain our current level of return to stockholders, which may increase the risk of an investment in our securities.
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Effects of Leverage [Text Block] | Illustration.
The following tables illustrate the effect of leverage on returns from an investment in our common stock
assuming various annual returns, net of expenses. The first table assumes the actual amount of senior securities
outstanding as of December 31, 2022. The second table assumes the maximum amount of senior securities
outstanding as permitted under our asset coverage ratio of 150%. The calculations in the tables below are
hypothetical and actual returns may be higher or lower than those appearing below. Table
1
Table
2
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Effects of Leverage [Table Text Block] | Table
1
Table
2
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Return at Minus Ten [Percent] | (14.57%) | (14.46%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return at Minus Five [Percent] | (9.57%) | (9.46%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return at Zero [Percent] | (4.57%) | (4.46%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return at Plus Five [Percent] | 0.43% | 0.54% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return at Plus Ten [Percent] | 5.43% | 5.54% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effects of Leverage, Purpose [Text Block] | We
have existing indebtedness and may in the future borrow additional money, including borrowings under the Loan Agreement, each of which
magnifies the potential for loss on amounts invested and may increase the risk of investing with us. Our ability to service our existing
and potential future debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive
pressures. The amount of leverage that we could employ at any particular time will depend on GECM’s and our Board’s assessment
of market and other factors at the time of any proposed borrowing.
Borrowings,
also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with
investing in our securities. Holders of such debt securities would have fixed dollar claims on our consolidated assets that would be superior
to the claims of our common stockholders or any preferred stockholders.
If
the value of our consolidated assets decreases while we have debt outstanding, leveraging would cause our NAV to decline more sharply
than it otherwise would have had we not leveraged. Similarly, any decrease in our consolidated income while we have debt outstanding would
cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to
make common stock distributions. We cannot assure you that our leveraging strategy will be successful.
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Capital Stock, Long-Term Debt, and Other Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Securities [Table Text Block] |
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Risk Factors Related to the Notes and the Offering [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Description of Registrant [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk [Text Block] | Risk
Factors Related to the Notes and the Offering
The
Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur
in the future.
The
Notes will not be secured by any of our assets or any of the assets of our subsidiaries. As a result, the Notes are effectively subordinated
to any secured indebtedness we or our subsidiaries have currently incurred or may incur in the future, including under the Loan Agreement,
and any indebtedness that is initially unsecured to which we subsequently grant security, to the extent of the value of the assets securing
such indebtedness. In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future
secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness
in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of
the Notes. As of June 30, 2023, there were $5.0 million in borrowings outstanding under the Loan Agreement.
The
Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The
Notes are obligations exclusively of GECC and not of any of our subsidiaries. None of our subsidiaries is a guarantor of the Notes and
the Notes are not required to be guaranteed by any subsidiary we may acquire or create in the future. Any assets of our subsidiaries will
not be directly available to satisfy the claims of our creditors, including holders of the Notes. Except to the extent we are a creditor
with recognized claims against our subsidiaries, all claims of creditors of our subsidiaries will have priority over our equity interests
in such subsidiaries (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries.
Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any
security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to
our claims. Consequently, the Notes will be structurally subordinated to all indebtedness and other liabilities of any of our subsidiaries
and any subsidiaries that we may in the future acquire or establish. Although our subsidiaries currently do not have any indebtedness
outstanding, they may incur substantial indebtedness in the future, all of which would be structurally senior to the Notes.
The
indenture under which the Notes will be issued contains limited protection for holders of the Notes.
The
indenture under which the Notes will be issued offers limited protection to holders of the Notes. The terms of the indenture and the Notes
do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions,
circumstances or events that could have an adverse impact on your investment in the Notes. The indenture and the Notes will not place
any restrictions on our or our subsidiaries’ ability to:
would
be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of
our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A)
as modified by Sections 61(a)(1) and (2) of the Investment Company Act or any successor provisions;
Notwithstanding
the restrictions on indebtedness and dividends described above, the indenture under which the Notes will be issued may not prohibit us
from paying distributions to our stockholders if we incur indebtedness in excess of the limits set forth in Sections 61(a)(1) and (2)
of the Investment Company Act or any successor provision if we determine that such indebtedness, which may include indebtedness under
a bank credit facility, is not a “senior security” for purposes of determining asset coverage under the Investment Company
Act.
In
addition, the indenture will not require us to offer to purchase the Notes in connection with a change of control or any other event.
Furthermore,
the terms of the indenture and the Notes do not protect holders of the Notes if we experience changes (including significant adverse changes)
in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any
financial tests or ratios or specified levels of net worth, revenues, income, cash flow, or liquidity other than as described under “Description
of the Notes—Events of Default.” Any such changes could affect the terms of the Notes.
Our
ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the Notes may have
important consequences for you as a holder of the Notes, including making it more difficult for us to satisfy our obligations with respect
to the Notes or negatively affecting the trading value of the Notes.
Other
debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional
covenants and events of default. The indenture under which the Notes will be issued does not contain cross-default provisions. The issuance
or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes. An
active trading market for the Notes may not develop, which could limit the market price of the Notes or your ability to sell them.
The
Notes are a new issue of debt securities for which there currently is no trading market. We intend to list the Notes on Nasdaq within
30 days of the original issue date under the symbol “GECCZ.” We cannot assure you that the Notes will be listed or that
an active trading market will develop for the Notes or that you will be able to sell your Notes. If the Notes are traded after their initial
issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar
securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. Certain
of the underwriters have advised us that they intend to make a market in the Notes, but they are not obligated to do so. Such underwriters
may discontinue any market-making in the Notes at any time at their sole discretion. Accordingly, we cannot assure you that a liquid trading
market will develop for the Notes, that you will be able to sell your Notes at a particular time or that the price you receive when you
sell will be favorable. To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be
harmed. Accordingly, you may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.
If
we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.
Any
default under the agreements governing our indebtedness, including our current indebtedness, which is composed of the GECCM Notes, the
GECCN Notes, the GECCO Notes and borrowings under the Loan Agreement, and any future indebtedness under the Loan Agreement or other agreements
to which we may be a party, that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could
make us unable to pay principal, premium, if any, and interest on the Notes and substantially decrease the market value of the Notes.
If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal,
premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and
operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing
such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder
to be due and payable, together with accrued and unpaid interest, the lenders under other debt we may incur in the future could elect
to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced
into bankruptcy or liquidation. If our operating performance declines, we may in the future need to seek to obtain waivers from the required
lenders under other debt that we may incur in the future to avoid being in default. If we breach our covenants under other debt and seek
a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under the other debt,
the lenders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to
repay debt, lenders having secured obligations could proceed against the collateral securing the debt. Because any future credit facilities
would likely have customary cross-default provisions, if we have a default under the terms of the Notes, the obligations under any future
credit facility may be accelerated and we may be unable to repay or finance the amounts due.
We
may be subject to certain corporate-level taxes which could adversely affect our cash flow and consequently adversely affect our ability
to make payments on the Notes.
We
currently are a RIC under Subchapter M of the Code for U.S. federal income tax purposes and intend to continue to qualify each year as
a RIC. In order to qualify for tax treatment as a RIC, we generally must satisfy certain source-of-income, asset diversification and distribution
requirements. As long as we so qualify, we will not be subject to U.S. federal income tax to the extent that we distribute investment
company taxable income and net capital gain on a timely basis.
We
may, nonetheless, be subject to certain corporate-level taxes regardless of whether we continue to qualify as a RIC. Additionally, should
we fail to qualify as a RIC, we would be subject to corporate-level taxes on all of our taxable income. The imposition of corporate-level
taxes could adversely affect our cash flow and consequently adversely affect our ability to make payments on the Notes. A
downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or our securities, if any, could cause the
liquidity or market value of the Notes to decline significantly.
Our
credit ratings are an assessment by rating agencies of our ability to pay our debts when due. Consequently, real or anticipated changes
in our credit ratings will generally affect the market value of the Notes. These credit ratings may not reflect the potential impact of
risks relating to the structure or marketing of the Notes. Credit ratings are not a recommendation to buy, sell or hold any security,
and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes
any obligation to maintain our credit ratings or to advise holders of Notes of any changes in our credit ratings. Private rating agencies
may rate the Notes. An explanation of the significance of ratings may be obtained from any such rating agency. Generally, rating agencies
base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate.
Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of Notes of any changes in
our credit ratings. There can be no assurance that our credit ratings will remain for any given period of time or that such credit ratings
will not be lowered or withdrawn entirely by the rating agency if in their judgment future circumstances relating to the basis of the
credit ratings, such as adverse changes in our company, so warrant.
The
optional redemption provision may materially adversely affect your return on the Notes.
The
Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option on or after ,
2025. We may choose to redeem the Notes at times when prevailing interest rates are lower than the interest rate paid on the Notes. In
this circumstance, you may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high
as the Notes being redeemed.
Our
redemption right also may adversely impact your ability to sell the Notes as the optional redemption date or period approaches.
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Risks Relating to Our Investments [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Description of Registrant [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk [Text Block] | Risks
Relating to Our Investments
Our
portfolio companies may experience financial distress and our investments in such companies may be restructured.
Our
portfolio companies may experience financial distress from time to time. Debt investments in such companies may cease to be income-producing,
may require us to bear certain expenses to protect our investment and may subject us to uncertainty as to when, in what manner and for
what value such distressed debt will eventually be satisfied, including through liquidation, reorganization or bankruptcy. Any restructuring
can fundamentally alter the nature of the related investment, and restructurings may not be subject to the same underwriting standards
that GECM employs in connection with the origination of an investment. In addition, we may write-down the value of our investment in any
such company to reflect the status of financial distress and future prospects of the business. Any restructuring could alter, reduce or
delay the payment of interest or principal on any investment, which could delay the timing and reduce the amount of payments made to us.
For example, if an exchange offer is made or plan of reorganization is adopted with respect to the debt securities we currently hold,
there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization
will have a value or income potential similar to what we anticipated when our original investment was made or even at the time of restructuring.
Restructurings of investments might also result in extensions of the term thereof, which could delay the timing of payments made to us,
or we may receive equity securities, which may require significantly more of our management’s time and attention or carry restrictions
on their disposition.
As
an example, during the year ended December 31, 2022, we wrote down the value of our investments in Avanti Communications Group plc
(“Avanti Communications”) and our net realized losses on investments were primarily driven by the April 2022 restructuring
of Avanti Communications on which we realized approximately $111 million of previously recognized unrealized losses. We cannot assure
you that we will not have to restructure any of our other investments, or that any particular restructuring strategy will recover value
equal to our original investment cost. We
face increasing competition for investment opportunities. Limited availability of attractive investment opportunities in the market could
cause us to hold a larger percentage of our assets in liquid securities until market conditions improve.
We
compete for investments with other BDCs and investment funds (including specialty finance companies, private equity funds, mezzanine funds
and small business investment companies), as well as traditional financial services companies such as commercial banks and other sources
of funding. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources
than we do. For example, some competitors have a lower cost of capital and access to funding sources that are not available to us, including
from the Small Business Administration. In addition, increased competition for attractive investment opportunities allows debtors to demand
more favorable terms and offer fewer contractual protections to creditors. Some of our competitors have higher risk tolerances or different
risk assessments than we do. These characteristics could allow our competitors to consider a wider variety of investments, establish more
relationships and offer better pricing and more flexible structuring than we are able to offer. We may lose investment opportunities if
we do not match our competitors’ pricing, terms and structure. If we are forced to match our competitors’ pricing, terms and
structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss. A significant
part of our competitive advantage stems from the fact that the market for investments in lower middle-market companies is underserved
by traditional commercial banks and other financing sources. A significant increase in the number and/or the size of our competitors in
this target market would force us to accept less attractive investment terms. GECM may, at its discretion, decide to pursue such opportunities
if it believes that they are in our best interest; however, GECM may decline to pursue available investment opportunities that, although
otherwise consistent with our investment policies and objectives, in GECM’s view present unacceptable risk/return profiles. Under
such circumstances, we may hold a larger percentage of our assets in liquid securities until market conditions improve in order to avoid
having assets remain uninvested. Furthermore, many of our competitors have greater experience operating under, or are not subject to,
the regulatory restrictions that the Investment Company Act imposes on us as a BDC. We believe that competitors will make first and second
lien loans with interest rates and returns that are lower than the rates and returns that we target. Therefore, we do not seek to compete
solely on the interest rates and returns offered to prospective portfolio companies.
We
are invested in a limited number of portfolio companies which may subject us to a risk of significant loss if one or more of these companies
defaults on its obligations under any of its debt instruments.
Our
portfolio is likely to hold a limited number of portfolio companies. Beyond the asset diversification requirements associated with qualifying
as a RIC, we do not have fixed guidelines for diversification, and our investments are likely to be concentrated in relatively few companies.
As our portfolio is less diversified than the portfolios of some funds, we are more susceptible to failure if a single investment fails.
Similarly, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or
if we need to write down the value of any one investment.
Our
portfolio is subject to change over time and may be concentrated in a limited number of industries, which subjects us to a risk of significant
loss if there is a downturn in a particular industry in which a number of our investments are concentrated.
Our
portfolio is likely to be concentrated in a limited number of industries. A downturn in any particular industry in which we are invested
could significantly impact our aggregate realized returns.
In
addition, we may from time to time invest a relatively significant percentage of our portfolio in industries in which GECM does not necessarily
have extensive historical research coverage. If an industry in which we have significant investments suffers from adverse business or
economic conditions, as these industries have to varying degrees, a material portion of our investment portfolio could be affected adversely,
which, in turn, could adversely affect our financial position and results of operations.
Any
unrealized losses we experience in our portfolio may be an indication of future realized losses, which could reduce our income available
for distribution.
As
a BDC, we are required to carry our investments at fair value as determined in good faith by our Board. Decreases in the fair values of
our investments are recorded as unrealized depreciation. Any unrealized losses in our portfolio could be an indication of a portfolio
company’s inability to meet its repayment obligations to us with
respect to the affected investments. This could result in realized losses in the future and ultimately in reductions of our income available
for distribution in future periods.
Prepayments
of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our returns on equity.
We
are subject to the risk that investments intended to be held over long periods are, instead, repaid prior to maturity. When this occurs,
we will generally reinvest these proceeds in temporary investments, repay debt or repurchase our common stock, depending on expected future
investment opportunities. These temporary investments will typically have substantially lower yields than the debt being prepaid and we
could experience significant delays in reinvesting these amounts. Any future investment may also be at lower yields than the debt that
was repaid. As a result, our results of operations could be materially adversely affected if one or more of our portfolio companies elects
to prepay amounts owed by them.
We
are not in a position to exercise control over certain of our portfolio companies or to prevent decisions by management of such portfolio
companies that could decrease the value of our investments.
Although
we may be deemed, under the Investment Company Act, to control certain of our portfolio companies because we own more than 25% of the
common equity of those portfolio companies, we generally do not hold controlling equity positions in our portfolio companies.
As a result, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and that the management
and/or stockholders of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack
of liquidity of the debt and equity investments that we hold in certain of our portfolio companies, we may not be able to dispose of
such investments if we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of such investments.
We
have made, and in the future intend to pursue additional, investments in specialty finance businesses, which may require reliance on the
management teams of such businesses.
We
have made, and may make additional, investments in companies and operating platforms that originate and/or service commercial specialty
finance businesses, including factoring, equipment finance, inventory leasing, merchant cash advance and hard money real estate lending
and may also invest directly (including via participation) in the investments made by such businesses. The form of investment may vary
and may require reliance on management teams to provide the resources necessary to originate new receivables, manage portfolios of performing
receivables, and work-out portfolios of stressed or non-performing receivables.
Defaults
by our portfolio companies may harm our operating results.
A
portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and,
potentially, termination of our investments and foreclosure on our secured assets, which could trigger cross-defaults under other agreements
and jeopardize a portfolio company’s ability to meet its obligations under the debt or equity securities that we hold. We may incur
expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of financial covenants,
with a defaulting portfolio company. If any of these occur, it could materially and adversely affect our operating results and cash flows.
If
we invest in companies that experience significant financial or business difficulties, we may be exposed to certain distressed lending
risks.
As
part of our lending activities, we may purchase notes or loans from companies that are experiencing significant financial or business
difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Although the terms of such
financing may result in significant financial returns to us, they involve a substantial degree of risk. The level of analytical sophistication,
both financial and legal, necessary for successful financing to companies experiencing significant business and financial difficulties
is unusually high. We cannot assure you that we will correctly evaluate the value of the assets collateralizing our investments or the
prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to a portfolio company,
we may lose all or part of the amounts advanced to the borrower or may be required to accept collateral with a value less than the amount
of the investment advanced by us to the borrower. Certain
of the companies in which we invest may have difficulty accessing the capital markets to meet their future capital needs, which may limit
their ability to grow or to repay their outstanding indebtedness upon maturity.
Senior
Secured Loans and Notes. There is a risk that the collateral securing our loans and notes may decrease
in value over time, may be difficult to sell in a timely manner, may be difficult to appraise
and may fluctuate in value based upon the success of the business and market conditions, including
as a result of the inability of the portfolio company to raise additional capital, and, in some
circumstances, our lien could be subordinated to claims of other creditors. In addition, deterioration
in a portfolio company’s financial condition and prospects, including its inability to
raise additional capital, may be accompanied by deterioration in the value of the collateral
for the loan or note. Consequently, the fact that a loan or note is secured does not guarantee that we will
receive principal and interest payments according to the loan’s or note’s terms, or at all, or that we will be able
to collect on the loan or note should we be forced to enforce our remedies.
Mezzanine
Loans. Our mezzanine debt investments will be generally subordinated to senior loans and will be generally
unsecured. As such, other creditors may rank senior to us in the event of an insolvency, which could likely
result in a substantial or complete loss on such investment in the case of such insolvency. This may result in
an above average amount of risk and loss of principal.
Unsecured
Loans and Notes. We may invest in unsecured loans and notes. If the issuer defaults or has an event
of insolvency, other creditors may rank senior, be structurally senior or have lien protection
that effectively renders their claim superior to our rights under our unsecured notes or loans,
which could likely result in a substantial or complete loss on such investment in the case of
such insolvency. This may result in an above average amount of risk and loss of principal.
Unfunded
Commitments. From time to time, we purchase revolving credit loans with unfunded commitments in the
ordinary course of business. In the event multiple borrowers of such revolving credit loans were to draw these
commitments at the same time, including during a market downturn, it could have an adverse impact on our
cash reserves and liquidity position at a time when it may be more difficult for us to sell other assets.
Equity
Investments. When we invest in senior secured loans or mezzanine loans, we may acquire equity securities,
including warrants, as well. In addition, we may invest directly in the equity securities of portfolio companies.
The equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly,
we may not be able to realize gains from our equity interests, and any gains that we realize on the disposition
of any equity interests may not be sufficient to offset any other losses we experience.
In
addition, investing in middle-market companies involves a number of significant risks, including:
Investing
in middle-market companies involves a high degree of risk and our financial results may be affected adversely if one or more of our portfolio
investments defaults on its loans or notes or fails to perform as we expect.
A
portion of our portfolio consists of debt and equity investments in privately owned middle-market companies. Investing in middle-market
companies involves a number of significant risks. Compared to larger publicly owned companies, these middle-market companies may be in
a weaker financial position and experience wider variations in their operating results, which may make them more vulnerable to economic
downturns and other business disruptions. Typically, these companies need more capital to compete; however, their access to capital is
limited and their cost of capital is often higher than that of their competitors. Our portfolio companies face intense competition from
larger companies with greater financial, technical and marketing resources and their success typically depends on the managerial talents
and efforts of an individual or a small group of persons.
Therefore,
the loss of any of their key employees, as well as increased competition in the labor market, could affect a portfolio company’s
ability to compete effectively and harm its financial condition. Further, some of these companies conduct business in regulated industries
that are susceptible to regulatory changes. These factors could impair the cash flow of our portfolio companies and result in other events,
such as bankruptcy. These events could limit a portfolio company’s ability to repay its obligations to us. Deterioration in a borrower’s
financial condition and prospects may be accompanied by deterioration in the value of the loan’s collateral and the fair market
value of the loan. Most of the loans in which we invest are not structured to fully amortize during their lifetime. In order to create
liquidity to pay the final principal payment, borrowers typically must raise additional capital or sell their assets, which could potentially
result in the collateral being sold for less than its fair market value. If they are unable to raise sufficient funds to repay us, the
loan will go into default, which will require us to foreclose on the borrower’s assets, even if the loan was otherwise performing
prior to maturity. This will deprive us from immediately obtaining full recovery on the loan and prevent or delay the reinvestment of
the loan proceeds in other, more profitable investments. Moreover, there are no assurances that any recovery on such loan will be obtained.
Most of these companies cannot obtain financing from public capital markets or from traditional credit sources, such as commercial banks.
Accordingly, loans made to these types of companies pose a higher default risk than loans made to companies that have access to traditional
credit sources.
An
investment strategy that includes privately held companies presents challenges, including the lack of available information about these
companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic
downturns.
We
invest in privately held companies. Generally, little public information exists about these companies, and we are required to rely on
GECM’s or our specialty finance partners’ ability to obtain adequate information to evaluate the potential returns from investing
in these companies. If we are unable to uncover all material information about these companies, we may not make a fully informed investment
decision, and may lose money on our investments. Also, privately held companies frequently have less diverse product lines and smaller
market presence than larger competitors. These factors could adversely affect our investment returns as compared to companies investing
primarily in the securities of public companies.
We
are exposed to risks relating to our specialty finance products.
There is no guarantee that our controls to monitor and detect fraud with respect to our specialty finance business will be effective and, as a result, we could face
exposure to the credit risk associated with such products. With respect to our asset-based loans, we generally limit our lending to a
percentage of the customer’s borrowing base assets that we believe can be readily liquidated in the event of financial distress of the
borrower. With respect to our factoring products, we purchase the underlying invoices of our customers and become the direct payee under
such invoices, thus transferring the credit risk in such transactions from our customers to the underlying account debtors on such invoices.
In the event one or more of our customers fraudulently represents the existence or valuation of borrowing base assets in the case of an
asset-based loan, or the existence or validity of an invoice we purchase in the case of a factoring transaction, we may advance more funds
to such customer than we otherwise would and lose the benefit of the structural protections of our products with respect to such advances.
In such event we could be exposed to material additional losses with respect to such loans or factoring products.
Our
portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
Our
portfolio companies may have, or may be permitted to incur, other debt that ranks equally with, or in some cases senior to, the debt in
which we invest. By their terms, such debt instruments may entitle the holders to receive payment of interest or principal on or before
the dates on which we are entitled to receive payments with respect to the debt instruments in which we invested. Also, in insolvency,
liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment
in that portfolio company would typically be entitled to receive payment in full before we receive any distribution. After repaying such
senior creditors, such portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt
ranking equally with debt instruments in which we invest, we would have to share on an equal basis any distributions with other creditors
holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
There
may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability
claims.
Even
though we may have structured investments as secured investments, if one of our portfolio companies were to go bankrupt, depending on
the facts and circumstances, and based upon principles of equitable subordination as defined by existing case law, a bankruptcy court
could subordinate all or a portion of our claim to that of other creditors and transfer any lien securing such subordinated claim to the
bankruptcy estate. The principles of equitable subordination defined by case law have generally indicated that a claim may be subordinated
only if its holder is guilty of misconduct or where the senior investment is re-characterized as an equity investment and the senior lender
has actually provided significant managerial assistance to the bankrupt debtor. We may also be subject to lender liability claims for
actions taken by us with respect to a borrower’s business or instances where we exercise control over the borrower. It is possible
that we could become subject to a lender’s liability claim, including as a result of actions taken in rendering managerial assistance
or actions to compel and collect payments from the borrower outside the ordinary course of business. To the extent GECC provides significant
managerial assistance to the portfolio companies, this risk is exacerbated.
Second
priority liens on collateral securing loans and notes that we invest in may be subject to control by senior creditors with first priority
liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and
us.
We
may purchase loans or notes that are secured by a second priority security interest in the same collateral pledged by a portfolio company
to secure senior debt owed by the portfolio company to commercial banks or other traditional lenders. Often the senior lender has procured
covenants from the portfolio company prohibiting the incurrence of additional secured debt without the senior lender’s consent.
Prior to and as a condition of permitting the portfolio company to borrow money from us secured by the same collateral pledged to the
senior lender, the senior lender will require assurances that it will control the disposition of any collateral in the event of bankruptcy
or other default. In many such cases, the senior lender will require us or the indenture trustee to enter into an “intercreditor
agreement” prior to permitting the portfolio company to borrow. Typically the intercreditor agreements expressly subordinate our
second lien debt instruments to those held by the senior lender and further provide that the senior lender shall control: (1) the commencement
of foreclosure or other proceedings to liquidate and collect on the collateral; (2) the nature, timing and conduct of foreclosure or other
collection proceedings; (3) the amendment of any collateral document; (4) the release of the security interests in respect of any collateral;
and (5) the waiver of defaults under any security agreement. Because of the control we may cede to senior lenders under intercreditor
agreements we may enter, we may be unable to realize the proceeds of any collateral securing some of our loans and notes. The
reference rates for our loans may be manipulated or changed.
Actions
by market participants or by government agencies, including central banks, may affect prevailing interest rates and the reference rates
for loans to our portfolio companies. Actions by governments may create inflation in asset prices that over-state the value of our portfolio
companies and their assets and drive cycles of capital market activities (like mergers and acquisitions) at a rate and at prices in excess
of those that would prevail in an unaffected market.
We
cannot assure you that actions by market participants or by government agencies will not materially adversely affect trading markets or
our portfolio companies or us or our and our portfolio companies’ respective business, prospects, financial condition or results
of operations.
The discontinuation of the London Interbank Offered Rate (“LIBOR”)
may adversely affect the value of the floating rate debt securities in our portfolio or the cost of our borrowings.
We expect that a substantial portion of our future floating rate investments
will be linked to the Secured Overnight Financing Rate (“SOFR”). The Alternative Reference Rates Committee has recommended
SOFR as an alternative to LIBOR. SOFR is a broad measure of the cost of borrowing cash in the overnight United States treasury market.
LIBOR and SOFR have significant differences: LIBOR was an unsecured lending rate and SOFR is a secured lending rate, and SOFR is an overnight
rate while LIBOR was a forward-looking rate that reflected term rates at different maturities. There can be no assurance that rates linked
to SOFR or associated changes related to the adoption of SOFR will be as favorable to us as LIBOR. The transition from LIBOR may disrupt
the overall financial markets and adversely affect the market for securities, including our portfolio of floating rate debt securities,
and may also result in an effective increase in the applicable interest rate on our current or future debt obligations.
We
may mismatch the interest rate and maturity exposure of our assets and liabilities.
Our
net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest
those funds. We cannot assure you that a significant change in market interest rates will not have a material adverse effect on our net
investment income. In periods of rising interest rates, our cost of
funds could increase, which could reduce our net investment income. Typically, our fixed-rate investments are financed primarily with
equity and/or long-term debt. We may use interest rate risk management techniques in an effort to limit our exposure to interest rate
fluctuations. Such techniques may include various interest rate hedging activities to the extent permitted by the Investment Company Act.
If we do not implement these techniques properly, we could experience losses on our hedging positions, which could be material.
If
interest rates fall, our portfolio companies are likely to refinance their obligations to us at lower interest rates. Our proceeds from
these refinancings are likely to be reinvested at lower interest rates than our refinanced loans resulting in a material decrease in our
net investment income.
We
may not realize gains from our equity investments.
Our
portfolio may include common stock, warrants or other equity securities. We may also take back equity securities in exchange for our debt
investments in workouts of troubled investments. Investments in equity securities involve a number of significant risks, including the
risk of further dilution as a result of additional issuances, inability to access additional capital and failure to pay current distributions.
Investments in preferred securities involve special risks, such as the risk of deferred distributions, credit risk, illiquidity and limited
voting rights. In addition, we may from time to time make non-control, equity investments in portfolio companies. The equity interests
we invest in may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our
equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other
losses we experience. We also may be unable to realize any value if a portfolio company does not have a liquidity event, such as a sale
of the business, recapitalization or public offering, which would allow us to sell the underlying equity interests. We may seek puts or
similar rights to give it the right to sell our equity securities back to the portfolio company. We may be unable to exercise these put
rights if the issuer is in financial distress or otherwise lacks sufficient liquidity to purchase the underlying equity investment.
Investments
in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our
investment strategy contemplates investments in debt securities of foreign companies. Investing in foreign companies may expose us to
additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations,
political and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than
is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less
developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater
price volatility. Such investments will generally not represent “qualifying assets” under Section 55(a) of the Investment
Company Act.
Any
investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation
to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of short-term interest
rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation,
and political developments. We may employ hedging techniques to minimize these risks, but we offer no assurance that we will, in fact,
hedge currency risk, or that if it does, such strategies will be effective.
We
may hold a significant portion of our portfolio assets in cash, cash equivalents, money market mutual funds, U.S. government securities,
repurchase agreements and high-quality debt instruments maturing in one year or less, which may have a negative impact on our business
and operations.
We
may hold a significant portion of our portfolio assets in cash, cash equivalents, money market mutual funds, U.S. government securities,
repurchase agreements and high-quality debt instruments maturing in one year or less for many reasons, including, among others:
We
may also be required to hold higher levels of cash, money market mutual funds or other short-term securities in order to pay our expenses
or make distributions to stockholders in the ordinary course of business given the relatively high percentage of our total investment
income represented by non-cash income, including PIK income and accretion of original issue discount (“OID”). During periods
when we maintain exposure to cash, money market mutual funds, or other short-term securities, we may not participate in market movements
to the same extent that it would if we were fully invested, which may have a negative impact on our business and operations and, accordingly,
our returns may be reduced.
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Risks Relating to Our Business and Structure [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Risk [Text Block] | Risks
Relating to Our Business and Structure
Capital
markets experience periods of disruption and instability. These market conditions have historically materially and adversely affected
debt and equity capital markets in the United States and abroad, which had, and may in the future have, a negative impact on our business
and operations.
The
global capital markets are subject to disruption, which may result from, among other things, a lack of liquidity in the debt capital markets,
significant write-offs in the financial services sector, the re-pricing of credit risk in the broadly syndicated credit market or the
failure of major financial institutions. Despite actions of the U.S. federal government and foreign governments, such events have historically materially and adversely impacted the broader financial and credit markets
and reduced the availability of debt and equity capital for the market as a whole and financial services firms in particular. Equity capital may be difficult to raise because, as a BDC,
we are generally not able to issue additional shares of our common stock at a price less than NAV. In addition, our ability to incur indebtedness
or issue preferred stock is limited by applicable regulations such that our asset coverage, as defined in the Investment Company Act,
must equal at least 150% immediately after each time we incur indebtedness or issue preferred stock. The debt capital that may be available,
if at all, may be at a higher cost and on less favorable terms and conditions in the future. Any inability to raise capital could have
a negative effect on our business, financial condition and results of operations.
Market
conditions may in the future make it difficult to extend the maturity of or refinance our existing indebtedness, and any failure to do
so could have a material adverse effect on our business. The expected illiquidity of our investments may make it difficult for us to sell
such investments if required. As a result, we may realize significantly less than the value at which we have recorded our investments.
In
addition, significant changes in the capital markets, including recent volatility and disruption, have had, and may in the future have,
a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. An inability
to raise capital, and any required sale of our investments for liquidity purposes, could have a material adverse impact on our business,
financial condition and results of operations.
We
may experience fluctuations in our quarterly results.
Our
quarterly operating results will fluctuate due to a number of factors, including the level of expenses, variations in and the timing of
the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic
conditions. Our quarterly operating results will also fluctuate due to a number of other factors, including the interest rates payable
on the debt investments we make and the default rates on such investments. As a result of these factors, results for any period should
not be relied upon as being indicative of performance in future periods.
Our
success depends on the ability of our investment adviser to attract and retain qualified personnel in a competitive environment.
Our
growth requires that GECM retain and attract new investment and administrative personnel in a competitive market. GECM’s ability
to attract and retain personnel with the requisite credentials, experience and skills depends on several factors, including, but not limited
to, its ability to offer competitive wages, benefits and professional growth opportunities. Many of the entities, including investment
funds (such as private equity funds and mezzanine funds) and traditional financial services companies, which compete for experienced personnel
with GECM, have greater resources than GECM. Our
ability to grow depends on our ability to raise equity capital and/or access debt financing.
We
intend to periodically access the capital markets to raise cash to fund new investments. We expect to continue to elect to be treated
as a RIC and operate in a manner so as to qualify for the U.S. federal income tax treatment applicable to RICs. Among other things, in
order to maintain our RIC status, we must distribute to our stockholders on a timely basis generally an amount equal to at least 90% of
our investment company taxable income (as defined by the Code), and, as a result, such distributions will not be available to fund new
investments. As a result, we must borrow from financial institutions or issue additional securities to fund our growth. Unfavorable economic
or capital market conditions, including interest rate volatility, may increase our funding costs, limit our access to the capital markets
or could result in a decision by lenders not to extend credit to us. There has been and will continue to be uncertainty in the financial
markets in general. An inability to successfully access the capital or credit markets for either equity or debt could limit our ability
to grow our business and fully execute our business strategy and could decrease our earnings, if any.
If
the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratios imposed upon us by the Investment
Company Act or our lenders. Any such failure, or a tightening or general disruption of the credit markets, would affect our ability to
issue senior securities, including borrowings, and pay dividends or other distributions, which could materially impair our business.
In
addition, with certain limited exceptions we are only allowed to borrow or issue debt securities or preferred stock such that our asset
coverage, as defined in the Investment Company Act, equals at least 150% immediately after such borrowing, which, in certain circumstances,
may restrict our ability to borrow or issue debt securities or preferred stock. The amount of leverage that we may employ will depend
on GECM’s and our Board’s assessments of market and other factors at the time of any proposed borrowing or issuance of debt
securities or preferred stock. We cannot assure you that we will be able to obtain lines of credit at all or on terms acceptable to us.
Economic
recessions or downturns could impair our portfolio companies and harm our operating results.
The
economy is subject to periodic downturns that, from time to time, result in recessions or more serious adverse macroeconomic events. Our
portfolio companies are susceptible to economic slowdowns or recessions and may be unable to repay loans or notes during these periods.
Therefore, our non-performing assets may increase and the value of our portfolio may decrease during these periods as we are required
to record the market value of our investments. Adverse economic conditions may also decrease the value of collateral securing some of
our investments and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio
and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access
to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments
and harm our operating results.
A
portfolio company’s failure to satisfy financial or operating covenants in its agreements with us or other lenders could lead to
defaults and, potentially, acceleration of the time when the debt obligations are due and foreclosure on its secured assets, which could
trigger cross-defaults under other agreements and jeopardize the portfolio company’s ability to meet its obligations under the debt
that we hold. We may incur additional expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a
defaulting portfolio company. In addition, if one of our portfolio companies were to go bankrupt, depending on the facts and circumstances,
including the extent to which we actually provided significant managerial assistance to that portfolio company, a bankruptcy court might
re-characterize our debt holding and subordinate all or a portion of our claim to that of other creditors.
Global
economic, political and market conditions may adversely affect our business, results of operations and financial condition, including
our revenue growth and profitability.
The
condition of the global financial market, as well as various social and political tensions in the United States and around the world,
may contribute to increased market volatility, may have long-term effects on the U.S. and worldwide financial markets, may cause economic
uncertainties or deterioration in the United States and worldwide, and may subject our investments to heightened risks.
These
heightened risks could also include to: increased risk of default; greater social, trade, economic and political instability (including
the risk of war or terrorist activity); greater governmental involvement in the economy;
greater governmental supervision and regulation of the securities markets and market participants resulting in increased expenses related
to compliance; greater fluctuations in currency exchange rates; controls or restrictions on foreign investment and/or trade, capital controls
and limitations on repatriation of invested capital and on the ability to exchange currencies; inability to purchase and sell investments
or otherwise settle transactions (i.e., a market freeze); and unavailability of hedging techniques. During times of political uncertainty
and/or change, global markets often become more volatile. Markets experiencing political uncertainty and/or change could have substantial,
and in some periods extremely high, rates of inflation for many years. Inflation and rapid fluctuations in inflation rates typically have
negative effects on such countries’ economies and markets. Tax laws could change materially, and any changes in tax laws could have
an unpredictable effect on us, our investments and our investors.
Our
debt investments may be risky, and we could lose all or part of our investments.
Our
debt portfolios, including those held by our specialty finance companies, are subject to credit and interest rate risk. “Credit
risk” refers to the likelihood that an issuer will default in the payment of principal and/or interest on an instrument. Financial
strength and solvency of an issuer are the primary factors influencing credit risk. In addition, subordination, lack or inadequacy of
collateral or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an instrument,
and securities which are rated by rating agencies are often reviewed and may be subject to downgrade. “Interest rate risk”
refers to the risks associated with market changes in interest rates. Factors that may affect market interest rates include, without limitation,
inflation, slow or stagnant economic growth or recession, unemployment, money supply and the monetary policies of the Federal Reserve
Board and central banks throughout the world, international disorders and instability in domestic and foreign financial markets. The Federal
Reserve Board has since raised the federal funds rate and has indicated it may continue to raise the federal funds rate in the near future.
These developments, along with domestic and international debt and credit concerns, could cause interest rates to be volatile, which may
negatively impact our ability to access the debt markets on favorable terms. Interest rate changes may also affect the value of a debt
instrument indirectly (especially in the case of fixed rate securities) and directly (especially in the case of instruments whose rates
are adjustable). In general, rising interest rates will negatively impact the price of a fixed-rate debt instrument and falling interest
rates will have a positive effect on price. Adjustable rate instruments may also react to interest rate changes in a similar manner although
generally to a lesser degree (depending, however, on the characteristics of the reset terms, including, among other factors, the index
chosen, frequency of reset and reset caps or floors). Interest rate sensitivity is generally more pronounced and less predictable in instruments
with uncertain payment or prepayment schedules. We expect that we will periodically experience imbalances in the interest rate sensitivities
of our assets and liabilities and the relationships of various interest rates to each other. In a changing interest rate environment,
we may not be able to manage this risk effectively, which in turn could adversely affect our performance.
We
may acquire other funds, portfolios of assets or pools of debt and those acquisitions may not be successful.
We
may acquire other funds, portfolios of assets or pools of debt investments. Any such acquisition program has a number of risks, including
among others:
Our
failure to maintain our status as a BDC would reduce our operating flexibility.
We
elected to be regulated as a BDC under the Investment Company Act. The Investment Company Act imposes numerous constraints on the operations
of BDCs and their external advisers. For example, BDCs are required to invest at least 70% of their gross assets in specified types of
securities, primarily in private companies or illiquid U.S. public companies below a certain market capitalization, cash, cash equivalents,
U.S. government securities and other high-quality debt investments that mature in one year or less. Furthermore, any failure to comply
with the requirements imposed on BDCs by the Investment Company Act could cause the SEC to bring an enforcement action against us and/or
expose us to claims of private litigants. In addition, upon approval of a majority of our voting securities (as defined under the Investment
Company Act), we may elect to withdraw our status as a BDC. If we decide to withdraw our BDC election, or if we otherwise fail to qualify,
or to maintain our qualification, as a BDC, we may be subject to substantially greater regulation under the Investment Company Act as
a closed-end management investment company. Compliance with such regulations would significantly decrease our operating flexibility and
would significantly increase our costs of doing business.
Regulations
governing our operations as a BDC affect our ability to raise additional capital and the way in which we do so. As a BDC, the necessity
of raising additional capital may expose us to risks, including the typical risks associated with leverage.
We
may issue debt securities or preferred stock and/or borrow money from banks or other financial institutions, referred to collectively
as “senior securities,” up to the maximum amount permitted under the Investment Company Act. Under the provisions of the Investment
Company Act applicable to BDCs, we are permitted to issue senior securities (e.g., notes and preferred stock) in amounts such that our
asset coverage ratio, as defined in the Investment Company Act, equals at least 150% of gross assets less all liabilities and indebtedness
not represented by senior securities, after each issuance of senior securities. If the value of our assets declines, we may be unable
to satisfy this test. If that happens, we may be required to sell a portion of our investments and, depending on the nature of our leverage,
repay a portion of our indebtedness at a time when such sales may be disadvantageous. Also, any amounts that we use to service our indebtedness
would not be available for distributions to our stockholders. Furthermore, as a result of issuing senior securities, we would also be
exposed to typical risks associated with leverage, including an increased risk of loss.
Our
Board may change our investment objectives, operating policies and strategies without prior notice or stockholder approval, the effects
of which may be adverse.
Our
Board has the authority to modify or waive our investment objectives, current operating policies, investment criteria and strategies without
prior notice and without stockholder approval. We cannot predict the effect any changes to our current operating policies, investment
criteria and strategies would have on our business, NAV and operating results.
We
may have difficulty paying our required distributions under applicable tax rules if we recognize income before or without receiving cash
representing such income.
For
U.S. federal income tax purposes, we may be required to include in income certain amounts before our receipt of the cash attributable
to such amounts, such as OID, which may arise if we receive warrants in connection with the making of a loan or possibly in other circumstances,
or PIK interest, which represents contractual interest added to the loan balance and due at the end of the loan term. For example, such
OID or increases in loan balances as a result of PIK interest will be included in income before we receive any corresponding cash payments.
Also, we may be required to include in income other amounts that we will not receive in cash, including, for example, non-cash income
from PIK securities, deferred payment securities and hedging and foreign currency transactions. In addition, we intend to seek debt investments
in the secondary market that represent attractive risk-adjusted returns, taking into account both stated interest rates and current market
discounts to par value. Such market discount may be included in income before we receive any corresponding cash payments. Certain of our
debt investments earn PIK interest.
Since
we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the U.S. federal income
tax requirement to distribute generally an amount equal to at least 90% of our investment company taxable income to maintain our status
as a RIC. Accordingly, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt
or equity capital or
reduce new investment originations to meet these distribution requirements. If we are not able to obtain cash from other sources, we may
fail to qualify as a RIC and thus be subject to additional corporate-level income taxes.
However,
in order to satisfy the Annual Distribution Requirement for a RIC, we may, but have no current intention to, declare a large portion of
a dividend in shares of our common stock instead of in cash. As long as a portion of such dividend is paid in cash (which portion may
be as low as 20% of such dividend, or 10% with respect to distributions declared on or before June 30, 2022) and certain requirements
are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes.
We
may expose ourselves to risks associated with the inclusion of non-cash income prior to receipt of cash.
To
the extent we invest in OID instruments, including PIK loans, zero coupon bonds, and debt securities with attached warrants, investors
will be exposed to the risks associated with the inclusion of such non-cash income in taxable and accounting income prior to receipt of
cash.
The
deferred nature of payments on PIK loans creates specific risks. Interest payments deferred on a PIK loan are subject to the risk that
the borrower may default when the deferred payments are due in cash at the maturity of the loan. Since the payment of PIK income does
not result in cash payments to us, we may also have to sell some of our investments at times we would not consider advantageous, raise
additional debt or equity capital or reduce new investment originations (and thus hold higher cash or cash equivalent balances, which
could reduce returns) to pay our expenses or make distributions to stockholders in the ordinary course of business, even if such loans
do not default. An election to defer PIK interest payments by adding them to principal increases our gross assets and, thus, increases
future base management fees to GECM and, because interest payments will then be payable on a larger principal amount, the PIK election
also increases GECM’s future Income Incentive Fees at a compounding rate. The deferral of interest on a PIK loan increases its loan-to-value
ratio, which is a measure of the riskiness of a loan.
More
generally, market prices of OID instruments are more volatile because they are impacted to a greater extent by interest rate changes than
instruments that pay interest periodically in cash. Ordinarily, OID would also create the risk of non-refundable cash payments to GECM
based on non-cash accruals that may never be realized; however, this risk is mitigated since the Investment Management Agreement requires
GECM to defer any incentive fees on Accrued Unpaid Income (as defined below), the effect of which is that Income Incentive Fees otherwise
payable with respect to Accrued Unpaid Income become payable only if, as, when and to the extent cash is received by us or our consolidated
subsidiaries in respect thereof.
Additionally,
we may be required to make distributions of non-cash income to stockholders without receiving any cash so as to satisfy certain requirements
necessary to maintain our RIC status for U.S. federal income tax purposes. Such required cash distributions may have to be paid from the
sale of our assets without investors being given any notice of this fact. The required recognition of non-cash income, including PIK and
OID interest, for U.S. federal income tax purposes may have a negative impact on liquidity because it represents a non-cash component
of our taxable income that must, nevertheless, be distributed to investors to avoid us being subject to corporate level taxation.
We
may choose to pay distributions in our own stock, in which case stockholders may be required to pay tax in excess of the cash they receive.
We
may distribute a portion of our taxable distributions in the form of shares of our stock. In accordance with certain applicable U.S. Treasury
regulations and other related administrative pronouncements issued by the Internal Revenue Service, a RIC may be eligible to treat a distribution
of its own stock as fulfilling its RIC distribution requirements if each stockholder is permitted to elect to receive his or her entire
distribution in either cash or stock of the RIC, subject to the satisfaction of certain guidelines. If too many stockholders elect to
receive cash, each stockholder electing to receive cash must receive a pro rata amount of cash (with the balance of the distribution paid
in stock). If these and certain other requirements are met, for U.S. federal income tax purposes, the amount of the distribution paid
in stock generally will be equal to the amount of cash that could have been received instead of stock. Taxable stockholders receiving
such distributions will be required to include the full amount of the distribution as ordinary income (or as long-term capital gain to
the extent such distribution is properly reported as a capital gain dividend) to the extent of their share of our current and accumulated
earnings and profits for U.S. federal income tax purposes. As a result, a U.S. stockholder may be subject to tax with
respect to such distributions in excess of any cash received. If a U.S. stockholder sells the stock it receives as a distribution in order
to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the
market price of our stock at the time of the sale. Furthermore, with respect to non-U.S. stockholders, we may be required to withhold
U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in stock. In
addition, if a significant number of our stockholders determine to sell shares of our stock in order to pay taxes owed on distributions,
such sales may put downward pressure on the trading price of our stock.
We
may expose our self to risks if we engage in hedging transactions.
If
we engage in hedging transactions, we may expose our self to risks associated with such transactions. We may utilize instruments such
as forward contracts, currency options and interest rate swaps, caps, collars and floors to seek to hedge against fluctuations in the
relative values of our portfolio positions from changes in currency exchange rates and market interest rates. Hedging against a decline
in the values of our portfolio positions does not eliminate the possibility of fluctuations in the values of such positions or prevent
losses if the values of such positions decline. Such hedging transactions may also limit the opportunity for gain if the values of the
underlying portfolio positions increase. It may not be possible to hedge against an exchange rate or interest rate fluctuation that is
generally anticipated because we may not be able to enter into a hedging transaction at an acceptable price. Moreover, for a variety of
reasons, we may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged.
Any
such imperfect correlation may prevent us from achieving the intended hedge and expose us to risk of loss. In addition, it may not be
possible to hedge fully or perfectly against currency fluctuations affecting the value of securities denominated in non-U.S. currencies
because the value of those securities is likely to fluctuate as a result of factors not related to currency fluctuations.
We
will be subject to corporate-level U.S. federal income tax if we are unable to qualify as a RIC under the Code.
No
assurance can be given that we will be able to qualify for and maintain RIC status. To maintain RIC tax treatment under the Code, we must
meet certain annual distribution, source of income and asset diversification requirements.
The
Annual Distribution Requirement for a RIC will be satisfied if we distribute to our stockholders on an annual basis at least 90% of our
net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, if any. Because we may
use debt financing, we may be subject to asset coverage ratio requirements under the Investment Company Act and financial covenants under
loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution
requirement. If we are unable to make the required distributions, we could fail to qualify for RIC tax treatment and thus become subject
to corporate-level U.S. federal income tax.
The
source of income requirement will be satisfied if we obtain at least 90% of our income for each year from dividends, interest, gains from
the sale of stock or securities or similar sources.
The
asset diversification requirement will be satisfied if we meet asset diversification requirements at the end of each quarter of our taxable
year. Failure to meet the asset diversification requirements could result in us having to dispose of investments quickly in order to prevent
the loss of RIC status. Because most of our investments will be relatively illiquid, any such dispositions could be made at disadvantageous
prices and could result in substantial losses. Further, the illiquidity of our investments may make them difficult or impossible to dispose
of in a timely manner.
If
we fail to qualify for RIC tax treatment for any reason and become subject to corporate U.S. federal income tax, the resulting corporate
taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions and
the value of our shares of common stock.
We
cannot predict how tax reform legislation will affect us, our investments, or our stockholders, and any such legislation could adversely
affect our business.
Legislative
or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly
under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. Recent
legislation has made many changes to the Code,
including significant changes to the taxation of business entities, the deductibility of interest expense, and the tax treatment of capital
investment. We cannot predict with certainty how any changes in the tax laws might affect us, our stockholders, or our portfolio investments.
New legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could
significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us
and our stockholders of such qualification, or could have other adverse consequences. Investors are urged to consult with their tax adviser
regarding tax legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our
securities.
The
incentive fee structure and the formula for calculating the management fee may incentivize GECM to pursue speculative investments, advise
us to use leverage when it may be unwise to do so, or advise us to refrain from reducing debt levels when it would otherwise be appropriate
to do so.
The
incentive fee payable by us to GECM creates an incentive for GECM to pursue investments on our behalf that are riskier or more speculative
than would be the case in the absence of such a compensation arrangement. The incentive fee payable to GECM is calculated based on a percentage
of our return on invested capital. In addition, GECM’s base management fee is calculated on the basis of our gross assets, including
assets acquired through the use of leverage. This may encourage GECM to use leverage to increase the aggregate amount of and the return
on our investments, even when it may not be appropriate to do so, and to refrain from reducing debt levels when it would otherwise be
appropriate to do so. The use of leverage increases our likelihood of default, which would impair the value of our securities. In addition,
GECM will receive the incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive
fee based on income, there will be no hurdle rate applicable to the portion of the incentive fee based on net capital gains. As a result,
GECM may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing
securities. Such a practice could result in us investing in more speculative securities than would otherwise be the case, which could
result in higher investment losses, particularly during economic downturns.
We
may invest in the securities and instruments of other investment companies, including private funds, and we will bear our ratable share
of any such investment company’s expenses, including management and performance fees. We will also remain obligated to pay management
and incentive fees to GECM with respect to the assets invested in the securities and instruments of other investment companies. With respect
to each of these investments, each of our stockholders will bear its share of the management and incentive fee payable to GECM, as well
as indirectly bearing the management and performance fees and other expenses of any investment companies in which we invest.
In
addition, if we purchase our debt instruments and such purchase results in our recording a net gain on the extinguishment of debt for
financial reporting and tax purposes, such net gain will be included in our pre-incentive fee net investment income for purposes of determining
the Income Incentive Fee payable to GECM under the Investment Management Agreement.
Finally,
the incentive fee payable by us to GECM also may create an incentive for GECM to invest on our behalf in instruments that have a deferred
interest feature, such as investments with PIK provisions. Under these investments, we would accrue the interest over the life of the
investment but would typically not receive the cash income from the investment until the end of the term or upon the investment being
called by the issuer. Our net investment income used to calculate the income portion of our incentive fee, however, includes accrued interest.
The portion of the incentive fee that is attributable to deferred interest, such as PIK, will not be paid to GECM until we receive such
interest in cash. Even though such portion of the incentive fee will be paid only when the accrued income is collected, the accrued income
is capitalized and included in the calculation of the base management fee. In other words, when deferred interest income (such as PIK)
is accrued, a corresponding Income Incentive Fee (if any) is also accrued (but not paid) based on that income. After the accrual of such
income, it is capitalized and added to the debt balance, which increases our total assets and thus the base management fee paid following
such capitalization. If any such interest is reversed in connection with any write-off or similar treatment of the investment, we will
reverse the Income Incentive Fee accrual and an Income Incentive Fee will not be payable with respect to such uncollected interest. If
a portfolio company defaults on a loan, it is possible that accrued interest previously used in the calculation of whether GECM met the
hurdle rate to earn the incentive fee will become uncollectible. A
general increase in interest rates will likely have the effect of making it easier for GECM to receive incentive fees, without necessarily
resulting in an increase in our net earnings.
Given
the structure of the Investment Management Agreement, any general increase in interest rates will likely have the effect of making it
easier for GECM to meet the quarterly hurdle rate for payment of Income Incentive Fees under the Investment Management Agreement without
any additional increase in relative performance on the part of GECM. In addition, in view of the catch-up provision applicable to Income
Incentive Fees under the Investment Management Agreement, GECM could potentially receive a significant portion of the increase in our
investment income attributable to such a general increase in interest rates. If that were to occur, our increase in net earnings, if any,
would likely be significantly smaller than the relative increase in GECM’s Income Incentive Fee resulting from such a general increase
in interest rates.
GECM
has the right to resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in
a disruption in our operations that could adversely affect our financial condition, business and results of operations.
GECM
has the right, under the Investment Management Agreement, to resign at any time upon not more than 60 days’ written notice, whether
we have found a replacement or not. If GECM resigns, we may not be able to find a new investment adviser or hire internal management with
similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable
to do so quickly, our operations are likely to experience a disruption; our financial condition, business and results of operations, as
well as our ability to pay distributions, are likely to be adversely affected; and the market price of our common stock may decline. In
addition, the coordination of our internal management and investment activities is likely to suffer if we are unable to identify and reach
an agreement with a single institution or group of executives having the expertise possessed by our investment adviser and its affiliates.
Even if we are able to retain comparable management, whether internal or external, the integration of such management and their lack of
familiarity with our investment objective and current investment portfolio may result in additional costs and time delays that may adversely
affect our financial condition, business and results of operations.
We
incur significant costs as a result of being a publicly traded company.
As
a publicly traded company, we incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements
applicable to a company whose securities are registered under Exchange Act, as well as additional corporate governance requirements, including
requirements under the Sarbanes-Oxley Act, the Dodd-Frank Act and other rules implemented by our government.
Changes
in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
We
and our portfolio companies are subject to applicable local, state and federal laws and regulations. New legislation may be enacted or
new interpretations, rulings or regulations could be adopted, including those governing the types of investments we are permitted to make,
any of which could harm us and you, potentially with retroactive effect. Additionally, any changes to the laws and regulations governing
our operations relating to permitted investments may cause us to alter our investment strategy in order to avail ourself of new or different
opportunities. Such changes could result in material differences to the strategies and plans and may result in our investment focus shifting
from the areas of expertise of GECM to other types of investments in which the investment committee may have less expertise or little
or no experience. Thus, any such changes, if they occur, could have a material adverse effect on our results of operations.
In
October 2020, the SEC adopted a revised version of Rule 18f-4, which is designed to modernize the regulation of the use of derivatives
by registered investment companies and BDCs. Among other things, Rule 18f-4 limits a fund’s derivatives exposure through a value-at-risk
test and requires the adoption and implementation of a derivatives risk management program subject to certain exceptions. Additionally,
subject to certain conditions, funds that do not invest heavily in derivatives may be deemed limited derivatives users and are not subject
to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, the SEC also eliminated the asset segregation and
cover framework arising from prior SEC guidance for covering derivatives and certain financial instruments. Rule 18f-4 could limit our
ability to engage in certain derivatives and other transactions and/or increase the costs of such transactions, which could adversely
affect our value or performance. There
is, and will be, uncertainty as to the value of our portfolio investments.
Under
the Investment Company Act, we are required to carry our portfolio investments at market value or, if there is no readily available market
value, at fair value as determined by us in accordance with our written valuation policy, with our Board having final responsibility for
overseeing, reviewing and approving, in good faith, our estimate of fair value. Often, there will not be a public market for the securities
of the privately held companies in which we invest. As a result, we will value these securities on a quarterly basis at fair value based
on input from management, third-party independent valuation firms and our audit committee, with the oversight, review and approval of
our Board. We consult with an independent valuation firm in valuing all securities in which we invest classified as “Level 3,”
other than investments which are less than 1% of NAV as of the applicable quarter end. See “Management’s Discussion and Analysis
of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates—Valuation of Portfolio Investments.”
The
determination of fair value and consequently, the amount of unrealized gains and losses in our portfolio, are subjective and dependent
on a valuation process approved and overseen by our Board. Factors that may be considered in determining the fair value of our investments
include, among others, estimates of the collectability of the principal and interest on our debt investments and expected realization
on our equity investments, as well as external events, such as private mergers, sales and acquisitions involving comparable companies.
Because such valuations, and particularly valuations of private securities and private companies and small cap public companies, are inherently
uncertain, they may fluctuate over short periods of time and may be based on estimates. Our determinations of fair value may differ materially
from the values that would have been used if a ready market for these securities existed. Due to this uncertainty, our fair value determinations
may cause our NAV on a given date to materially misstate the value that we may ultimately realize on one or more of our investments. As
a result, investors purchasing our securities based on an overstated NAV would pay a higher price than the value of our investments might
warrant. Conversely, investors selling securities during a period in which the NAV understates the value of our investments will receive
a lower price for their securities than the value of our investments might otherwise warrant.
Our
financial condition and results of operations depend on our ability to effectively manage and deploy capital.
Our
ability to achieve our investment objective depends on our ability to effectively manage and deploy capital, which depends, in turn, on
GECM’s ability to identify, evaluate and monitor, and our ability to finance and invest in, companies that meet our investment criteria.
Accomplishing
our investment objective on a cost-effective basis is largely a function of GECM’s handling of the investment process, its ability
to provide competent, attentive and efficient services and its access to investments offering acceptable terms. In addition to monitoring
the performance of our existing investments, GECM may also be called upon, from time to time, to provide managerial assistance to some
of our portfolio companies. These demands on their time may distract them or slow the rate of investment.
Even
if we are able to grow and build out our investment operations, any failure to manage our growth effectively could have a material adverse
effect on our business, financial condition, results of operations and prospects. Our results of operations will depend on many factors,
including the availability of opportunities for investment, readily accessible short and long-term funding alternatives in the financial
markets and economic conditions.
We
may hold assets in cash or short-term treasury securities in situations where we or GECM expects downward pricing in the high yield market.
Our strategic decision not to be fully invested may, from time to time, reduce funds available for distribution and cause downward pressure
on the price of our common stock.
The
failure in cyber security systems, as well as the occurrence of events unanticipated in our disaster recovery systems and management continuity
planning, could impair our ability to conduct business effectively.
The
occurrence of a disaster such as a cyber-attack, a natural catastrophe, an epidemic or pandemic, an industrial accident, a terrorist attack
or war, events anticipated or unanticipated in our disaster recovery systems, or a failure in externally provided data systems, could
have an adverse effect on our ability to conduct business and on our results of operations and financial condition, particularly if those
events affect our computer-based data processing,
transmission, storage and retrieval systems or destroy data. Our ability to effectively conduct our business could be severely compromised.
The financial markets we operate in are dependent upon third-party data systems to link buyers and sellers and provide pricing information.
We
depend heavily upon computer systems to perform necessary business functions. Our computer systems could be subject to cyber-attacks and
unauthorized access, such as physical and electronic break-ins or unauthorized tampering. Like other companies, we expect to experience
threats to our data and systems, including malware and computer virus attacks, unauthorized access, system failures and disruptions. These
failures and disruptions may be more likely to occur as a result of employees working remotely. If one or more of these events occurs,
it could potentially jeopardize the confidential, proprietary and other information processed and stored in, and transmitted through,
our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in damage to
our reputation, financial losses, litigation, increased costs, regulatory penalties and/or customer dissatisfaction or loss, respectively.
Terrorist
attacks, acts of war, natural disasters or an epidemic or pandemic may affect the market for our securities, impact the businesses in
which we invest and harm our business, operating results and financial condition.
Terrorist
acts, acts of war, natural disasters or an epidemic or pandemic may disrupt our operations, as well as the operations of the businesses
in which we invest. Such acts, including, for example, Russia’s February 2022 invasion of Ukraine, have created, and continue to
create, economic and political uncertainties and have contributed to global economic instability. Additionally, a public health epidemic
or pandemic, including, for example, COVID-19, poses the risk that we, GECM, our portfolio companies or other business partners may be
prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated
by governmental authorities. While it is not possible at this time to estimate the impact that any such event could have on our business,
the continued occurrence thereof and the measures taken by the governments of countries affected in response thereto could disrupt the
supply chain and the manufacture or shipment of products and adversely impact our business, financial condition or results of operations.
Future
terrorist activities, military or security operations, or natural disasters could further weaken the domestic/global economies and create
additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have
a material adverse impact on our business, operating results and financial condition. Losses from terrorist attacks and natural disasters
are generally uninsurable.
There
are significant potential conflicts of interest that could impact our investment returns.
Certain
of our executive officers and directors, and members of the investment committee of GECM, serve or may serve as officers, directors or
principals of other entities, including ICAM or funds managed by ICAM, and affiliates of GECM and investment funds managed by our affiliates.
Accordingly, they may have obligations to investors in those entities, the fulfillment of which might not be in our or our stockholders’
best interests or that may require them to devote time to services for other entities, which could interfere with the time available to
provide services to us. For example, Matt Kaplan, our President and Chief Executive Officer, is a portfolio manager at GECM and a member
of its investment committee.
Although
funds managed by GECM may have different primary investment objectives than we do, they may from time to time invest in asset classes
similar to those targeted by us. GECM is not restricted from raising an investment fund with investment objectives similar to ours. Any
such funds may also, from time to time, invest in asset classes similar to those targeted by us. It is possible that we may not be given
the opportunity to participate in certain investments made by investment funds managed by investment managers affiliated with GECM. GECC’s
participation in any negotiated co-investment opportunities (other than those in which the only term negotiated is price) with investment
funds managed by investment managers under common control with GECM is subject to compliance with the SEC order dated May 12, 2020
(Release No. 33864).
We
will pay management and incentive fees to GECM and will reimburse GECM for certain expenses it incurs. In addition, investors in our common
stock will invest on a gross basis and receive distributions on a net basis after expenses, resulting in, among other things, a lower
rate of return than one might achieve through direct investments. GECM’s
management fee is based on a percentage of our total assets (other than cash or cash equivalents but including assets purchased with borrowed
funds) and GECM may have conflicts of interest in connection with decisions that could affect our total assets, such as decisions as to
whether to incur indebtedness.
The
part of the incentive fee payable by us that relates to our pre-incentive fee net investment income is computed and paid on income that
may include interest that is accrued but not yet received in cash. If a portfolio company defaults on a loan or note that is structured
to provide accrued interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become
uncollectible.
The
Investment Management Agreement renews for successive annual periods if approved by our Board or by the affirmative vote of the holders
of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested
persons. However, both we and GECM have the right to terminate the agreement without penalty upon 60 days’ written notice to the
other party. Moreover, conflicts of interest may arise if GECM seeks to change the terms of the Investment Management Agreement, including,
for example, the terms for compensation.
Pursuant
to the Administration Agreement, we pay GECM our allocable portion of overhead and other expenses incurred by GECM in performing its obligations
under the Administration Agreement, including our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer
and their respective staffs.
As
a result of the arrangements described above, there may be times when our management team has interests that differ from those of our
stockholders, giving rise to a conflict.
Our
stockholders may have conflicting investment, tax and other objectives with respect to their investments in us. The conflicting interests
of individual stockholders may relate to or arise from, among other things, the nature of our investments, the structure or the acquisition
of our investments, and the timing of disposition of our investments. As a consequence, conflicts of interest may arise in connection
with decisions made by GECM, including with respect to the nature or structuring of our investments, that may be more beneficial for one
stockholder than for another stockholder, especially with respect to stockholders’ individual tax situations. In selecting and structuring
investments appropriate for us, GECM will consider the investment and tax objectives of us and our stockholders, as a whole, not the investment,
tax or other objectives of any stockholder individually.
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Risks Relating to Indebtedness [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General Description of Registrant [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Risk [Text Block] | Risks
Relating to Indebtedness
We
may borrow additional money, which would magnify the potential for loss on amounts invested and may increase the risk of investing with
us.
We
have existing indebtedness and may in the future borrow additional money, including borrowings under the Loan Agreement, each of which
magnifies the potential for loss on amounts invested and may increase the risk of investing with us. Our ability to service our existing
and potential future debt depends largely on our financial performance and is subject to prevailing economic conditions and competitive
pressures. The amount of leverage that we could employ at any particular time will depend on GECM’s and our Board’s assessment
of market and other factors at the time of any proposed borrowing.
Borrowings,
also known as leverage, magnify the potential for gain or loss on amounts invested and, therefore, increase the risks associated with
investing in our securities. Holders of such debt securities would have fixed dollar claims on our consolidated assets that would be superior
to the claims of our common stockholders or any preferred stockholders.
If
the value of our consolidated assets decreases while we have debt outstanding, leveraging would cause our NAV to decline more sharply
than it otherwise would have had we not leveraged. Similarly, any decrease in our consolidated income while we have debt outstanding would
cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to
make common stock distributions. We cannot assure you that our leveraging strategy will be successful.
Illustration.
The following tables illustrate the effect of leverage on returns from an investment in our common stock
assuming various annual returns, net of expenses. The first table assumes the actual amount of senior securities
outstanding as of December 31, 2022. The second table assumes the maximum amount of senior securities
outstanding as permitted under our asset coverage ratio of 150%. The calculations in the tables below are
hypothetical and actual returns may be higher or lower than those appearing below. Table
1
Table
2
Incurring
additional indebtedness could increase the risk in investing in our Company.
In
2018, our stockholders approved of the reduction of our required minimum asset coverage ratio from 200% to 150%, permitting us to incur
additional leverage. The use of leverage magnifies the potential for gain or loss on amounts invested. The use of leverage is generally
considered a speculative investment technique and increases the risks associated with investing in our securities.
As
June 30, 2023, we had approximately $150.9 million of total outstanding indebtedness in the aggregate under the Loan Agreement
and three series of senior securities (unsecured notes)—the GECCM Notes, the GECCN Notes and the GECCO Notes—and our asset
coverage ratio was 161.5%.
On
May 5, 2021, we entered into the Loan Agreement, which provides for a senior secured revolving line of credit of up to $25 million
(subject to a borrowing base). As of June 30, 2023, there were $5.0 million in borrowings outstanding under the revolving line.
We may request to increase the revolving line in an aggregate amount not to exceed $25 million, which increase is subject to the
sole discretion of CNB.
If
we are unable to meet the financial obligations under any of the Loan Agreement or any series of our outstanding unsecured notes, the
holders of such indebtedness would have a superior claim to our assets over our common stockholders, and the lender or noteholders may
seek to recover against our assets in the event of a default by us. If the value of our assets decreases, leveraging would cause NAV to
decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses. Similarly, any decrease in our revenue
or income will cause our net income to decline more sharply than it would have had we not borrowed. Such a decline would also negatively
affect our ability to make distributions with respect to our common stock. Our ability to service any debt depends largely on our financial
performance and is subject to prevailing economic conditions and competitive pressures. Moreover, as the base management fee payable to
GECM, our investment advisor, is payable based on the average value of our total assets, including those assets acquired through the use
of leverage, GECM will have a financial incentive to incur leverage, which may not be consistent with our stockholders’ interests.
In addition, our common stockholders bear the burden of any increase in our fees or expenses as a result of our use of leverage, including
interest expenses and any increase in the base management fee payable to GECM.
If
our asset coverage ratio falls below the required limit, we will not be able to incur additional debt until we are able to comply with
the asset coverage ratio applicable to us. This could have a material adverse effect on our operations, and we may not be able to make
distributions to stockholders. The actual amount of leverage that we employ will depend on GECM’s and our Board’s assessment
of market and other factors at the time of any proposed borrowing. We cannot assure you that we will be able to obtain credit at all or
on terms acceptable to us. Incurring
additional leverage may magnify our exposure to risks associated with changes in interest rates, including fluctuations in interest rates
which could adversely affect our profitability.
If
we incur additional leverage, including through the offering of Notes hereby, general interest rate fluctuations may have a more significant
negative impact on our financial condition and results of operations than they would have absent such additional incurrence, and, accordingly,
may have a material adverse effect on our investment objectives and rate of return on investment capital. A portion of our income will
depend upon the difference between the rate at which we borrow funds and the interest rate on the debt securities in which we invest.
Because we may borrow money to make investments and may issue debt securities, preferred stock or other securities, our net investment
income is dependent upon the difference between the rate at which we borrow funds or pay interest or dividends on such debt securities,
preferred stock or other securities and the rate at which we invest these borrowed funds.
We
expect that a majority of our investments in debt will continue to be at floating rates with a floor. As a result, significant increase
in market interest rates could result in an increase in our non-performing assets and a decrease in the value of our portfolio because
our floating-rate loan portfolio companies may be unable to meet higher payment obligations. In periods of rising interest rates, our
cost of funds would increase, resulting in a decrease in our net investment income. Incurring additional leverage will magnify the impact
of an increase to our cost of funds. In addition, a decrease in interest rates may reduce net income, because new investments may be made
at lower rates despite the increased demand for our capital that the decrease in interest rates may produce. To the extent our additional
borrowings are in fixed-rate instruments, we may be required to invest in higher-yield securities in order to cover our interest expense
and maintain our current level of return to stockholders, which may increase the risk of an investment in our securities.
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Entity Address, Postal Zip Code | 02453 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contact Personnel Name | Matt Kaplan | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8.25% Notes due 2020 [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Amount | [1] | $ 33,646 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Coverage per Unit | [2] | $ 6,168 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Average Market Value per Unit | [3] | $ 1.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6.50% Notes due 2022 ("GECCL Notes") [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Amount | [1] | $ 32,631 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Coverage per Unit | [2] | $ 5,010 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Average Market Value per Unit | [3] | $ 1.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GECCL Notes [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Amount | [1] | $ 30,293 | $ 32,631 | $ 32,631 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Coverage per Unit | [2] | $ 1,671 | $ 1,701 | $ 2,393 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Average Market Value per Unit | [3] | $ 0.89 | $ 1.01 | $ 1.01 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GECCM Notes [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Amount | [1] | $ 45,610 | $ 45,610 | $ 45,610 | $ 45,610 | $ 46,398 | $ 46,398 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Coverage per Unit | [2] | $ 1,615 | $ 1,544 | $ 1,511 | $ 1,671 | $ 1,701 | $ 2,393 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Average Market Value per Unit | [3] | $ 0.98 | $ 0.99 | $ 1.00 | $ 0.84 | $ 1.01 | $ 0.98 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock, Long-Term Debt, and Other Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Title [Text Block] | GECCM Notes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Authorized [Shares] | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Not Held [Shares] | 45,600,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GECCN Notes [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Amount | [1] | $ 42,823 | $ 42,823 | $ 42,823 | $ 42,823 | $ 45,000 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Coverage per Unit | [2] | $ 1,615 | $ 1,544 | $ 1,511 | $ 1,671 | $ 1,701 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Average Market Value per Unit | [3] | $ 0.99 | $ 1.00 | $ 1.00 | $ 0.84 | $ 1.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock, Long-Term Debt, and Other Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Title [Text Block] | GECCN Notes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Authorized [Shares] | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Not Held [Shares] | 42,800,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
GECCO Notes [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Amount | [1] | $ 57,500 | $ 57,500 | $ 57,500 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Coverage per Unit | [2] | $ 1,615 | $ 1,544 | $ 1,511 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Average Market Value per Unit | [3] | $ 0.96 | $ 1.00 | $ 1.02 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock, Long-Term Debt, and Other Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Title [Text Block] | GECCO Notes | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Authorized [Shares] | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Not Held [Shares] | 57,500,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revolving Credit Facility [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Highlights [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Amount | [1] | $ 5,000 | $ 10,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Coverage per Unit | [2] | $ 1,615 | $ 1,544 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Senior Securities Average Market Value per Unit | [3] | $ 0 | $ 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Capital Stock, Long-Term Debt, and Other Securities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Title [Text Block] | Common Stock | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Authorized [Shares] | 100,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Outstanding Security, Not Held [Shares] | 7,601,958 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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1 Year Great Elm Capital Chart |
1 Month Great Elm Capital Chart |
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