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TABLE OF CONTENTS

 

Filed Pursuant to Rule 497

Registration Statement No. 333-203147

 

 

Supplement, dated November 3, 2017
to

Prospectus, dated April 26, 2017,

Prospectus Supplement, dated May 10, 2017

and
Prospectus Supplement, dated July 18, 2017

 

This supplement contains information which amends, supplements or modifies certain information contained in the Prospectus of Main Street Capital Corporation (the “Company”) dated April 26, 2017 (the “Prospectus”), as supplemented by the Prospectus Supplement dated May 10, 2017 (the “ATM Prospectus Supplement”) and the Prospectus Supplement dated July 18, 2017 (the “DSPP Prospectus Supplement” and, together with the ATM Prospectus Supplement, the “Prospectus Supplements”), each as further supplemented from time to time including hereby. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus Supplements or Prospectus, as applicable.

 

Investing in our common stock involves a high degree of risk, and should be considered highly speculative. See “Risk Factors” beginning on page 14 of the Prospectus, “Supplementary Risk Factors” beginning on page S-6 of the DSPP Prospectus Supplement and in Annex A hereto to read about factors you should consider, including the risk of leverage and dilution, before investing in our common stock.

 

STATUS OF OUR OFFERINGS

 

On May 10, 2017, we established an at-the-market program to which the ATM Prospectus Supplement relates and through which we may sell, from time to time and at our sole discretion up to 4,500,000 shares of our common stock. As of the date hereof, we have sold 1,762,919 shares of our common stock for net proceeds of approximately $68.2 million, after commissions to the Sales Agents on shares sold and offering costs, under the at-the-market program. As a result, 2,737,081 shares of our common stock remain available for sale under the at-the-market program.

 

On July 18, 2017, we established a Dividend Reinvestment and Direct Stock Purchase Plan (the “Plan”), which includes the direct stock purchase feature to which the DSPP Prospectus Supplement relates and through which we are offering up to 1,000,000 shares of our common stock.  As of the date hereof, we have sold 1,151 shares of our common stock for gross proceeds of approximately $46.0 thousand under the direct stock purchase feature of the Plan. As a result, 998,849 shares of our common stock remain available for sale under the direct stock purchase feature of the Plan.

 

FORM 10-Q

 

On November 3, 2017, we filed our Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2017 (the “Report”) with the Securities and Exchange Commission. We have attached the Report as Annex A to this supplement.

 



 

Annex A

 


Table of Contents

 

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

FORM 10-Q

(Mark One)    

ý

 

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

For the quarterly period ended September 30, 2017

OR

o

 

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

For the transition period from:                             to                              

Commission File Number: 001-33723

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

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

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

 

77056
(Zip Code)

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

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

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

        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

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

Large accelerated filer ý   Accelerated filer o   Non-accelerated filer o
(do not check if
smaller reporting company)
  Smaller reporting company o

Emerging growth company o

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

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

        The number of shares outstanding of the issuer's common stock as of November 2, 2017 was 58,097,927.


Table of Contents


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.

 

Consolidated Financial Statements

   

 

Consolidated Balance Sheets—September 30, 2017 (unaudited) and December 31, 2016

  1

 

Consolidated Statements of Operations (unaudited)—Three and nine months ended September 30, 2017 and 2016

  2

 

Consolidated Statements of Changes in Net Assets (unaudited)—Nine months ended September 30, 2017 and 2016

  3

 

Consolidated Statements of Cash Flows (unaudited)—Nine months ended September 30, 2017 and 2016

  4

 

Consolidated Schedule of Investments (unaudited)—September 30, 2017

  5

 

Consolidated Schedule of Investments—December 31, 2016

  37

 

Notes to Consolidated Financial Statements (unaudited)

  71

 

Consolidated Financial Statement Schedule

  117

 

Consolidated Schedules of Investments in and Advances to Affiliates (unaudited)—Nine months ended September 30, 2017 and 2016

  117

Item 2.

 

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

  126

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  151

Item 4.

 

Controls and Procedures

  152


PART II
OTHER INFORMATION

Item 1.

 

Legal Proceedings

  153

Item 1A.

 

Risk Factors

  153

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

  153

Item 5.

 

Other information

  153

Item 6.

 

Exhibits

  154

 

Signatures

  155

Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Balance Sheets

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

 
  September 30,
2017
  December 31,
2016
 
 
  (Unaudited)
   
 

ASSETS

             

Portfolio investments at fair value:

   
 
   
 
 

Control investments (cost: $527,609 and $439,674 as of September 30, 2017 and December 31, 2016, respectively)

  $ 715,873   $ 594,282  

Affiliate investments (cost: $376,957 and $394,699 as of September 30, 2017 and December 31, 2016, respectively)

    338,231     375,948  

Non-Control/Non-Affiliate investments (cost: $1,144,962 and $1,037,510 as of September 30, 2017 and December 31, 2016, respectively)                  

    1,115,877     1,026,676  

Total investments (cost: $2,049,528 and $1,871,883 as of September 30, 2017 and December 31, 2016, respectively)

    2,169,981     1,996,906  

Cash and cash equivalents

   
30,144
   
24,480
 

Interest receivable and other assets

    39,374     35,133  

Receivable for securities sold

    26,090     1,990  

Deferred financing costs (net of accumulated amortization of $5,344 and $4,598 as of September 30, 2017 and December 31, 2016, respectively)

    4,093     4,718  

Deferred tax asset, net

        9,125  

Total assets

  $ 2,269,682   $ 2,072,352  

LIABILITIES

             

Credit facility

  $ 355,000   $ 343,000  

SBIC debentures (par: $274,800 and $240,000 as of September 30, 2017 and December 31, 2016, respectively)

    269,345     235,686  

4.50% Notes (par: $175,000 as of both September 30, 2017 and December 31, 2016)

    173,435     172,893  

6.125% Notes (par: $90,655 as of both September 30, 2017 and December 31, 2016)

    88,981     88,752  

Accounts payable and other liabilities

    14,357     14,205  

Payable for securities purchased

    23,172     2,184  

Interest payable

    3,609     4,103  

Dividend payable

    10,935     10,048  

Deferred tax liability, net

    1,182      

Total liabilities

    940,016     870,871  

Commitments and contingencies (Note M)

             

NET ASSETS

   
 
   
 
 

Common stock, $0.01 par value per share (150,000,000 shares authorized; 57,680,789 and 54,312,444 shares issued and outstanding as of September 30, 2017 and December 31, 2016, respectively)

    577     543  

Additional paid-in capital

    1,272,175     1,143,883  

Accumulated net investment income, net of cumulative dividends of $603,902 and $521,297 as of September 30, 2017 and December 31, 2016, respectively

    29,099     19,033  

Accumulated net realized gain from investments (accumulated net realized gain from investments of $76,236 before cumulative dividends of $133,997 as of September 30, 2017 and accumulated net realized gain from investments of $48,394 before cumulative dividends of $107,281 as of December 31, 2016)

    (57,761 )   (58,887 )

Net unrealized appreciation, net of income taxes

    85,576     96,909  

Total net assets

    1,329,666     1,201,481  

Total liabilities and net assets

  $ 2,269,682   $ 2,072,352  

NET ASSET VALUE PER SHARE

  $ 23.02   $ 22.10  

   

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

1


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Operations

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

(Unaudited)

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2017   2016   2017   2016  

INVESTMENT INCOME:

                         

Interest, fee and dividend income:

                         

Control investments

  $ 15,145   $ 14,826   $ 42,720   $ 40,398  

Affiliate investments

    10,134     9,619     29,601     27,095  

Non-Control/Non-Affiliate investments

    26,507     22,149     77,623     63,841  

Interest, fee and dividend income

    51,786     46,594     149,944     131,334  

Interest, fee and dividend income from marketable securities and idle funds investments

        5         174  

Total investment income

    51,786     46,599     149,944     131,508  

EXPENSES:

                         

Interest

    (9,420 )   (8,573 )   (26,820 )   (25,010 )

Compensation

    (4,777 )   (4,309 )   (13,762 )   (12,081 )

General and administrative

    (2,748 )   (2,247 )   (8,748 )   (6,808 )

Share-based compensation

    (2,476 )   (2,137 )   (7,542 )   (5,977 )

Expenses allocated to the External Investment Manager

    1,664     1,224     4,816     3,739  

Total expenses

    (17,757 )   (16,042 )   (52,056 )   (46,137 )

NET INVESTMENT INCOME

    34,029     30,557     97,888     85,371  

NET REALIZED GAIN (LOSS):

   
 
   
 
   
 
   
 
 

Control investments

    (2,848 )   17,862     259     32,220  

Affiliate investments

    (9,896 )   (3,447 )   12,920     25,260  

Non-Control/Non-Affiliate investments

    2,038     (10,033 )   14,663     (22,452 )

Marketable securities and idle funds investments

        (96 )       (1,681 )

SBIC debentures

            (5,217 )    

Total net realized gain (loss)

    (10,706 )   4,286     22,625     33,347  

NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):

   
 
   
 
   
 
   
 
 

Portfolio investments

    16,368     8,376     (4,358 )   (29,738 )

Marketable securities and idle funds investments

        235         1,729  

SBIC debentures

    (221 )   (801 )   5,408     (820 )

Total net change in unrealized appreciation (depreciation)             

    16,147     7,810     1,050     (28,829 )

INCOME TAXES:

                         

Federal and state income, excise and other taxes

    (799 )   (904 )   (2,489 )   (2,372 )

Deferred taxes

    (3,772 )   1,432     (9,894 )   3,390  

Income tax benefit (provision)

    (4,571 )   528     (12,383 )   1,018  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ 34,899   $ 43,181   $ 109,180   $ 90,907  

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

  $ 0.60   $ 0.58   $ 1.74   $ 1.66  

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

  $ 0.61   $ 0.82   $ 1.94   $ 1.76  

DIVIDENDS PAID PER SHARE:

                         

Regular monthly dividends

  $ 0.555   $ 0.540   $ 1.665   $ 1.620  

Supplemental dividends

            0.275     0.275  

Total dividends

  $ 0.555   $ 0.540   $ 1.940   $ 1.895  

WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED

    57,109,104     52,613,277     56,140,953     51,538,745  

   

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

2


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Changes in Net Assets

(dollars in thousands, except shares)

(Unaudited)

 
  Common Stock    
   
  Accumulated
Net Realized
Gain From
Investments,
Net of Dividends
  Net Unrealized
Appreciation from
Investments,
Net of Income
Taxes
   
 
 
   
  Accumulated
Net Investment
Income, Net
of Dividends
   
 
 
  Number of
Shares
  Par
Value
  Additional
Paid-In
Capital
  Total Net
Asset Value
 

Balances at December 31, 2015

    50,413,744   $ 504   $ 1,011,467   $ 7,181   $ (49,653 ) $ 101,395   $ 1,070,894  

Public offering of common stock, net of offering costs

   
1,996,793
   
20
   
64,239
   
   
   
   
64,259
 

Share-based compensation

            5,977                 5,977  

Purchase of vested stock for employee payroll tax withholding

    (80,750 )   (1 )   (2,592 )               (2,593 )

Dividend reinvestment

    339,544     3     10,645                 10,648  

Amortization of directors' deferred compensation

            464                 464  

Issuance of restricted stock, net of forfeited shares

    262,586     3     (3 )                

Dividends to stockholders

                (54,131 )   (43,881 )       (98,012 )

Cumulative-effect to retained earnings for excess tax benefit

                        1,806     1,806  

Net increase (decrease) resulting from operations

                85,371     33,347     (27,811 )   90,907  

Balances at September 30, 2016

    52,931,917   $ 529   $ 1,090,197   $ 38,421   $ (60,187 ) $ 75,390   $ 1,144,350  

Balances at December 31, 2016

    54,354,857   $ 543   $ 1,143,883   $ 19,033   $ (58,887 ) $ 96,909   $ 1,201,481  

Public offering of common stock, net of offering costs

   
3,119,581
   
31
   
118,087
   
   
   
   
118,118
 

Share-based compensation

            7,542                 7,542  

Purchase of vested stock for employee payroll tax withholding

    (113,371 )   (1 )   (4,350 )               (4,351 )

Investment through issuance of unregistered shares

    11,464         442                 442  

Dividend reinvestment

    158,301     2     6,085                 6,087  

Amortization of directors' deferred compensation

            488                 488  

Issuance of restricted stock, net of forfeited shares

    225,361     2     (2 )                

Dividends to stockholders

                (82,605 )   (26,716 )       (109,321 )

Net increase (decrease) resulting from operations

                92,671     27,842     (11,333 )   109,180  

Balances at September 30, 2017

    57,756,193   $ 577   $ 1,272,175   $ 29,099   $ (57,761 ) $ 85,576   $ 1,329,666  

   

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

3


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Statements of Cash Flows

(dollars in thousands)

(Unaudited)

 
  Nine Months Ended
September 30,
 
 
  2017   2016  

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net increase in net assets resulting from operations

  $ 109,180   $ 90,907  

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

             

Investments in portfolio companies

    (743,695 )   (420,036 )

Proceeds from sales and repayments of debt investments in portfolio companies

    527,562     274,907  

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

    80,078     73,017  

Investments in marketable securities and idle funds investments

        (523 )

Proceeds from sales and repayments of marketable securities and idle funds investments

        4,316  

Net change in net unrealized (appreciation) depreciation

    (1,050 )   28,829  

Net realized gain

    (22,625 )   (33,347 )

Accretion of unearned income

    (12,403 )   (7,073 )

Payment-in-kind interest

    (4,122 )   (4,911 )

Cumulative dividends

    (2,711 )   (1,470 )

Share-based compensation expense

    7,542     5,977  

Amortization of deferred financing costs

    2,022     1,931  

Deferred tax (benefit) provision

    9,894     (3,390 )

Changes in other assets and liabilities:

             

Interest receivable and other assets

    (2,848 )   (685 )

Interest payable

    (494 )   (398 )

Accounts payable and other liabilities

    640     (247 )

Deferred fees and other

    2,050     1,644  

Net cash provided by (used in) operating activities

    (50,980 )   9,448  

CASH FLOWS FROM FINANCING ACTIVITIES

   
 
   
 
 

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

    118,118     64,259  

Dividends paid

    (102,347 )   (86,655 )

Proceeds from issuance of SBIC debentures

    60,000     6,000  

Repayments of SBIC debentures

    (25,200 )    

Proceeds from credit facility

    394,000     254,000  

Repayments on credit facility

    (382,000 )   (232,000 )

Payment of deferred loan costs and SBIC debenture fees

    (1,576 )   (925 )

Purchases of vested stock for employee payroll tax withholding

    (4,351 )   (2,593 )

Other

        (83 )

Net cash provided by financing activities

    56,644     2,003  

Net increase in cash and cash equivalents

    5,664     11,451  

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    24,480     20,331  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 30,144   $ 31,782  

Supplemental cash flow disclosures:

             

Interest paid

  $ 25,200   $ 23,368  

Taxes paid

  $ 3,162   $ 1,762  

Non-cash financing activities:

             

Shares issued pursuant to the DRIP

  $ 6,087   $ 10,648  

   

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

4


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Control Investments(5)

 

 

 

 

                   

                           

Access Media Holdings, LLC(10)

 

Private Cable Operator

                       

     

5% Current / 5% PIK Secured Debt (Maturity—July 22, 2020)(19)

  $ 23,529   $ 23,529   $ 19,440  

     

Preferred Member Units (7,771,500 units)

          7,665     150  

     

Member Units (45 units)

          1      

                  31,195     19,590  

                           

ASC Interests, LLC

 

Recreational and Educational Shooting Facility

                       

     

11% Secured Debt (Maturity—July 31, 2018)

    1,925     1,917     1,925  

     

Member Units (1,500 units)(8)

          1,500     1,820  

                  3,417     3,745  

                           

Bond-Coat, Inc.

 

Casing and Tubing Coating Services

                       

     

12% Secured Debt (Maturity—December 28, 2017)

    11,596     11,586     11,596  

     

Common Stock (57,508 shares)

          6,350     8,430  

                  17,936     20,026  

                           

Café Brazil, LLC

 

Casual Restaurant Group

                       

     

Member Units (1,233 units)(8)

          1,742     5,390  

                           

CBT Nuggets, LLC

 

Produces and Sells IT Training Certification Videos

                       

     

Member Units (416 units)(8)

          1,300     71,850  

                           

Charps, LLC

 

Pipeline Maintenance and Construction

                       

     

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

    18,400     18,217     18,217  

     

Preferred Member Units (1,600 units)

          400     400  

                  18,617     18,617  

                           

Clad-Rex Steel, LLC

 

Specialty Manufacturer of Vinyl-Clad Metal

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity—December 20, 2021)(9)

    13,680     13,558     13,680  

     

Member Units (717 units)(8)

          7,280     8,520  

     

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

    1,188     1,177     1,177  

     

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

          210     210  

                  22,225     23,587  

                           

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

CMS Minerals Investments

 

Oil & Gas Exploration & Production

                       

     

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

          3,491     2,582  

                           

Copper Trail Energy Fund I, LP(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 30.1%)

          2,500     2,500  

                           

Datacom, LLC

 

Technology and Telecommunications Provider

                       

     

8% Secured Debt (Maturity—May 30, 2018)

    1,350     1,350     1,350  

     

5.25% Current / 5.25% PIK Secured Debt (Maturity—May 30, 2019)(19)

    12,133     12,088     11,370  

     

Class A Preferred Member Units

          1,181     1,360  

     

Class B Preferred Member Units (6,453 units)

          6,030      

                  20,649     14,080  

                           

Gamber-Johnson Holdings, LLC

 

Manufacturer of Ruggedized Computer Mounting Systems

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.24%, Secured Debt (Maturity—June 24, 2021)(9)

    23,680     23,480     23,680  

     

Member Units (8,619 units)(8)

          14,844     22,960  

                  38,324     46,640  

                           

Garreco, LLC

 

Manufacturer and Supplier of Dental Products

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.30%, Secured Debt (Maturity—March 31, 2020)(9)

    5,724     5,678     5,678  

     

Member Units (1,200 units)

          1,200     1,830  

                  6,878     7,508  

                           

GRT Rubber Technologies LLC

 

Manufacturer of Engineered Rubber Products

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.24%, Secured Debt (Maturity—December 19, 2019)(9)

    12,030     11,969     12,030  

     

Member Units (5,879 units)(8)

          13,065     20,680  

                  25,034     32,710  

                           

Gulf Manufacturing, LLC

 

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

     

Member Units (438 units)(8)

          2,980     10,680  

                           

6


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Gulf Publishing Holdings, LLC

 

Energy Industry Focused Media and Publishing

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity—September 30, 2020)(9)

    80     80     80  

     

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

    12,800     12,697     12,697  

     

Member Units (3,681 units)

          3,681     4,330  

                  16,458     17,107  

                           

Harborside Holdings, LLC

 

Real Estate Holding Company

                       

     

Member units (100 units)

          6,206     9,400  

                           

Harrison Hydra-Gen, Ltd.

 

Manufacturer of Hydraulic Generators

                       

     

Common Stock (107,456 shares)

          718     2,800  

                           

HW Temps LLC

 

Temporary Staffing Solutions

                       

     

LIBOR Plus 13.00% (Floor 1.00%), Current Coupon 14.24%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,913     9,913  

     

Preferred Member Units (3,200 units)

          3,942     3,940  

                  13,855     13,853  

                           

Hydratec, Inc.

 

Designer and Installer of Micro-Irrigation Systems

                       

     

Common Stock (7,095 shares)(8)

          7,095     15,480  

                           

IDX Broker, LLC

 

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

     

11.5% Secured Debt (Maturity—November 15, 2018)

    10,050     10,023     10,050  

     

Member Units (5,400 units)(8)

          5,606     9,000  

                  15,629     19,050  

                           

Jensen Jewelers of Idaho, LLC

 

Retail Jewelry Store

                       

     

Prime Plus 6.75% (Floor 2.00%), Current Coupon 11.00%, Secured Debt (Maturity—November 14, 2019)(9)

    4,105     4,062     4,105  

     

Member Units (627 units)(8)

          811     4,460  

                  4,873     8,565  

                           

KBK Industries, LLC

 

Manufacturer of Specialty Oilfield and Industrial Products

                       

     

10% Secured Debt (Maturity—September 28, 2020)

    750     750     750  

     

12.5% Secured Debt (Maturity—September 28, 2020)

    5,900     5,900     5,900  

     

Member Units (325 units)(8)

          783     4,060  

                  7,433     10,710  

                           

7


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Lamb Ventures, LLC

 

Aftermarket Automotive Services Chain

                       

     

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

    10,079     10,024     10,024  

     

Preferred Equity (non-voting)

          400     400  

     

Member Units (742 units)(8)

          5,273     6,430  

     

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

    432     428     432  

     

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

          625     520  

                  16,750     17,806  

                           

Marine Shelters Holdings, LLC

 

Fabricator of Marine and Industrial Shelters

                       

     

12% PIK Secured Debt (Maturity—December 28, 2017)(14)

    3,131     3,078      

     

Preferred Member Units (3,810 units)

          5,352      

                  8,430      

                           

Market Force Information, LLC

 

Provider of Customer Experience Management Services

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.32%, Secured Debt (Maturity—July 28, 2022)(9)

    512     512     512  

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.32%, Secured Debt (Maturity—July 28, 2022)(9)

    23,520     23,293     23,293  

     

Member Units (657,113 units)

          14,700     14,700  

                  38,505     38,505  

                           

MH Corbin Holding LLC

 

Manufacturer and Distributor of Traffic Safety Products

                       

     

10% Secured Debt (Maturity—August 31, 2020)

    12,775     12,694     12,694  

     

Preferred Member Units (4,000 shares)

          6,000     6,000  

                  18,694     18,694  

                           

Mid-Columbia Lumber Products, LLC

 

Manufacturer of Finger-Jointed Lumber Products

                       

     

10% Secured Debt (Maturity—December 18, 2017)

    1,750     1,750     1,750  

     

12% Secured Debt (Maturity—December 18, 2017)

    3,900     3,900     3,900  

     

Member Units (3,554 units)

          1,810     980  

     

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

    802     802     802  

     

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

          790     1,290  

                  9,052     8,722  

                           

8


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

MSC Adviser I, LLC(16)

 

Third Party Investment Advisory Services

                       

     

Member Units (Fully diluted 100.0%)(8)

              39,304  

                           

Mystic Logistics Holdings, LLC

 

Logistics and Distribution Services Provider for Large Volume Mailers

                       

     

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

    7,768     7,686     7,768  

     

Common Stock (5,873 shares)

          2,720     6,590  

                  10,406     14,358  

                           

NAPCO Precast, LLC

 

Precast Concrete Manufacturing

                       

     

LIBOR Plus 8.50%, Current Coupon 9.82%, Secured Debt (Maturity—May 31, 2019)

    11,475     11,433     11,433  

     

Member Units (2,955 units)(8)

          2,975     10,830  

                  14,408     22,263  

                           

NRI Clinical Research, LLC

 

Clinical Research Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.00%, Secured Debt (Maturity—January 15, 2018)(9)

    400     400     400  

     

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

    4,205     4,205     4,205  

     

Warrants (251,723 equivalent units; Expiration—September 8, 2021; Strike price—$0.01 per unit)

          252     500  

     

Member Units (500,000 units)

          765     2,500  

                  5,622     7,605  

                           

NRP Jones, LLC

 

Manufacturer of Hoses, Fittings and Assemblies

                       

     

8% Current / 4% PIK Secured Debt (Maturity—December 22, 2019)(19)

    15,037     15,037     15,037  

     

Member Units (65,208 units)

          3,717     1,260  

                  18,754     16,297  

                           

NuStep, LLC

 

Designer, Manufacturer and Distributor of Fitness Equipment

                       

     

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

    20,600     20,411     20,411  

     

Preferred Member Units (406 units)

          10,200     10,200  

                  30,611     30,611  

                           

OMi Holdings, Inc.

 

Manufacturer of Overhead Cranes

                       

     

Common Stock (1,500 shares)(8)

          1,080     12,740  

                           

Pegasus Research Group, LLC

 

Provider of Telemarketing and Data Services

                       

     

Member Units (460 units)(8)

          1,290     9,350  

                           

9


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

PPL RVs, Inc.

 

Recreational Vehicle Dealer

                       

     

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 8.30%, Secured Debt (Maturity—November 15, 2021)(9)

    16,100     15,965     16,100  

     

Common Stock (1,962 shares)(8)

          2,150     11,780  

                  18,115     27,880  

                           

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

 

Noise Abatement Service Provider

                       

     

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

    7,477     7,335     7,335  

     

Preferred Member Units (19,631 units)

          4,600     8,220  

     

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

          1,200     420  

                  13,135     15,975  

                           

Quality Lease Service, LLC

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

Zero Coupon Secured Debt (Maturity—June 8, 2020)

    7,341     7,341     6,950  

     

Member Units (1,000 units)

          2,768     4,838  

                  10,109     11,788  

                           

River Aggregates, LLC

 

Processor of Construction Aggregates

                       

     

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

    750     686     686  

     

Member Units (1,150 units)(8)

          1,150     4,410  

     

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

          369     2,510  

                  2,205     7,606  

                           

SoftTouch Medical Holdings LLC

 

Provider of In-Home Pediatric Durable Medical Equipment

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.24%, Secured Debt (Maturity—October 31, 2019)(9)

    7,140     7,107     7,140  

     

Member Units (4,450 units)(8)

          4,930     9,540  

                  12,037     16,680  

                           

10


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

The MPI Group, LLC

 

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

     

9% Secured Debt (Maturity—October 2, 2018)

    2,924     2,923     2,619  

     

Series A Preferred Units (2,500 units)

          2,500      

     

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

          1,096      

     

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

          2,300     2,390  

                  8,819     5,009  

                           

Uvalco Supply, LLC

 

Farm and Ranch Supply Store

                       

     

9% Secured Debt (Maturity—January 1, 2019)

    474     474     474  

     

Member Units (1,867 units)(8)

          3,579     4,307  

                  4,053     4,781  

                           

Vision Interests, Inc.

 

Manufacturer / Installer of Commercial Signage

                       

     

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

    2,814     2,794     2,794  

     

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

          3,000     3,000  

     

Common Stock (1,126,242 shares)

          3,706      

                  9,500     5,794  

                           

Ziegler's NYPD, LLC

 

Casual Restaurant Group

                       

     

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

    1,000     995     995  

     

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

    300     300     300  

     

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

    2,750     2,750     2,750  

     

Warrants (587 equivalent units; Expiration—September 29, 2018; Strike price—$0.01 per unit)

          600     190  

     

Preferred Member Units (10,072 units)

          2,834     3,400  

                  7,479     7,635  

Subtotal Control Investments (33.0% of total investments at fair value)

  $ 527,609   $ 715,873  

11


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

 
   

Affiliate Investments(6)

             

                           

AFG Capital Group, LLC

 

Provider of Rent-to-Own Financing Solutions and Services

                       

     

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

        $ 259   $ 750  

     

Member Units (186 units)(8)

          1,200     3,130  

                  1,459     3,880  

                           

Barfly Ventures, LLC(10)

 

Casual Restaurant Group

                       

     

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

    8,715     8,568     8,689  

     

Options (2 equivalent units)

          397     780  

     

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

          473     440  

                  9,438     9,909  

                           

BBB Tank Services, LLC

 

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

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity—April 8, 2021)(9)

    800     797     797  

     

15% Secured Debt (Maturity—April 8, 2021)

    4,027     3,995     3,995  

     

Member Units (800,000 units)

          800     580  

                  5,592     5,372  

                           

Boccella Precast Products LLC

 

Manufacturer of Precast Hollow Core Concrete

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.30%, Secured Debt (Maturity—June 30, 2022)(9)

    16,400     16,223     16,223  

     

Member Units (2,160,000 units)

          2,160     2,160  

                  18,383     18,383  

                           

Boss Industries, LLC

 

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

     

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

          2,570     3,730  

                           

12


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

 
   

Bridge Capital Solutions Corporation

 

Financial Services and Cash Flow Solutions Provider

                       

     

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

    7,500     5,810     5,810  

     

Warrants (63 equivalent shares; Expiration—July 25, 2026; Strike price—$0.01 per share)

          2,132     3,370  

     

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

    1,000     992     1,000  

     

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

          1,000     1,000  

                  9,934     11,180  

                           

Buca C, LLC

 

Casual Restaurant Group

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.48%, Secured Debt (Maturity—June 30, 2020)(9)

    21,204     21,078     21,078  

     

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

          4,115     4,110  

                  25,193     25,188  

                           

CAI Software LLC

 

Provider of Specialized Enterprise Resource Planning Software

                       

     

12% Secured Debt (Maturity—October 10, 2019)

    3,483     3,466     3,483  

     

Member Units (65,356 units)(8)

          654     3,040  

                  4,120     6,523  

                           

CapFusion, LLC(13)

 

Non-Bank Lender to Small Businesses

                       

     

13% Secured Debt (Maturity—March 25, 2021)(14)

    11,320     10,260     6,678  

     

Warrants (1,600 equivalent units; Expiration—March 24, 2026; Strike price—$0.01 per unit)

          1,200      

                  11,460     6,678  

                           

Chandler Signs Holdings, LLC(10)

 

Sign Manufacturer

                       

     

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

    4,500     4,466     4,500  

     

Class A Units (1,500,000 units)(8)

          1,500     2,650  

                  5,966     7,150  

                           

Condit Exhibits, LLC

 

Tradeshow Exhibits / Custom Displays Provider

                       

     

Member Units (3,936 units)(8)

          100     1,840  

                           

13


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

 
   

Congruent Credit Opportunities Funds(12)(13)

 

Investment Partnership

                       

     

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)(8)

          5,730     1,515  

     

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

          17,869     18,714  

                  23,599     20,229  

                           

Dos Rios Partners(12)(13)

 

Investment Partnership

                       

     

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

          5,996     6,427  

     

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

          1,904     1,889  

                  7,900     8,316  

                           

Dos Rios Stone Products LLC(10)

 

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

     

Class A Units (2,000,000 units)(8)

          2,000     1,870  

                           

East Teak Fine Hardwoods, Inc.

 

Distributor of Hardwood Products

                       

     

Common Stock (6,250 shares)(8)

          480     630  

                           

East West Copolymer & Rubber, LLC

 

Manufacturer of Synthetic Rubbers

                       

     

12% Current / 2% PIK Secured Debt (Maturity—October 17, 2019)(14)(15)

    3,734     3,626      

     

Warrants (2,510,790 equivalent units; Expiration—October 15, 2024; Strike price—$0.01 per unit)

          50      

                  3,676      

                           

EIG Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          295     247  

                           

Freeport Financial Funds(12)(13)

 

Investment Partnership

                       

     

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

          5,974     5,519  

     

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

          7,559     7,507  

                  13,533     13,026  

                           

14


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

 
   

Gault Financial, LLC (RMB Capital, LLC)

 

Purchases and Manages Collection of Healthcare and other Business Receivables

                       

     

10.5% Secured Debt (Maturity—January 1, 2019)

    12,592     12,592     11,642  

     

Warrants (29,032 equivalent units; Expiration—February 9, 2022; Strike price—$0.01 per unit)

          400      

                  12,992     11,642  

                           

Guerdon Modular Holdings, Inc.

 

Multi-Family and Commercial Modular Construction Company

                       

     

13% Secured Debt (Maturity—August 13, 2019)

    10,708     10,622     10,622  

     

Preferred Stock (404,998 shares)

          1,140     950  

     

Common Stock (212,033 shares)

          2,983      

                  14,745     11,572  

                           

Harris Preston Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (HPEP 3, L.P.) (Fully diluted 9.9%)

          943     943  

     

LP Interests (2717 MH, L.P.) (Fully diluted 7.0%)

          400     400  

                  1,343     1,343  

                           

Hawk Ridge Systems, LLC(13)

 

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

     

10% Secured Debt (Maturity—December 2, 2021)

    9,500     9,417     9,417  

     

Preferred Member Units (226 units)(8)

          2,850     3,230  

     

Preferred Member Units (HRS Services, ULC) (226 units)(8)

          150     170  

                  12,417     12,817  

                           

Houston Plating and Coatings, LLC

 

Provider of Plating and Industrial Coating Services

                       

     

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

    3,000     3,000     3,080  

     

Member Units (315,756 units)

          2,179     5,560  

                  5,179     8,640  

                           

I-45 SLF LLC(12)(13)

 

Investment Partnership

                       

     

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

          16,200     16,897  

                           

L.F. Manufacturing Holdings, LLC(10)

 

Manufacturer of Fiberglass Products

                       

     

Member Units (2,179,001 units)

          2,019     1,850  

                           

15


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

 
   

Meisler Operating LLC

 

Provider of Short-term Trailer and Container Rental

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.80%, Secured Debt (Maturity—June 7, 2022)(9)

    16,800     16,626     16,626  

     

Member Units (Milton Meisler Holdings LLC) (32,000 units)

          3,200     3,200  

                  19,826     19,826  

                           

OnAsset Intelligence, Inc.

 

Provider of Transportation Monitoring / Tracking Products and Services

                       

     

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

    4,943     4,943     4,943  

     

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

    47     47     47  

     

Preferred Stock (912 shares)

          1,981      

     

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

          1,919      

                  8,890     4,990  

                           

OPI International Ltd.(13)

 

Provider of Man Camp and Industrial Storage Services

                       

     

Common Stock (20,766,317 shares)

          1,371      

                           

PCI Holding Company, Inc.

 

Manufacturer of Industrial Gas Generating Systems

                       

     

12% Secured Debt (Maturity—March 31, 2019)

    12,975     12,906     12,906  

     

Preferred Stock (1,740,000 shares)

          1,740     2,610  

     

Preferred Stock (1,500,000 shares; 20% cumulative)(8)(19)

          3,927     4,550  

                  18,573     20,066  

                           

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

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

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

    30,785     30,281     250  

     

Preferred Member Units (250 units)

          2,500      

                  32,781     250  

                           

Tin Roof Acquisition Company

 

Casual Restaurant Group

                       

     

12% Secured Debt (Maturity—November 13, 2018)

    13,010     12,933     12,933  

     

Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8)(19)

          2,951     2,951  

                  15,884     15,884  

                           

16


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

 
   

UniTek Global Services, Inc.(11)

 

Provider of Outsourced Infrastructure Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.80%, Secured Debt (Maturity—January 13, 2019)(9)

    8,535     8,528     8,535  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.80% / 1.00% PIK, Current Coupon Plus PIK 10.80%, Secured Debt (Maturity—January 13, 2019)(9)(19)

    137     137     137  

     

15% PIK Unsecured Debt (Maturity—July 13, 2019)(19)

    833     833     833  

     

Preferred Stock (2,596,567 shares; 19% cumulative)(8)(19)

          2,725     2,720  

     

Preferred Stock (4,935,377 shares; 13.5% cumulative)(8)(19)

          7,115     7,080  

     

Common Stock (1,075,992 shares)

              2,320  

                  19,338     21,625  

                           

Universal Wellhead Services Holdings, LLC(10)

 

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

                       

     

Preferred Member Units (UWS Investments, LLC) (716,949 units)

          717     800  

     

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

          4,000     1,230  

                  4,717     2,030  

                           

Valley Healthcare Group, LLC

 

Provider of Durable Medical Equipment

                       

     

LIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.74%, Secured Debt (Maturity—December 29, 2020)(9)

    11,846     11,759     11,759  

     

Preferred Member Units (Valley Healthcare Holding, LLC) (1,600 units)

          1,600     1,600  

                  13,359     13,359  

                           

Volusion, LLC

 

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

                       

     

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

    16,734     15,049     15,049  

     

Preferred Member Units (4,876,670 units)

          14,000     14,000  

     

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

          2,576     2,240  

                  31,625     31,289  

Subtotal Affiliate Investments (15.6% of total investments at fair value)

        $ 376,957   $ 338,231  

17


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Non-Control/Non-Affiliate Investments(7)

                   

                           

AAC Holdings, Inc.(11)

 

Substance Abuse Treatment Service Provider

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.06%, Secured Debt (Maturity—June 30, 2023)(9)

  $ 11,826   $ 11,538   $ 11,826  

                           

Adams Publishing Group, LLC(10)

 

Local Newspaper Operator

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity—November 3, 2020)(9)

    8,572     8,338     8,411  

                           

ADS Tactical, Inc.(10)

 

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

                       

     

LIBOR Plus 7.50% (Floor 0.75%), Current Coupon 8.83%, Secured Debt (Maturity—December 31, 2022)(9)

    13,014     12,757     12,757  

                           

Aethon United BR LP(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.98%, Secured Debt (Maturity—September 8, 2023)(9)

    3,438     3,386     3,386  

                           

Ahead, LLC(10)

 

IT Infrastructure Value Added Reseller

                       

     

LIBOR Plus 6.50%, Current Coupon 7.84%, Secured Debt (Maturity—November 2, 2020)

    13,688     13,406     13,688  

                           

Allflex Holdings III Inc.(11)

 

Manufacturer of Livestock Identification Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.31%, Secured Debt (Maturity—July 19, 2021)(9)

    14,516     14,443     14,619  

                           

American Scaffold Holdings, Inc.(10)

 

Marine Scaffolding Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.83%, Secured Debt (Maturity—March 31, 2022)(9)

    7,125     7,036     7,089  

                           

18


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

American Teleconferencing Services, Ltd.(11)

 

Provider of Audio Conferencing and Video Collaboration Solutions

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.78%, Secured Debt (Maturity—December 8, 2021)(9)

    10,873     10,182     10,519  

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.74%, Secured Debt (Maturity—June 6, 2022)(9)

    3,714     3,584     3,689  

                  13,766     14,208  

                           

Anchor Hocking, LLC(11)

 

Household Products Manufacturer

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.32%, Secured Debt (Maturity—June 4, 2018)(9)

    2,260     2,260     2,299  

     

Member Units (440,620 units)

          4,928     3,800  

                  7,188     6,099  

                           

Apex Linen Service, Inc.

 

Industrial Launderers

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

     

13% Secured Debt (Maturity—October 30, 2022)

    14,416     14,345     14,345  

                  16,745     16,745  

                           

Arcus Hunting LLC.(10)

 

Manufacturer of Bowhunting and Archery Products and Accessories

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.30%, Secured Debt (Maturity—November 13, 2019)(9)

    17,138     17,027     17,138  

                           

ATI Investment Sub, Inc.(11)

 

Manufacturer of Solar Tracking Systems

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.49%, Secured Debt (Maturity—June 22, 2021)(9)

    7,614     7,456     7,595  

                           

ATS Workholding, Inc.(10)

 

Manufacturer of Machine Cutting Tools and Accessories

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.73%, Secured Debt (Maturity—March 10, 2019)(9)

    6,173     6,153     5,663  

                           

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

 

Provider of Radio Frequency Management Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33%, Secured Debt (Maturity—June 11, 2021)(9)

    9,666     9,542     9,569  

                           

19


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Berry Aviation, Inc.(10)

 

Airline Charter Service Operator

                       

     

13.75% Secured Debt (Maturity—January 30, 2020)

    5,627     5,595     5,627  

     

Common Stock (553 shares)

          400     880  

                  5,995     6,507  

                           

BigName Commerce, LLC(10)

 

Provider of Envelopes and Complimentary Stationery Products

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.55%, Secured Debt (Maturity—May 11, 2022)(9)

    2,504     2,475     2,475  

                           

Binswanger Enterprises, LLC(10)

 

Glass Repair and Installation Service Provider

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.34%, Secured Debt (Maturity—March 9, 2022)(9)

    15,383     15,104     15,104  

     

Member Units (1,050,000 units)

          1,050     940  

                  16,154     16,044  

                           

Bluestem Brands, Inc.(11)

 

Multi-Channel Retailer of General Merchandise

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.81%, Secured Debt (Maturity—November 6, 2020)(9)

    12,315     12,128     8,734  

                           

Brainworks Software, LLC(10)

 

Advertising Sales and Newspaper Circulation Software

                       

     

Prime Plus 9.25% (Floor 3.25%), Current Coupon 13.50%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,700     6,502  

                           

Brightwood Capital Fund Investments(12)(13)

 

Investment Partnership

                       

     

LP Interests (Brightwood Capital Fund III, LP) (Fully diluted 1.7%)(8)

          12,000     10,328  

     

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.8%)(8)

          500     500  

                  12,500     10,828  

                           

Brundage-Bone Concrete Pumping, Inc.(11)

 

Construction Services Provider

                       

     

10.375% Secured Debt (Maturity—September 1, 2023)

    3,000     2,987     3,090  

                           

California Pizza Kitchen, Inc.(11)

 

Casual Restaurant Group

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity—August 23, 2022)(9)

    12,902     12,860     12,816  

                           

20


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

CDHA Management, LLC(10)

 

Dental Services

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.68%, Secured Debt (Maturity—December 5, 2021)(9)

    4,356     4,290     4,356  

                           

Cengage Learning Acquisitions, Inc.(11)

 

Provider of Educational Print and Digital Services

                       

     

LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.49%, Secured Debt (Maturity—June 7, 2023)(9)

    9,304     8,834     8,603  

                           

Cenveo Corporation(11)

 

Provider of Commercial Printing, Envelopes, Labels, and Printed Office Products

                       

     

6% Secured Debt (Maturity—August 1, 2019)

    19,130     16,846     15,161  

                           

Charlotte Russe, Inc(11)

 

Fast-Fashion Retailer to Young Women

                       

     

LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.82%, Secured Debt (Maturity—May 22, 2019)(9)

    17,058     15,660     7,559  

                           

Clarius BIGS, LLC(10)

 

Prints & Advertising Film Financing

                       

     

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

    2,924     2,924     88  

                           

Construction Supply Investments, LLC(10)

 

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

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity—June 30, 2023)(9)

    7,313     7,276     7,276  

     

Member Units (28,000 units)

          3,723     3,723  

                  10,999     10,999  

                           

Covenant Surgical Partners, Inc.(11)

 

Ambulatory Surgical Centers

                       

     

8.75% Secured Debt (Maturity—August 1, 2019)

    2,800     2,755     2,892  

                           

21


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

CST Industries Inc.(11)

 

Storage Tank Manufacturer

                       

     

PRIME Plus 5.25% (Floor 2.50%), Current Coupon 9.50%, Secured Debt (Maturity—October 14, 2017)(9)

    1,590     1,574     1,590  

     

PRIME Plus 5.25% (Floor 2.50%), Current Coupon 9.50%, Secured Debt (Maturity—May 22, 2017)(9)(17)

    9,102     9,102     8,875  

                  10,676     10,465  

                           

CTVSH, PLLC(10)

 

Emergency Care and Specialty Service Animal Hospital

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.32%, Secured Debt (Maturity—August 3, 2022)(9)

    12,000     11,883     11,883  

                           

Darr Equipment LP(10)

 

Heavy Equipment Dealer

                       

     

12% Current / 2% PIK Secured Debt (Maturity—April 15, 2020)(19)

    21,455     21,113     21,164  

     

Warrants (915,734 equivalent units; Expiration—April 15, 2024; Strike price—$1.50 per unit)

          474     10  

                  21,587     21,174  

                           

Digital River, Inc.(11)

 

Provider of Outsourced e-Commerce Solutions and Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity—February 12, 2021)(9)

    15,184     15,102     15,260  

                           

Digital Room LLC(11)

 

Pure-Play e-Commerce Print Business

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity—November 21, 2022)(9)

    7,339     7,207     7,302  

                           

Drilling Info Holdings, Inc.

 

Information Services for the Oil and Gas Industry

                       

     

Common Stock (3,788,865 shares)(8)

              8,410  

                           

ECP-PF Holdings Group, Inc.(10)

 

Fitness Club Operator

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.30%, Secured Debt (Maturity—November 26, 2019)(9)

    5,625     5,597     5,625  

                           

22


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

EnCap Energy Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          3,881     2,177  

     

LP Interests (EnCap Energy Capital Fund VIII Co-Investors, L.P.) (Fully diluted 0.3%)

          2,227     1,549  

     

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

          4,189     3,508  

     

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

          5,522     5,284  

     

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

          5,812     5,611  

     

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

          3,317     3,494  

                  24,948     21,623  

                           

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

 

Technology-based Performance Support Solutions

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.49%, Secured Debt (Maturity—April 28, 2022)(9)

    6,999     6,872     5,760  

                           

Extreme Reach, Inc.(11)

 

Integrated TV and Video Advertising Platform

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—February 7, 2020)(9)

    9,032     9,017     9,028  

                           

Felix Investments Holdings II(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.81%, Secured Debt (Maturity—August 9, 2022)(9)

    3,333     3,264     3,264  

                           

Flavors Holdings Inc.(11)

 

Global Provider of Flavoring and Sweetening Products

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 7.08%, Secured Debt (Maturity—April 3, 2020)(9)

    13,271     12,763     12,640  

                           

23


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

GI KBS Merger Sub LLC(11)

 

Outsourced Janitorial Services to Retail/Grocery Customers

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.32%, Secured Debt (Maturity—October 29, 2021)(9)

    6,807     6,728     6,803  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.81%, Secured Debt (Maturity—April 29, 2022)(9)

    3,800     3,653     3,705  

                  10,381     10,508  

                           

Grace Hill, LLC(10)

 

Online Training Tools for the Multi-Family Housing Industry

                       

     

Prime Plus 5.25% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—August 15, 2019)(9)

    1,215     1,206     1,215  

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.53%, Secured Debt (Maturity—August 15, 2019)(9)

    11,465     11,407     11,465  

                  12,613     12,680  

                           

Great Circle Family Foods, LLC(10)

 

Quick Service Restaurant Franchise

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31%, Secured Debt (Maturity—October 28, 2019)(9)

    7,320     7,283     7,320  

                           

Grupo Hima San Pablo, Inc.(11)

 

Tertiary Care Hospitals

                       

     

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (Maturity—January 31, 2018)(9)

    4,767     4,759     3,551  

     

13.75% Secured Debt (Maturity—July 31, 2018)

    2,055     2,034     205  

                  6,793     3,756  

                           

GST Autoleather, Inc.(11)

 

Automotive Leather Manufacturer

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.65%, Secured Debt (Maturity—July 10, 2020)(9)

    19,409     18,909     15,042  

                           

Guitar Center, Inc.(11)

 

Musical Instruments Retailer

                       

     

6.5% Secured Debt (Maturity—April 15, 2019)

    16,625     15,902     15,087  

                           

Hojeij Branded Foods, LLC(10)

 

Multi-Airport, Multi-Concept Restaurant Operator

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—July 20, 2022)(9)

    12,000     11,882     11,925  

                           

24


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Hoover Group, Inc.(10)(13)

 

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

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.48%, Secured Debt (Maturity—January 28, 2021)(9)

    8,481     7,977     7,803  

                           

Hostway Corporation(11)

 

Managed Services and Hosting Provider

                       

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.08%, Secured Debt (Maturity—December 13, 2019)(9)

    20,150     19,752     19,621  

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.08%, Secured Debt (Maturity—December 13, 2018)(9)

    2,433     2,329     2,293  

                  22,081     21,914  

                           

Hunter Defense Technologies, Inc.(11)

 

Provider of Military and Commercial Shelters and Systems

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31%, Secured Debt (Maturity—August 5, 2019)(9)

    16,381     15,985     16,258  

                           

Hydrofarm Holdings LLC(10)

 

Wholesaler of Horticultural Products

                       

     

LIBOR Plus 7.00%, Current Coupon 8.24%, Secured Debt (Maturity—May 12, 2022)

    6,750     6,625     6,625  

                           

iEnergizer Limited(11)(13)(21)

 

Provider of Business Outsourcing Solutions

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—May 1, 2019)(9)

    11,589     11,298     11,560  

                           

Implus Footcare, LLC(10)

 

Provider of Footwear and Related Accessories

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 8.08%, Secured Debt (Maturity—September 15, 2021)(9)

    19,372     19,101     19,101  

                           

Indivior Finance LLC(11)(13)

 

Specialty Pharmaceutical Company Treating Opioid Dependence

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.32%, Secured Debt (Maturity—December 19, 2019)(9)

    3,178     3,057     3,206  

                           

25


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Industrial Services Acquisition, LLC(10)

 

Industrial Cleaning Services

                       

     

11.25% Current / 0.75% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    4,544     4,467     4,544  

     

Member Units (Industrial Services Investments, LLC) (900,000 units)

          900     810  

                  5,367     5,354  

                           

Inn of the Mountain Gods Resort and Casino(11)

 

Hotel & Casino Owner & Operator

                       

     

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

    6,249     5,976     5,624  

                           

Intertain Group Limited(11)(13)(21)

 

Business-to-Consumer Online Gaming Operator

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.74%, Secured Debt (Maturity—April 8, 2022)(9)

    4,049     4,002     4,095  

                           

iPayment, Inc.(11)

 

Provider of Merchant Acquisition

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31%, Secured Debt (Maturity—April 11, 2023)(9)

    12,000     11,887     12,150  

                           

iQor US Inc.(11)

 

Business Process Outsourcing Services Provider

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.34%, Secured Debt (Maturity—April 1, 2021)(9)

    995     985     988  

                           

irth Solutions, LLC

 

Provider of Damage Prevention Information Technology Services

                       

     

Member Units (27,893 units)

          1,441     1,920  

                           

Jacent Strategic Merchandising, LLC(10)

 

General Merchandise Distribution

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity—September 16, 2020)(9)

    11,239     11,178     11,239  

                           

Jackmont Hospitality, Inc.(10)

 

Franchisee of Casual Dining Restaurants

                       

     

LIBOR Plus 6.75% (Floor 1.00%), Current Coupon 7.99%, Secured Debt (Maturity—May 26, 2021)(9)

    4,390     4,378     4,390  

                           

Jacuzzi Brands LLC(11)

 

Manufacturer of Bath and Spa Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity—June 28, 2023)(9)

    3,975     3,898     3,955  

                           

26


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Joerns Healthcare, LLC(11)

 

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.82% Secured Debt (Maturity—May 9, 2020)(9)

    13,387     13,290     12,556  

                           

Keypoint Government Solutions, Inc.(10)

 

Provider of Pre-Employment Screening Services

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.30%, Secured Debt (Maturity—April 18, 2024)(9)

    12,344     12,228     12,228  

                           

Larchmont Resources, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.32%, PIK Secured Debt (Maturity—August 7, 2020)(9)(19)

    2,377     2,377     2,329  

     

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

          353     976  

                  2,730     3,305  

                           

LifeMiles Ltd.(11)(13)(21)

 

Operator of Latin American Coalition Loyalty Program

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.82%, Secured Debt (Maturity—August 18, 2022)(9)

    2,500     2,475     2,525  

                           

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

 

Investment Partnership

                       

     

LP Interests (Fully diluted 2.3%)

          2,500     3,967  

                           

Logix Acquisition Company, LLC(10)

 

Competitive Local Exchange Carrier

                       

     

LIBOR Plus 8.28% (Floor 1.00%), Current Coupon 9.54%, Secured Debt (Maturity—June 24, 2021)(9)(23)

    8,358     8,241     8,358  

                           

Looking Glass Investments, LLC(12)(13)

 

Specialty Consumer Finance

                       

     

Member Units (2.5 units)

          125     125  

     

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

          116     128  

                  241     253  

                           

27


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

LSF9 Atlantis Holdings, LLC(11)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity—May 1, 2023)(9)

    8,000     7,904     8,048  

                           

Lulu's Fashion Lounge, LLC(10)

 

Fast Fashion E-Commerce Retailer

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.24%, Secured Debt (Maturity—August 28, 2022)(9)

    13,636     13,233     13,534  

                           

Messenger, LLC(10)

 

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.49%, Secured Debt (Maturity—September 9, 2020)(9)

    17,803     17,714     17,803  

                           

NBG Acquisition Inc(11)

 

Wholesaler of Home Décor Products

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.91%, Secured Debt (Maturity—April 26, 2024)(9)

    4,430     4,362     4,408  

                           

Minute Key, Inc.

 

Operator of Automated Key Duplication Kiosks

                       

     

12% Secured Debt (Maturity—September 19, 2019)

    16,582     16,350     16,582  

     

Warrants (1,437,409 equivalent shares; Expiration—May 20, 2025; Strike price—$0.01 per share)

          280     1,050  

                  16,630     17,632  

                           

New Media Holdings II LLC(11)(13)

 

Local Newspaper Operator

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.49%, Secured Debt (Maturity—July 14, 2022)(9)

    17,759     17,371     17,787  

                           

NNE Partners, LLC(10)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 8.00%, Current Coupon 9.31%, Secured Debt (Maturity—March 2, 2022)

    10,500     10,404     10,404  

                           

North American Lifting Holdings, Inc.(11)

 

Crane Service Provider

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.83%, Secured Debt (Maturity—November 27, 2020)(9)

    7,765     6,871     7,163  

                           

28


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Novetta Solutions, LLC(11)

 

Provider of Advanced Analytics Solutions for Defense Agencies

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.34%, Secured Debt (Maturity—October 17, 2022)(9)

    9,706     9,359     9,439  

                           

NTM Acquisition Corp.(11)

 

Provider of B2B Travel Information Content

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.55%, Secured Debt (Maturity—June 7, 2022)(9)

    6,268     6,202     6,236  

                           

Ospemifene Royalty Sub LLC (QuatRx)(10)

 

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

     

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

    5,071     5,071     1,391  

                           

P.F. Chang's China Bistro, Inc.(11)

 

Casual Restaurant Group

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.24%, Secured Debt (Maturity—September 1, 2022)(9)

    5,000     4,852     4,800  

                           

Pardus Oil and Gas, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

13% PIK Secured Debt (Maturity—November 12, 2021)(19)

    2,053     2,053     1,351  

     

5% PIK Secured Debt (Maturity—May 13, 2022)(19)

    1,029     1,029     132  

     

Member Units (2,472 units)

          2,472      

                  5,554     1,483  

                           

Paris Presents Incorporated(11)

 

Branded Cosmetic and Bath Accessories

                       

     

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 9.99%, Secured Debt (Maturity—December 31, 2021)(9)

    4,500     4,469     4,455  

                           

Parq Holdings Limited Partnership(11)(13)(21)

 

Hotel & Casino Operator

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.73%, Secured Debt (Maturity—December 17, 2020)(9)

    7,500     7,411     7,481  

                           

Permian Holdco 2, Inc.(11)

 

Storage Tank Manufacturer

                       

     

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

    219     219     219  

     

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

          799     799  

     

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

               

                  1,018     1,018  

                           

29


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Pernix Therapeutics Holdings, Inc.(10)

 

Pharmaceutical Royalty

                       

     

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

    3,129     3,129     1,971  

                           

Point.360(10)

 

Fully Integrated Provider of Digital Media Services

                       

     

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

          69      

     

Common Stock (163,658 shares)

          273     9  

                  342     9  

                           

PPC/SHIFT LLC(10)

 

Provider of Digital Solutions to Automotive Industry

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.33%, Secured Debt (Maturity—December 22, 2021)(9)

    6,869     6,741     6,869  

                           

Prowler Acquisition Corp.(11)

 

Specialty Distributor to the Energy Sector

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.83%, Secured Debt (Maturity—January 28, 2020)(9)

    11,170     9,607     9,941  

                           

PT Network, LLC(10)

 

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

     

PRIME Plus 5.50% (Floor 2.00%), Current Coupon 9.75%, Secured Debt (Maturity—November 30, 2021)(9)

    634     612     634  

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.82%, Secured Debt (Maturity—November 30, 2021)(9)

    17,578     17,388     17,578  

                  18,000     18,212  

                           

PSC Industrial Holdings Corp(11)

 

Diversified Industrial Service Provider

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.99%, Secured Debt (Maturity—December 5, 2020)(9)

    5,596     5,275     5,587  

                           

QBS Parent, Inc.(11)

 

Provider of Software and Services to the Oil & Gas Industry

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 6.06%, Secured Debt (Maturity—August 7, 2021)(9)

    14,272     14,104     13,916  

                           

30


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Redbox Automated Retail, LLC(11)

 

Operator of Home Media Entertainment Kiosks

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.74%, Secured Debt (Maturity—September 27, 2021)(9)

    10,500     10,224     10,605  

                           

Resolute Industrial, LLC(10)

 

HVAC Equipment Rental and Remanufacturing

                       

     

LIBOR Plus 7.62% (Floor 1.00%), Current Coupon 8.95%, Secured Debt (Maturity—July 26, 2022)(9)(24)

    17,088     16,759     16,759  

     

Member Units (601 units)

          750     750  

                  17,509     17,509  

                           

RGL Reservoir Operations Inc.(11)(13)(21)

 

Oil & Gas Equipment and Services

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.33%, Secured Debt (Maturity—August 13, 2021)(9)

    3,880     3,808     698  

                           

RM Bidder, LLC(10)

 

Scripted and Unscripted TV and Digital Programming Provider

                       

     

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

          425      

     

Member Units (2,779 units)

          46     25  

                  471     25  

                           

SAExploration, Inc.(10)(13)(21)

 

Geophysical Services Provider

                       

     

Common Stock (50 shares)

          65      

                           

SAFETY Investment Holdings, LLC

 

Provider of Intelligent Driver Record Monitoring Software and Services

                       

     

Member Units (2,000,000 units)

          2,000     1,670  

                           

Salient Partners L.P.(11)

 

Provider of Asset Management Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.80%, Secured Debt (Maturity—June 9, 2021)(9)

    10,369     10,143     10,058  

                           

Sigma Electric Manufacturing Corporation(10)(13)

 

Manufacturer and Distributor of Electrical Fittings and Parts

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.58%, Secured Debt (Maturity—October 13, 2021)(9)

    12,438     12,175     12,437  

                           

31


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

SiTV, LLC(11)

 

Cable Networks Operator

                       

     

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

    7,304     4,814     4,948  

                           

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

 

Provider of Specialty Memory Solutions

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.56%, Secured Debt (Maturity—August 8, 2022)(9)

    15,000     14,708     14,925  

                           

Sorenson Communications, Inc.(11)

 

Manufacturer of Communication Products for Hearing Impaired

                       

     

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.00%, Secured Debt (Maturity—April 30, 2020)(9)

    13,268     13,198     13,359  

     

9% Secured Debt (Maturity—October 31, 2020)

    2,666     2,532     2,600  

                  15,730     15,959  

                           

Staples Canada ULC(10)(13)(21)

 

Office Supplies Retailer

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.46%, Secured Debt (Maturity—September 12, 2023)(9)(22)

    20,000     19,604     19,023  

                           

Strike, LLC(11)

 

Pipeline Construction and Maintenance Services

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—November 30, 2022)(9)

    9,625     9,363     9,769  

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.45%, Secured Debt (Maturity—May 30, 2019)(9)

    500     475     512  

                  9,838     10,281  

                           

Subsea Global Solutions, LLC(10)

 

Underwater Maintenance and Repair Services

                       

     

LIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (Maturity—March 17, 2020)(9)

    7,706     7,651     7,706  

                           

Synagro Infrastructure Company, Inc(11)

 

Waste Management Services

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.58%, Secured Debt (Maturity—August 22, 2020)(9)

    9,161     8,913     8,749  

                           

Tectonic Holdings, LLC

 

Financial Services Organization

                       

     

Member Units (200,000 units)(8)

          2,000     2,000  

                           

32


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

TE Holdings, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

Member Units (97,048 units)

          970     291  

                           

TeleGuam Holdings, LLC(11)

 

Cable and Telecom Services Provider

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.73%, Secured Debt (Maturity—April 12, 2024)(9)

    7,750     7,598     7,828  

                           

TGP Holdings III LLC(11)

 

Outdoor Cooking & Accessories

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.33%, Secured Debt (Maturity—September 25, 2024)(9)

    8,000     7,920     8,050  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.83%, Secured Debt (Maturity—September 25, 2025)(9)

    5,000     4,925     5,025  

                  12,845     13,075  

                           

The Container Store, Inc.(11)

 

Operator of Stores Offering Storage and Organizational Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity—August 15, 2021)(9)

    10,000     9,707     9,631  

                           

TMC Merger Sub Corp.(11)

 

Refractory & Maintenance Services Provider

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—October 31, 2022)(9)(25)

    13,741     13,618     13,809  

                           

TOMS Shoes, LLC(11)

 

Global Designer, Distributor, and Retailer of Casual Footwear

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.82%, Secured Debt (Maturity—October 30, 2020)(9)

    4,875     4,589     2,331  

                           

Turning Point Brands, Inc.(10)(13)

 

Marketer/Distributor of Tobacco Products

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.32%, Secured Debt (Maturity—May 17, 2022)(9)(24)

    8,458     8,381     8,436  

                           

33


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

TVG-I-E CMN ACQUISITION, LLC(10)

 

Organic Lead Generation for Online Postsecondary Schools

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.24%, Secured Debt (Maturity—November 3, 2021)(9)

    6,338     6,229     6,337  

                           

Tweddle Group, Inc.(11)

 

Provider of Technical Information Services to Automotive OEMs

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.31%, Secured Debt (Maturity—October 21, 2022)(9)

    6,195     6,086     6,210  

                           

U.S. TelePacific Corp.(11)

 

Provider of Communications and Managed Services

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.32%, Secured Debt (Maturity—May 2, 2023)(9)

    17,955     17,834     17,533  

                           

US Joiner Holding Company(11)

 

Marine Interior Design and Installation

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.34%, Secured Debt (Maturity—April 16, 2020)(9)

    13,500     13,390     13,400  

                           

VIP Cinema Holdings, Inc.(11)

 

Supplier of Luxury Seating to the Cinema Industry

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.34%, Secured Debt (Maturity—March 1, 2023)(9)

    7,800     7,764     7,884  

                           

Virtex Enterprises, LP(10)

 

Specialty, Full-Service Provider of Complex Electronic Manufacturing Services

                       

     

12% Secured Debt (Maturity—December 27, 2018)

    1,667     1,595     1,595  

     

Preferred Class A Units (14 units; 5% cumulative)(8)

          333     904  

     

Warrants (11 equivalent units; Expiration—December 27, 2023; Strike price—$0.001 per unit)

          186     443  

                  2,114     2,942  

                           

34


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

Vistar Media, Inc.(10)

 

Operator of Digital Out-of-Home Advertising Platform

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.33%, Secured Debt (Maturity—February 16, 2022)(9)

    3,375     3,088     3,088  

     

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

          331     331  

                  3,419     3,419  

                           

Wellnext, LLC(10)

 

Manufacturer of Supplements and Vitamins

                       

     

LIBOR Plus 10.10% (Floor 1.00%), Current Coupon 11.34%, Secured Debt (Maturity—July 21, 2022)(9)(23)

    9,930     9,852     9,930  

                           

Wireless Vision Holdings, LLC(10)

 

Provider of Wireless Telecommunications Carrier Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.83%, Secured Debt (Maturity—September 29, 2022)(9)(23)

    6,711     6,576     6,576  

                           

Wirepath LLC(11)

 

E-Commerce Provider into Connected Home Market

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.56%, Secured Debt (Maturity—August 5, 2024)(9)

    5,000     4,981     5,042  

                           

Zilliant Incorporated

 

Price Optimization and Margin Management Solutions

                       

     

Preferred Stock (186,777 shares)

          154     260  

     

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

          1,071     1,190  

                  1,225     1,450  

Subtotal Non-Control/Non-Affiliate Investments (51.4% of total investments at fair value)

        $ 1,144,962   $ 1,115,877  

Total Portfolio Investments, September 30, 2017

        $ 2,049,528   $ 2,169,981  

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

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

(3)
See Note C for a summary of geographic location of portfolio companies.

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

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

35


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

September 30, 2017

(dollars in thousands)

(Unaudited)

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

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

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at September 30, 2017. As noted in this schedule, 66% (based on the par amount of the loans) of the loans contain LIBOR floors which range between 0.50% and 2.25%, with a weighted-average LIBOR floor of approximately 1.02%.

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

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

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

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

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

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

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

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

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

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

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

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

(22)
In connection with the Company's debt investment in Staples Canada ULC to help mitigate any potential adverse change in foreign exchange rates during the term of the Company's investment, the Company entered into a forward foreign currency contract with Cadence Bank to lend $24.2 million Canadian Dollars and receive $20.0 million U.S. Dollars with a settlement date of September 12, 2018. The unrealized appreciation on the forward foreign currency contract is $0.5 million as of September 30, 2017. This unrealized appreciation is offset by the foreign currency translation depreciation on the investment.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(24)
As part of the credit agreement with the portfolio company, the Company is entitled to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche receives priority over the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. The rate the Company receives per the Credit Agreement is the same as the rate reflected in the Consolidated Schedule of Investments above.

(25)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such lower rate.

36


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

December 31, 2016

(dollars in thousands)

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

 
   

Control Investments(5)

 

 

 

 

                   

                           

Access Media Holdings, LLC(10)

 

Private Cable Operator

                       

     

5% Current / 5% PIK Secured Debt (Maturity—July 22, 2020)(19)

  $ 22,664   $ 22,664   $ 19,700  

     

Preferred Member Units (6,581,250 units)

          6,475     240  

     

Member Units (45 units)

          1      

                  29,140     19,940  

                           

Ameritech College Operations, LLC

 

For-Profit Nursing and Healthcare College

                       

     

10% Secured Debt (Maturity—November 30, 2019)

    514     514     514  

     

13% Secured Debt (Maturity—November 30, 2019)

    489     489     489  

     

13% Secured Debt (Maturity—January 31, 2020)

    3,025     3,025     3,025  

     

Preferred Member Units (294 units)

          2,291     2,291  

                  6,319     6,319  

                           

ASC Interests, LLC

 

Recreational and Educational Shooting Facility

                       

     

11% Secured Debt (Maturity—July 31, 2018)

    2,100     2,084     2,100  

     

Member Units (1,500 units)(8)

          1,500     2,680  

                  3,584     4,780  

                           

Bond-Coat, Inc.

 

Casing and Tubing Coating Services

                       

     

12% Secured Debt (Maturity—December 28, 2017)

    11,596     11,556     11,596  

     

Common Stock (57,508 shares)

          6,350     6,660  

                  17,906     18,256  

                           

Café Brazil, LLC

 

Casual Restaurant Group

                       

     

Member Units (1,233 units)(8)

          1,742     6,040  

                           

CBT Nuggets, LLC

 

Produces and Sells IT Training Certification Videos

                       

     

Member Units (416 units)(8)

          1,300     55,480  

                           

37


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

 
   

Clad-Rex Steel, LLC

 

Specialty Manufacturer of Vinyl-Clad Metal

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—December 20, 2018)(9)

    400     396     396  

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—December 20, 2021)(9)

    14,080     13,941     13,941  

     

Member Units (717 units)

          7,280     7,280  

     

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

    1,202     1,190     1,190  

     

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

          210     210  

                  23,017     23,017  

                           

CMS Minerals Investments

 

Oil & Gas Exploration & Production

                       

     

Preferred Member Units (CMS Minerals LLC) (458 units)(8)

          2,104     3,682  

     

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

          3,829     3,381  

                  5,933     7,063  

                           

Datacom, LLC

 

Technology and Telecommunications Provider

                       

     

8% Secured Debt (Maturity—May 30, 2017)

    900     900     900  

     

5.25% Current / 5.25% PIK Secured Debt (Maturity—May 30, 2019)(19)

    11,713     11,651     11,049  

     

Class A Preferred Member Units

          1,181     1,368  

     

Class B Preferred Member Units (6,453 units)

          6,030     1,529  

                  19,762     14,846  

                           

Gamber-Johnson Holdings, LLC

 

Manufacturer of Ruggedized Computer Mounting Systems

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.00%, Secured Debt (Maturity—June 24, 2021)(9)

    24,080     23,846     23,846  

     

Member Units (8,619 units)

          14,844     18,920  

                  38,690     42,766  

                           

Garreco, LLC

 

Manufacturer and Supplier of Dental Products

                       

     

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

    5,250     5,219     5,219  

     

Member Units (1,200 units)

          1,200     1,150  

                  6,419     6,369  

                           

38


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

 
   

GRT Rubber Technologies LLC

 

Manufacturer of Engineered Rubber Products

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—December 19, 2019)(9)

    13,274     13,188     13,274  

     

Member Units (5,879 units)(8)

          13,065     20,310  

                  26,253     33,584  

                           

Gulf Manufacturing, LLC

 

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

     

9% PIK Secured Debt (Ashland Capital IX, LLC) (Maturity—June 30, 2017)(19)

    777     777     777  

     

Member Units (438 units)(8)

          2,980     8,770  

                  3,757     9,547  

                           

Gulf Publishing Holdings, LLC

 

Energy Industry Focused Media and Publishing

                       

     

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

    10,000     9,911     9,911  

     

Member Units (3,124 units)

          3,124     3,124  

                  13,035     13,035  

                           

Harrison Hydra-Gen, Ltd.

 

Manufacturer of Hydraulic Generators

                       

     

Common Stock (107,456 shares)(8)

          718     3,120  

                           

Hawthorne Customs and Dispatch Services, LLC

 

Facilitator of Import Logistics, Brokerage, and Warehousing

                       

     

Member Units (500 units)

          589     280  

     

Member Units (Wallisville Real Estate, LLC) (588,210 units)(8)

          1,215     2,040  

                  1,804     2,320  

                           

HW Temps LLC

 

Temporary Staffing Solutions

                       

     

LIBOR Plus 13.00% (Floor 1.00%), Current Coupon 14.00%, Secured Debt (Maturity July 2, 2020)(9)

    10,576     10,500     10,500  

     

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

          3,942     3,940  

                  14,442     14,440  

                           

Hydratec, Inc.

 

Designer and Installer of Micro-Irrigation Systems

                       

     

Common Stock (7,095 shares)(8)

          7,095     15,640  

                           

IDX Broker, LLC

 

Provider of Marketing and CRM Tools for the Real Estate Industry

                       

     

12.5% Secured Debt (Maturity—November 15, 2018)

    10,950     10,904     10,950  

     

Member Units (5,400 units)(8)

          5,606     7,040  

                  16,510     17,990  

                           

39


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

 
   

Indianapolis Aviation Partners, LLC

 

Fixed Base Operator

                       

     

15% Secured Debt (Maturity—January 15, 2017)

    3,100     3,100     3,100  

     

Warrants (1,046 equivalent units; Expiration—September 15, 2019; Strike price—$0.01 per unit)

          1,129     2,649  

                  4,229     5,749  

                           

Jensen Jewelers of Idaho, LLC

 

Retail Jewelry Store

                       

     

Prime Plus 6.75% (Floor 2.00%), Current Coupon 10.25%, Secured Debt (Maturity—November 14, 2019)(9)

    4,055     3,996     4,055  

     

Member Units (627 units)(8)

          811     4,460  

                  4,807     8,515  

                           

Lamb Ventures, LLC

 

Aftermarket Automotive Services Chain

                       

     

11% Secured Debt (Maturity—May 31, 2018)

    7,657     7,657     7,657  

     

Preferred Equity (non-voting)

          400     400  

     

Member Units (742 units)(8)

          5,273     5,990  

     

9.5% Secured Debt (Lamb's Real Estate Investment I, LLC) (Maturity—December 31, 2041)

    1,170     1,170     1,170  

     

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

          625     1,340  

                  15,125     16,557  

                           

Lighting Unlimited, LLC

 

Commercial and Residential Lighting Products and Design Services

                       

     

8% Secured Debt (Maturity—August 22, 2017)

    1,514     1,514     1,514  

     

Preferred Equity (non-voting)

          434     410  

     

Warrants (71 equivalent units; Expiration—June 14, 2021; Strike price—$0.01 per unit)

          54      

     

Member Units (700 units)

          100      

                  2,102     1,924  

                           

Marine Shelters Holdings, LLC

 

Fabricator of Marine and Industrial Shelters

                       

     

12% PIK Secured Debt (Maturity—December 28, 2017)(14)

    9,967     9,914     9,387  

     

Preferred Member Units (3,810 units)

          5,352      

                  15,266     9,387  

                           

MH Corbin Holding LLC

 

Manufacturer and Distributor of Traffic Safety Products

                       

     

10% Secured Debt (Maturity—August 31, 2020)

    13,300     13,197     13,197  

     

Preferred Member Units (4,000 shares)

          6,000     6,000  

                  19,197     19,197  

                           

40


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

 
   

Mid-Columbia Lumber Products, LLC

 

Manufacturer of Finger-Jointed Lumber Products

                       

     

10% Secured Debt (Maturity—December 18, 2017)

    1,750     1,750     1,750  

     

12% Secured Debt (Maturity—December 18, 2017)

    3,900     3,900     3,900  

     

Member Units (3,554 units)

          1,810     2,480  

     

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

    836     836     836  

     

Member Units (Mid—Columbia Real Estate, LLC) (250 units)(8)

          250     600  

                  8,546     9,566  

                           

MSC Adviser I, LLC(16)

 

Third Party Investment Advisory Services

                       

     

Member Units (Fully diluted 100.0%)(8)

              30,617  

                           

Mystic Logistics Holdings, LLC

 

Logistics and Distribution Services Provider for Large Volume Mailers

                       

     

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

    9,176     9,053     9,176  

     

Common Stock (5,873 shares)

          2,720     5,780  

                  11,773     14,956  

                           

NAPCO Precast, LLC

 

Precast Concrete Manufacturing

                       

     

Prime Plus 2.00% (Floor 7.00%), Current Coupon 9.00%, Secured Debt (Maturity—February 1, 2019)(9)

    2,713     2,693     2,713  

     

18% Secured Debt (Maturity—February 1, 2019)

    3,952     3,922     3,952  

     

Member Units (2,955 units)(8)

          2,975     10,920  

                  9,590     17,585  

                           

NRI Clinical Research, LLC

 

Clinical Research Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.50%), Current Coupon 8.00%, Secured Debt (Maturity—September 8, 2017)(9)

    200     200     200  

     

14% Secured Debt (Maturity—September 8, 2017)

    4,261     4,228     4,261  

     

Warrants (251,723 equivalent units; Expiration—September 8, 2021; Strike price—$0.01 per unit)

          252     680  

     

Member Units (1,454,167 units)

          765     2,462  

                  5,445     7,603  

                           

41


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

 
   

NRP Jones, LLC

 

Manufacturer of Hoses, Fittings and Assemblies

                       

     

6% Current / 6% PIK Secured Debt (Maturity—December 22, 2016)(17)(19)

    13,915     13,915     13,915  

     

Warrants (14,331 equivalent units; Expiration—December 22, 2022; Strike price—$0.01 per unit)

          817     130  

     

Member Units (50,877 units)

          2,900     410  

                  17,632     14,455  

                           

OMi Holdings, Inc.

 

Manufacturer of Overhead Cranes

                       

     

Common Stock (1,500 shares)(8)

          1,080     13,080  

                           

Pegasus Research Group, LLC

 

Provider of Telemarketing and Data Services

                       

     

Member Units (460 units)(8)

          1,290     8,620  

                           

PPL RVs, Inc.

 

Recreational Vehicle Dealer

                       

     

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 7.93%, Secured Debt (Maturity—November 15, 2021)(9)

    18,000     17,826     17,826  

     

Common Stock (1,962 shares)(8)

          2,150     11,780  

                  19,976     29,606  

                           

Principle Environmental, LLC

 

Noise Abatement Service Provider

                       

     

12% Secured Debt (Maturity—April 30, 2017)

    4,060     4,060     4,060  

     

12% Current / 2% PIK Secured Debt (Maturity—April 30, 2017)(19)

    3,378     3,378     3,378  

     

Preferred Member Units (19,631 units)

          4,663     5,370  

     

Warrants (1,036 equivalent units; Expiration—January 31, 2021; Strike price—$0.01 per unit)

          1,200     270  

                  13,301     13,078  

                           

Quality Lease Service, LLC

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

8% PIK Secured Debt (Maturity—June 8, 2020)(19)

    7,068     7,068     7,068  

     

Member Units (1,000 units)

          1,118     3,188  

                  8,186     10,256  

                           

River Aggregates, LLC

 

Processor of Construction Aggregates

                       

     

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

    750     627     627  

     

Member Units (1,150 units)(8)

          1,150     4,600  

     

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

          369     2,510  

                  2,146     7,737  

                           

42


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

 
   

SoftTouch Medical Holdings LLC

 

Provider of In-Home Pediatric Durable Medical Equipment

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—October 31, 2019)(9)

    7,140     7,096     7,140  

     

Member Units (4,450 units)(8)

          4,930     9,170  

                  12,026     16,310  

                           

The MPI Group, LLC

 

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

     

9% Secured Debt (Maturity—October 2, 2018)

    2,924     2,922     2,922  

     

Series A Preferred Units (2,500 units)

          2,500      

     

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

          1,096      

     

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

          2,300     2,300  

                  8,818     5,222  

                           

Uvalco Supply, LLC

 

Farm and Ranch Supply Store

                       

     

9% Secured Debt (Maturity—January 1, 2019)

    872     872     872  

     

Member Units (2,011 units)(8)

          3,843     4,640  

                  4,715     5,512  

                           

Vision Interests, Inc.

 

Manufacturer / Installer of Commercial Signage

                       

     

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

    2,814     2,814     2,814  

     

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

          3,000     3,000  

     

Common Stock (1,126,242 shares)

          3,706      

                  9,520     5,814  

                           

Ziegler's NYPD, LLC

 

Casual Restaurant Group

                       

     

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

    1,000     994     994  

     

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

    300     300     300  

     

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

    2,750     2,750     2,750  

     

Warrants (587 equivalent units; Expiration—September 29, 2018; Strike price—$0.01 per unit)

          600     240  

     

Preferred Member Units (10,072 units)

          2,834     4,100  

                  7,478     8,384  

Subtotal Control Investments (29.8% of total investments at fair value)

  $ 439,674   $ 594,282  

43


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Affiliate Investments(6)

 

 

 

 

                   

                           

AFG Capital Group, LLC

 

Provider of Rent-to-Own Financing Solutions and Services

                       

     

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

        $ 259   $ 670  

     

Member Units (186 units)(8)

          1,200     2,750  

                  1,459     3,420  

                           

Barfly Ventures, LLC(10)

 

Casual Restaurant Group

                       

     

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

    5,958     5,860     5,827  

     

Options (2 equivalent units)

          397     490  

     

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

          473     280  

                  6,730     6,597  

                           

BBB Tank Services, LLC

 

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

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—April 8, 2021)(9)

    800     797     797  

     

15% Current Secured Debt (Maturity—April 8, 2021)

    4,027     3,991     3,991  

     

Member Units (800,000 units)

          800     800  

                  5,588     5,588  

                           

Boss Industries, LLC

 

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

     

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

          2,426     2,800  

                           

Bridge Capital Solutions Corporation

 

Financial Services and Cash Flow Solutions Provider

                       

     

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

    7,500     5,610     5,610  

     

Warrants (63 equivalent shares; Expiration—April 18, 2022; Strike price—$0.01 per share)

          2,132     3,370  

     

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

    1,000     991     1,000  

     

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

          1,000     1,000  

                  9,733     10,980  

                           

44


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Buca C, LLC

 

Casual Restaurant Group

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—June 30, 2020)(9)

    22,671     22,504     22,671  

     

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

          3,937     4,660  

                  26,441     27,331  

                           

CAI Software LLC

 

Provider of Specialized Enterprise Resource Planning Software

                       

     

12% Secured Debt (Maturity—October 10, 2019)

    3,683     3,660     3,683  

     

Member Units (65,356 units)(8)

          654     2,480  

                  4,314     6,163  

                           

CapFusion, LLC(13)

 

Non-Bank Lender to Small Businesses

                       

     

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

    14,400     13,202     13,202  

     

Warrants (1,600 equivalent units; Expiration—March 24, 2026; Strike price—$0.01 per unit)

          1,200     1,200  

                  14,402     14,402  

                           

Chandler Signs Holdings, LLC(10)

 

Sign Manufacturer

                       

     

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

    4,500     4,461     4,500  

     

Class A Units (1,500,000 units)(8)

          1,500     3,240  

                  5,961     7,740  

                           

Condit Exhibits, LLC

 

Tradeshow Exhibits / Custom Displays Provider

                       

     

Member Units (3,936 units)(8)

          100     1,840  

                           

Congruent Credit OpportunitiesFunds(12)(13)

 

Investment Partnership

                       

     

LP Interests (Congruent Credit Opportunities Fund II, LP) (Fully diluted 19.8%)(8)

          5,730     1,518  

     

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

          15,754     16,181  

                  21,484     17,699  

                           

Daseke, Inc.

 

Specialty Transportation Provider

                       

     

12% Current / 2.5% PIK Secured Debt (Maturity—July 31, 2018)(19)

    21,799     21,632     21,799  

     

Common Stock (19,467 shares)

          5,213     24,063  

                  26,845     45,862  

                           

45


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Dos Rios Partners(12)(13)

 

Investment Partnership

                       

     

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

          5,996     4,925  

     

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

          1,904     1,444  

                  7,900     6,369  

                           

Dos Rios Stone Products LLC(10)

 

Limestone and Sandstone Dimension Cut Stone Mining Quarries

                       

     

Class A Units (2,000,000 units)(8)

          2,000     2,070  

                           

East Teak Fine Hardwoods, Inc.

 

Distributor of Hardwood Products

                       

     

Common Stock (6,250 shares)(8)

          480     860  

                           

East West Copolymer & Rubber, LLC

 

Manufacturer of Synthetic Rubbers

                       

     

12% Current / 2% PIK Secured Debt (Maturity—October 17, 2019)(19)

    9,699     9,591     8,630  

     

Warrants (2,510,790 equivalent units; Expiration—October 15, 2024; Strike price—$0.01 per unit)

          50      

                  9,641     8,630  

                           

EIG Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          2,804     2,804  

                           

EIG Traverse Co-Investment, L.P.(12)(13)

 

Investment Partnership

                       

     

LP Interests (Fully diluted 22.2%)(8)

          9,805     9,905  

                           

Freeport Financial Funds(12)(13)

 

Investment Partnership

                       

     

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

          5,974     5,620  

     

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

          4,763     4,763  

                  10,737     10,383  

                           

Gault Financial, LLC (RMB Capital, LLC)

 

Purchases and Manages Collection of Healthcare and other Business Receivables

                       

     

10% Current Secured Debt (Maturity—January 1, 2019)

    13,046     13,046     11,079  

     

Warrants (29,025 equivalent units; Expiration—February 9, 2022; Strike price—$0.01 per unit)

          400      

                  13,446     11,079  

                           

46


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Glowpoint, Inc.

 

Provider of Cloud Managed Video Collaboration Services

                       

     

12% Secured Debt (Maturity—October 18, 2018)

    9,000     8,949     3,997  

     

Common Stock (7,711,517 shares)(26)

          3,958     2,080  

                  12,907     6,077  

                           

Guerdon Modular Holdings, Inc.

 

Multi-Family and Commercial Modular Construction Company

                       

     

9% Current / 4% PIK Secured Debt (Maturity—August 13, 2019)(19)

    10,708     10,594     10,594  

     

Preferred Stock (404,998 shares)

          1,140     1,140  

     

Common Stock (212,033 shares)

          2,983     80  

                  14,717     11,814  

                           

Hawk Ridge Systems, LLC(13)

 

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

     

10% Secured Debt (Maturity—December 2, 2021)

    10,000     9,901     9,901  

     

Preferred Member Units (226 units)(8)

          2,850     2,850  

     

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

          150     150  

                  12,901     12,901  

                           

Houston Plating and Coatings, LLC

 

Provider of Plating and Industrial Coating Services

                       

     

Member Units (265,756 units)

          1,429     4,000  

                           

I-45 SLF LLC(12)(13)

 

Investment Partnership

                       

     

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

          14,200     14,586  

                           

Indianhead Pipeline Services, LLC

 

Provider of Pipeline Support Services

                       

     

12% Secured Debt (Maturity—February 6, 2017)

    5,100     5,079     5,079  

     

Preferred Member Units (33,819 units; 8% cumulative)(8)(19)

          2,339     2,677  

     

Warrants (31,928 equivalent units; Expiration—August 6, 2022; Strike price—$0.001 per unit)

          459      

     

Member Units (14,732 units)

          1      

                  7,878     7,756  

                           

47


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

KBK Industries, LLC

 

Manufacturer of Specialty Oilfield and Industrial Products

                       

     

10% Secured Debt (Maturity—September 28, 2017)

    1,250     1,250     1,250  

     

12.5% Secured Debt (Maturity—September 28, 2017)

    5,900     5,889     5,889  

     

Member Units (250 units)

          341     2,780  

                  7,480     9,919  

                           

L.F. Manufacturing Holdings,LLC(10)

 

Manufacturer of Fiberglass Products

                       

     

Member Units (2,179,001 units)

          2,019     1,380  

                           

OnAsset Intelligence, Inc.

 

Provider of Transportation Monitoring / Tracking Products and Services

                       

     

12% PIK Secured Debt (Maturity—December 31, 2015)(17)(19)

    4,519     4,519     4,519  

     

Preferred Stock (912 shares)

          1,981      

     

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

          1,919      

                  8,419     4,519  

                           

OPI International Ltd.(13)

 

Provider of Man Camp and Industrial Storage Services

                       

     

10% Unsecured Debt (Maturity—April 8, 2018)

    473     473     473  

     

Common Stock (20,766,317 shares)

          1,371     1,600  

                  1,844     2,073  

                           

PCI Holding Company, Inc.

 

Manufacturer of Industrial Gas Generating Systems

                       

     

12% Secured Debt (Maturity—March 31, 2019)

    13,000     12,898     13,000  

     

Preferred Stock (1,500,000 shares; 20% cumulative)(8)(19)

          3,379     5,370  

                  16,277     18,370  

                           

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

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

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

    30,785     30,281     250  

     

Preferred Member Units (250 units)

          2,500      

                  32,781     250  

                           

48


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Tin Roof Acquisition Company

 

Casual Restaurant Group

                       

     

12% Secured Debt (Maturity—November 13, 2018)

    13,511     13,385     13,385  

     

Class C Preferred Stock (Fully diluted 10.0%; 10% cumulative)(8)(19)

          2,738     2,738  

                  16,123     16,123  

                           

UniTek Global Services, Inc.(11)

 

Provider of Outsourced Infrastructure Services

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—January 13, 2019)(9)

    5,021     5,010     5,021  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—January 13, 2019)(9)

    824     824     824  

     

15% PIK Unsecured Debt (Maturity—July 13, 2019)(19)

    745     745     745  

     

Preferred Stock (4,935,377 shares; 13.5% cumulative)(8)(19)

          5,814     6,410  

     

Common Stock (705,054 shares)

              3,010  

                  12,393     16,010  

                           

Universal Wellhead Services Holdings, LLC(10)

 

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

                       

     

Preferred Member Units (UWS Investments, LLC) (716,949 units)

          717     720  

     

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

          4,000     610  

                  4,717     1,330  

                           

Valley Healthcare Group, LLC

 

Provider of Durable Medical Equipment

                       

     

LIBOR Plus 12.50% (Floor 0.50%), Current Coupon 13.12%, Secured Debt (Maturity—December 29, 2020)(9)

    12,956     12,844     12,844  

     

Preferred Member Units (Valley Healthcare Holding, LLC) (1,600 units)

          1,600     1,600  

                  14,444     14,444  

                           

49


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Volusion, LLC

 

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

                       

     

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

    17,500     15,298     15,298  

     

Preferred Member Units (4,876,670 units)

          14,000     14,000  

     

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

          2,576     2,576  

                  31,874     31,874  

Subtotal Affiliate Investments (18.8% of total investments at fair value)

  $ 394,699   $ 375,948  

50


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Non-Control/Non-Affiliate Investments(7)

 

 

                   

                           

Adams Publishing Group, LLC(10)

 

Local Newspaper Operator

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—November 3, 2020)(9)

  $ 7,662   $ 7,544   $ 7,662  

                           

Ahead, LLC(10)

 

IT Infrastructure Value Added Reseller

                       

     

LIBOR Plus 6.50%, Current Coupon 7.50%, Secured Debt (Maturity—November 2, 2020)

    14,250     13,906     14,303  

                           

Allflex Holdings III Inc.(11)

 

Manufacturer of Livestock Identification Products

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—July 19, 2021)(9)

    14,795     14,706     14,809  

                           

American Scaffold Holdings, Inc.(10)

 

Marine Scaffolding Service Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—March 31, 2022)(9)

    7,359     7,258     7,323  

                           

American Seafoods Group, LLC(11)

 

Catcher and Processor of Alaskan Pollock

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—August 19, 2021)(9)

    9,634     9,624     9,634  

                           

American Teleconferencing Services, Ltd.(11)

 

Provider of Audio Conferencing and Video Collaboration Solutions

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—December 8, 2021)(9)

    11,163     10,345     10,933  

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—June 6, 2022)(9)

    3,714     3,569     3,569  

                  13,914     14,502  

                           

51


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Anchor Hocking, LLC(11)

 

Household Products Manufacturer

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—June 4, 2018)(9)

    2,277     2,277     2,231  

     

Member Units (440,620 units)

          4,928     3,305  

                  7,205     5,536  

                           

AP Gaming I, LLC(10)

 

Developer, Manufacturer, and Operator of Gaming Machines

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—December 20, 2020)(9)

    7,209     7,099     7,194  

                           

Apex Linen Service, Inc.

 

Industrial Launderers

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—October 30, 2022)(9)

    2,400     2,400     2,400  

     

13% Secured Debt (Maturity—October 30, 2022)

    14,416     14,337     14,337  

                  16,737     16,737  

                           

Applied Products, Inc.(10)

 

Adhesives Distributor

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 30, 2019)(9)

    3,527     3,499     3,518  

                           

Arcus Hunting LLC.(10)

 

Manufacturer of Bowhunting and Archery Products and Accessories

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—November 13, 2019)(9)

    13,947     13,796     13,947  

                           

Artel, LLC(11)

 

Provider of Secure Satellite Network and IT Solutions

                       

     

LIBOR Plus 7.00% (Floor 1.25%), Current Coupon 8.25%, Secured Debt (Maturity—November 27, 2017)(9)

    7,050     6,920     6,592  

                           

ATI Investment Sub, Inc.(11)

 

Manufacturer of Solar Tracking Systems

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—June 22, 2021)(9)

    9,500     9,322     9,476  

                           

52


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

ATS Workholding, Inc.(10)

 

Manufacturer of Machine Cutting Tools and Accessories

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—March 10, 2019)(9)

    6,173     6,146     5,924  

                           

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

 

Provider of Radio Frequency Management Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—June 11, 2021)(9)

    11,790     11,604     11,584  

                           

Berry Aviation, Inc.(10)

 

Airline Charter Service Operator

                       

     

13.75% Secured Debt (Maturity—January 30, 2020)

    5,627     5,588     5,627  

     

Common Stock (553 shares)

          400     820  

                  5,988     6,447  

                           

Bluestem Brands, Inc.(11)

 

Multi-Channel Retailer of General Merchandise

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—November 6, 2020)(9)

    12,880     12,635     11,227  

                           

Brainworks Software, LLC(10)

 

Advertising Sales and Newspaper Circulation Software

                       

     

Prime Plus 9.25% (Floor 3.25%), Current Coupon 13.00%, Secured Debt (Maturity—July 22, 2019)(9)

    6,733     6,684     6,733  

                           

Brightwood Capital Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          12,000     11,094  

     

LP Interests (Brightwood Capital Fund IV, LP) (Fully diluted 0.9%)

          500     500  

                  12,500     11,594  

                           

Brundage-Bone Concrete Pumping, Inc.(11)

 

Construction Services Provider

                       

     

10.375% Secured Debt (Maturity—September 1, 2021)

    3,000     2,985     3,240  

                           

California Pizza Kitchen, Inc.(11)

 

Casual Restaurant Group

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—August 23, 2022)(9)

    4,988     4,940     4,976  

                           

53


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Cenveo Corporation(11)

 

Provider of Commercial Printing, Envelopes, Labels, and Printed Office Products

                       

     

6% Secured Debt (Maturity—August 1, 2019)

    13,130     11,097     11,719  

                           

CDHA Management, LLC(10)

 

Dental Services

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—December 5, 2021)(9)

    4,491     4,415     4,415  

                           

Charlotte Russe, Inc(11)

 

Fast-Fashion Retailer to Young Women

                       

     

LIBOR Plus 5.50% (Floor 1.25%), Current Coupon 6.75%, Secured Debt (Maturity—May 22, 2019)(9)

    14,346     14,141     8,724  

                           

Clarius BIGS, LLC(10)

 

Prints & Advertising Film Financing

                       

     

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

    2,928     2,928     88  

                           

Compact Power Equipment, Inc.

 

Equipment / Tool Rental

                       

     

12% Secured Debt (Maturity—October 1, 2017)

    4,100     4,095     4,100  

     

Series A Preferred Stock (4,298,435 shares)

          1,079     4,180  

                  5,174     8,280  

                           

Compuware Corporation(11)

 

Provider of Software and Supporting Services

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity—December 15, 2019)(9)

    8,345     8,187     8,398  

                           

Construction Supply Investments, LLC(10)

 

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

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.50%, Secured Debt (Maturity—June 30, 2023)(9)

    8,500     8,416     8,416  

     

Member Units (20,000 units)

          2,000     2,000  

                  10,416     10,416  

                           

54


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

ContextMedia Health, LLC(11)

 

Provider of Healthcare Media Content

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—December 23, 2021)(9)

    8,000     7,201     7,320  

                           

Covenant Surgical Partners, Inc.(11)

 

Ambulatory Surgical Centers

                       

     

8.75% Secured Debt (Maturity—August 1, 2019)

    800     800     772  

                           

CRGT Inc.(11)

 

Provider of Custom Software Development

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—December 19, 2020)(9)

    6,366     6,286     6,382  

                           

CST Industries Inc.(11)

 

Storage Tank Manufacturer

                       

     

LIBOR Plus 6.25% (Floor 1.50%), Current Coupon 7.75%, Secured Debt (Maturity—May 22, 2017)(9)

    9,102     9,084     9,102  

                           

Darr Equipment LP(10)

 

Heavy Equipment Dealer

                       

     

12% Current / 2% PIK Secured Debt (Maturity—April 15, 2020)(19)

    21,130     20,697     20,748  

     

Warrants (915,734 equivalent units; Expiration—April 15, 2024; Strike price—$1.50 per unit)

          474     10  

                  21,171     20,758  

                           

Digital River, Inc.(11)

 

Provider of Outsourced e-Commerce Solutions and Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—February 12, 2021)(9)

    15,184     15,086     15,317  

                           

Digital Room LLC(11)

 

Pure-Play e-Commerce Print Business

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—November 21, 2022)(9)

    7,625     7,475     7,549  

                           

Drilling Info Holdings, Inc.

 

Information Services for the Oil and Gas Industry

                       

     

Common Stock (3,788,865 shares)

          1,335     10,410  

                           

55


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

ECP-PF Holdings Group, Inc.(10)

 

Fitness Club Operator

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, Secured Debt (Maturity—November 26, 2019)(9)

    5,625     5,589     5,625  

                           

EnCap Energy Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          3,877     1,955  

     

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

          2,200     1,225  

     

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

          3,957     3,680  

     

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

          3,039     3,039  

     

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

          9,116     10,452  

     

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

          2,513     2,461  

                  24,702     22,812  

                           

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

 

Technology-based Performance Support Solutions

                       

     

LIBOR Plus 8.25% (Floor 1.00%), Current Coupon 9.25%, Secured Debt (Maturity—April 28, 2022)(9)

    7,000     6,857     5,274  

                           

Flavors Holdings Inc.(11)

 

Global Provider of Flavoring and Sweetening Products and Solutions

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity—April 3, 2020)(9)

    12,483     12,082     10,174  

                           

GI KBS Merger Sub LLC(11)

 

Outsourced Janitorial Services to Retail/Grocery Customers

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—October 29, 2021)(9)

    3,900     3,851     3,842  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—April 29, 2022)(9)

    800     787     760  

                  4,638     4,602  

                           

56


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Grace Hill, LLC(10)

 

Online Training Tools for the Multi-Family Housing Industry

                       

     

Prime Plus 5.25% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—August 15, 2019)(9)

    634     623     634  

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—August 15, 2019)(9)

    11,552     11,472     11,552  

                  12,095     12,186  

                           

Great Circle Family Foods, LLC(10)

 

Quick Service Restaurant Franchise

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—October 28, 2019)(9)

    7,648     7,598     7,648  

                           

Grupo Hima San Pablo, Inc.(11)

 

Tertiary Care Hospitals

                       

     

LIBOR Plus 7.00% (Floor 1.50%), Current Coupon 8.50%, Secured Debt (Maturity—January 31, 2018)(9)

    4,813     4,787     3,734  

     

13.75% Secured Debt (Maturity—July 31, 2018)

    2,000     1,962     1,205  

                  6,749     4,939  

                           

GST Autoleather, Inc.(11)

 

Automotive Leather Manufacturer

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—July 10, 2020)(9)

    13,317     13,215     13,017  

                           

Guitar Center, Inc.(11)

 

Musical Instruments Retailer

                       

     

6.5% Secured Debt (Maturity—April 15, 2019)

    14,625     13,890     13,272  

                           

Hojeij Branded Foods, LLC(10)

 

Multi-Airport, Multi-Concept Restaurant Operator

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—July 27, 2021)(9)

    5,432     5,390     5,432  

                           

Hoover Group, Inc.(10)(13)

 

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

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—January 28, 2021)(9)

    8,546     7,963     7,963  

                           

57


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Horizon Global Corporation(11)(13)

 

Auto Parts Manufacturer

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—June 30, 2021)(9)

    9,375     9,249     9,551  

                           

Hostway Corporation(11)

 

Managed Services and Hosting Provider

                       

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (Maturity—December 13, 2019)(9)

    10,577     10,515     10,028  

                           

Hunter Defense Technologies, Inc.(11)

 

Provider of Military and Commercial Shelters and Systems

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—August 5, 2019)(9)

    9,606     9,120     8,933  

                           

Hygea Holdings, Corp.(10)

 

Provider of Physician Services

                       

     

LIBOR Plus 9.25%, Current Coupon 10.17%, Secured Debt (Maturity—February 24, 2019)

    7,875     7,381     7,615  

     

Warrants (5,990,452 equivalent shares; Expiration—February 24, 2023; Strike price—$0.01 per share)

          369     1,530  

                  7,750     9,145  

                           

iEnergizer Limited(11)(13)(21)

 

Provider of Business Outsourcing Solutions

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—May 1, 2019)(9)

    9,918     9,467     9,621  

                           

Indivior Finance LLC(11)(13)

 

Specialty Pharmaceutical Company Treating Opioid Dependence

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—December 19, 2019)(9)

    6,750     6,455     6,809  

                           

Industrial Container Services, LLC(10)

 

Steel Drum Reconditioner

                       

     

LIBOR Plus 5.75% (Floor 1.00%), Current Coupon 6.75%, Secured Debt (Maturity—December 31, 2018)(9)

    8,949     8,932     8,949  

                           

58


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Industrial Services Acquisition, LLC(10)

 

Industrial Cleaning Services

                       

     

11.25% Current / 0.75% PIK Unsecured Debt (Maturity—December 17, 2022)(19)

    4,519     4,433     4,433  

     

Member Units (Industrial Services Investments, LLC) (900,000 units)

          900     900  

                  5,333     5,333  

                           

Infinity Acquisition Finance Corp.(11)

 

Application Software for Capital Markets

                       

     

7.25% Unsecured Debt (Maturity—August 1, 2022)

    5,700     5,366     4,802  

                           

Inn of the Mountain Gods Resort and Casino(11)

 

Hotel & Casino Owner & Operator

                       

     

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

    6,249     5,924     5,687  

                           

Intertain Group Limited(11)(13)(21)

 

Business-to-Consumer Online Gaming Operator

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—April 8, 2022)(9)

    4,426     4,364     4,465  

                           

iPayment, Inc.(11)

 

Provider of Merchant Acquisition

                       

     

LIBOR Plus 5.25% (Floor 1.50%), Current Coupon 6.75%, Secured Debt (Maturity—May 8, 2017)(9)

    14,918     14,907     14,395  

                           

iQor US Inc.(11)

 

Business Process Outsourcing Services Provider

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—April 1, 2021)(9)

    9,812     9,671     9,413  

                           

irth Solutions, LLC

 

Provider of Damage Prevention Information Technology Services

                       

     

Member Units (27,893 units)

          1,441     1,790  

                           

Jackmont Hospitality, Inc.(10)

 

Franchisee of Casual Dining Restaurants

                       

     

LIBOR Plus 4.25% (Floor 1.00%), Current Coupon 5.25% / 2.50% PIK, Current Coupon Plus PIK 7.75%, Secured Debt (Maturity—May 26, 2021)(9)(19)

    4,445     4,429     4,445  

                           

59


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Joerns Healthcare, LLC(11)

 

Manufacturer and Distributor of Health Care Equipment & Supplies

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—May 9, 2020)(9)

    14,655     14,560     13,776  

                           

JSS Holdings, Inc.(11)

 

Aircraft Maintenance Program Provider

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—August 31, 2021)(9)

    12,829     12,562     12,765  

                           

Kendra Scott, LLC(11)

 

Jewelry Retail Stores

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—July 17, 2020)(9)

    5,578     5,536     5,550  

                           

Keypoint Government Solutions, Inc.(11)

 

Provider of Pre-Employment Screening Services

                       

     

LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (Maturity—November 13, 2017)(9)

    5,459     5,443     5,431  

                           

LaMi Products, LLC(10)

 

General Merchandise Distribution

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 16, 2020)(9)

    10,735     10,658     10,735  

                           

Larchmont Resources, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.00%, PIK Secured Debt (Maturity—August 7, 2020)(9)(19)

    2,260     2,260     2,209  

     

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

          353     1,193  

                  2,613     3,402  

                           

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

 

Investment Partnership

                       

     

LP Interests (Fully diluted 2.3%)

          2,500     3,627  

                           

60


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Logix Acquisition Company, LLC(10)

 

Competitive Local Exchange Carrier

                       

     

LIBOR Plus 8.28% (Floor 1.00%), Current Coupon 9.28%, Secured Debt (Maturity—June 24, 2021)(9)(22)

    8,593     8,457     8,593  

                           

Looking Glass Investments, LLC(12)(13)

 

Specialty Consumer Finance

                       

     

9% Unsecured Debt (Maturity—June 30, 2020)

    188     188     188  

     

Member Units (2.5 units)

          125     125  

     

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

          160     160  

                  473     473  

                           

Messenger, LLC(10)

 

Supplier of Specialty Stationery and Related Products to the Funeral Industry

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—September 9, 2020)(9)

    14,403     14,326     14,403  

                           

Minute Key, Inc.

 

Operator of Automated Key Duplication Kiosks

                       

     

10% Current / 2% PIK Secured Debt (Maturity—September 19, 2019)(19)

    15,700     15,404     15,404  

     

Warrants (1,437,409 equivalent shares; Expiration—May 20, 2025; Strike price—$0.01 per share)

          280     470  

                  15,684     15,874  

                           

Mood Media Corporation(11)(13)

 

Provider of Electronic Equipment

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—May 1, 2019)(9)

    14,805     14,645     14,312  

                           

New Media Holdings II LLC(11)(13)

 

Local Newspaper Operator

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—June 4, 2020)(9)

    14,888     14,632     14,813  

                           

61


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

North American Lifting Holdings, Inc.(11)

 

Crane Service Provider

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—November 27, 2020)(9)

    3,865     3,235     3,375  

                           

North Atlantic Trading Company, Inc.(11)

 

Marketer/Distributor of Tobacco Products

                       

     

LIBOR Plus 6.50% (Floor 1.25%), Current Coupon 7.75%, Secured Debt (Maturity—January 13, 2020)(9)

    9,396     9,343     9,337  

                           

Novitex Intermediate, LLC(11)

 

Provider of Document Management Services

                       

     

LIBOR Plus 6.75% (Floor 1.25%), Current Coupon 8.00%, Secured Debt (Maturity—July 7, 2020)(9)

    9,335     9,175     8,985  

                           

NTM Acquisition Corp.(11)

 

Provider of B2B Travel Information Content

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—June 7, 2022)(9)

    4,144     4,085     4,128  

                           

Ospemifene Royalty Sub LLC (QuatRx)(10)

 

Estrogen-Deficiency Drug Manufacturer and Distributor

                       

     

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

    5,071     5,071     2,088  

                           

Pardus Oil and Gas, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

13% PIK Secured Debt (Maturity—November 12, 2021)(19)

    1,869     1,869     1,869  

     

5% PIK Secured Debt (Maturity—May 13, 2022)(19)

    992     992     562  

     

Member Units (2,472 units)

          2,472     970  

                  5,333     3,401  

                           

Paris Presents Incorporated(11)

 

Branded Cosmetic and Bath Accessories

                       

     

LIBOR Plus 8.75% (Floor 1.00%), Current Coupon 9.75%, Secured Debt (Maturity—December 31, 2021)(9)

    2,000     1,969     1,960  

                           

Parq Holdings Limited Partnership(11)(13)(21)

 

Hotel & Casino Operator

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—December 17, 2020)(9)

    7,500     7,394     7,388  

                           

62


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Permian Holdco 2, Inc.(11)

 

Storage Tank Manufacturer

                       

     

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

    198     198     198  

     

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

          799     799  

     

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

               

                  997     997  

                           

Pernix Therapeutics Holdings, Inc.(10)

 

Pharmaceutical Royalty

                       

     

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

    3,447     3,447     3,326  

                           

Pet Holdings ULC(11)(13)(21)

 

Retailer of Pet Products and Supplies to Consumers

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—July 5, 2022)(9)

    2,494     2,470     2,503  

                           

Pike Corporation(11)

 

Construction and Maintenance Services for Electric Transmission and Distribution Infrastructure

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—June 22, 2022)(9)

    14,000     13,720     14,082  

                           

Point.360(10)

 

Fully Integrated Provider of Digital Media Services

                       

     

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

          69      

     

Common Stock (163,658 shares)

          273     63  

                  342     63  

                           

Polycom, Inc.(11)

 

Provider of Audio and Video Communication Solutions

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—September 27, 2023)(9)

    12,089     11,617     12,194  

                           

PPC/SHIFT LLC(10)

 

Provider of Digital Solutions to Automotive Industry

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—June 6, 2022)(9)

    7,000     6,852     6,852  

                           

63


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Prowler Acquisition Corp.(11)

 

Specialty Distributor to the Energy Sector

                       

     

LIBOR Plus 4.50% (Floor 1.00%), Current Coupon 5.50%, Secured Debt (Maturity—January 28, 2020)(9)

    9,519     7,904     7,044  

                           

PT Network, LLC(10)

 

Provider of Outpatient Physical Therapy and Sports Medicine Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—November 30, 2021)(9)

    16,225     15,979     15,979  

                           

QBS Parent, Inc.(11)

 

Provider of Software and Services to the Oil & Gas Industry

                       

     

LIBOR Plus 4.75% (Floor 1.00%), Current Coupon 5.75%, Secured Debt (Maturity—August 7, 2021)(9)

    11,274     11,201     11,161  

                           

Raley's(11)

 

Family-Owned Supermarket Chain

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—May 18, 2022)(9)

    4,195     4,125     4,242  

                           

Redbox Automated Retail, LLC(11)

 

Operator of Home Media Entertainment Kiosks

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—September 27, 2021)(9)

    15,000     14,581     14,629  

                           

Renaissance Learning, Inc.(11)

 

Technology-based K-12 Learning Solutions

                       

     

LIBOR Plus 7.00% (Floor 1.00%), Current Coupon 8.00%, Secured Debt (Maturity—April 11, 2022)(9)

    3,000     2,978     2,987  

                           

RGL Reservoir Operations Inc.(11)(13)(21)

 

Oil & Gas Equipment and Services

                       

     

LIBOR Plus 5.00% (Floor 1.00%), Current Coupon 6.00%, Secured Debt (Maturity—August 13, 2021)(9)

    3,910     3,826     880  

                           

64


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

RM Bidder, LLC(10)

 

Scripted and Unscripted TV and Digital Programming Provider

                       

     

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

          425     300  

     

Member Units (2,779 units)

          46     44  

                  471     344  

                           

SAExploration, Inc.(10)(13)(21)

 

Geophysical Services Provider

                       

     

Common Stock (50 shares)

          65     3  

                           

SAFETY Investment Holdings, LLC

 

Provider of Intelligent Driver Record Monitoring Software and Services

                       

     

Member Units (2,000,000 units)

          2,000     2,000  

                           

Salient Partners L.P.(11)

 

Provider of Asset Management Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—June 9, 2021)(9)

    10,812     10,538     10,352  

                           

School Specialty, Inc.(11)

 

Distributor of Education Supplies and Furniture

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—June 11, 2019)(9)

    5,712     5,632     5,784  

                           

Sigma Electric Manufacturing Corporation(10)(13)

 

Manufacturer and Distributor of Electrical Fittings and Parts

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.25%, Secured Debt (Maturity—October 13, 2021)(9)

    12,500     12,200     12,200  

                           

Sorenson Communications, Inc.(11)

 

Manufacturer of Communication Products for Hearing Impaired

                       

     

LIBOR Plus 5.75% (Floor 2.25%), Current Coupon 8.00%, Secured Debt (Maturity—April 30, 2020)(9)

    13,371     13,283     13,271  

                           

Strike, LLC(11)

 

Pipeline Construction and Maintenance Services

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—November 30, 2022)(9)

    10,000     9,666     9,864  

                           

65


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

Subsea Global Solutions, LLC(10)

 

Underwater Maintenance and Repair Services

                       

     

LIBOR Plus 6.00% (Floor 1.50%), Current Coupon 7.50%, Secured Debt (Maturity—March 17, 2020)(9)

    5,629     5,588     5,624  

                           

Synagro Infrastructure Company, Inc(11)

 

Waste Management Services

                       

     

LIBOR Plus 5.25% (Floor 1.00%), Current Coupon 6.25%, Secured Debt (Maturity—August 22, 2020)(9)

    4,714     4,659     4,136  

                           

Targus International, LLC(11)

 

Distributor of Protective Cases for Mobile Devices

                       

     

15% PIK Secured Debt (Maturity—December 31, 2019)(19)

    1,140     1,140     1,140  

     

Common Stock (Targus Cayman HoldCo Limited) (249,614 shares)(13)

          2,555     2,260  

                  3,695     3,400  

                           

TE Holdings, LLC(11)

 

Oil & Gas Exploration & Production

                       

     

Member Units (97,048 units)

          970     728  

                           

TeleGuam Holdings, LLC(11)

 

Cable and Telecom Services Provider

                       

     

LIBOR Plus 4.00% (Floor 1.25%), Current Coupon 5.25%, Secured Debt (Maturity—December 10, 2018)(9)

    7,622     7,613     7,546  

     

LIBOR Plus 7.50% (Floor 1.25%), Current Coupon 8.75%, Secured Debt (Maturity—June 10, 2019)(9)

    10,500     10,442     10,290  

                  18,055     17,836  

                           

The Topps Company, Inc.(11)

 

Trading Cards & Confectionary

                       

     

LIBOR Plus 6.00% (Floor 1.25%), Current Coupon 7.25%, Secured Debt (Maturity—October 2, 2020)(9)

    2,218     2,208     2,226  

                           

TMC Merger Sub Corp.(11)

 

Refractory & Maintenance Services Provider

                       

     

LIBOR Plus 6.25% (Floor 1.00%), Current Coupon 7.25%, Secured Debt (Maturity—October 31, 2022)(9)(23)

    12,500     12,376     12,438  

                           

66


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

TOMS Shoes, LLC(11)

 

Global Designer, Distributor, and Retailer of Casual Footwear

                       

     

LIBOR Plus 5.50% (Floor 1.00%), Current Coupon 6.50%, Secured Debt (Maturity—October 30, 2020)(9)

    4,913     4,567     3,635  

                           

Travel Leaders Group, LLC(11)

 

Travel Agency Network Provider

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—December 7, 2020)(9)

    10,994     10,936     10,975  

                           

Truck Bodies and Equipment International, Inc.(10)

 

Manufacturer of Dump Truck Bodies and Dump Trailers

                       

     

LIBOR Plus 7.50% (Floor 1.00%), Current Coupon 8.50%, Secured Debt (Maturity—March 31, 2021)(9)

    15,750     15,602     15,602  

                           

TVG-I-E CMN ACQUISITION, LLC(10)

 

Organic Lead Generation for Online Postsecondary Schools

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—November 3, 2021)(9)

    6,459     6,334     6,334  

                           

Tweddle Group, Inc.(11)

 

Provider of Technical Information Services to Automotive OEMs

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—October 21, 2022)(9)

    8,462     8,295     8,419  

                           

UniRush, LLC

 

Provider of Prepaid Debit Card Solutions

                       

     

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

    12,000     10,981     12,000  

     

Warrants (444,725 equivalent units; Expiration—February 2, 2026; Strike price—$10.27 per unit)

          1,250     1,250  

                  12,231     13,250  

                           

US Joiner Holding Company(11)

 

Marine Interior Design and Installation

                       

     

LIBOR Plus 6.00% (Floor 1.00%), Current Coupon 7.00%, Secured Debt (Maturity—April 16, 2020)(9)

    11,514     11,435     11,456  

                           

67


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

U.S. TelePacific Corp.(10)

 

Provider of Communications and Managed Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.50%, Secured Debt (Maturity—February 24, 2021)(9)

    7,500     7,377     7,377  

                           

VCVH Holding Corp. (Verisk)(11)

 

Healthcare Technology Services Focused on Revenue Maximization

                       

     

LIBOR Plus 9.25% (Floor 1.00%), Current Coupon 10.25%, Secured Debt (Maturity—June 1, 2024)(9)

    1,500     1,464     1,488  

                           

Virtex Enterprises, LP(10)

 

Specialty, Full-Service Provider of Complex Electronic Manufacturing Services

                       

     

12% Secured Debt (Maturity—December 27, 2018)

    1,667     1,559     1,559  

     

Preferred Class A Units (14 units; 5% cumulative)(8)

          333     612  

     

Warrants (11 equivalent units; Expiration—December 27, 2023; Strike price—$0.001 per unit)

          186     220  

                  2,078     2,391  

                           

Wellnext, LLC(10)

 

Manufacturer of Supplements and Vitamins

                       

     

LIBOR Plus 9.00% (Floor 0.50%), Current Coupon 9.85%, Secured Debt (Maturity—May 23, 2021)(9)

    10,058     9,968     10,058  

                           

Western Dental Services, Inc.(11)

 

Dental Care Services

                       

     

LIBOR Plus 6.50% (Floor 1.00%), Current Coupon 7.50%, Secured Debt (Maturity—November 1, 2018)(9)

    4,904     4,902     4,885  

                           

Wilton Brands LLC(11)

 

Specialty Housewares Retailer

                       

     

LIBOR Plus 7.25% (Floor 1.25%), Current Coupon 8.50%, Secured Debt (Maturity—August 30, 2018)(9)

    1,153     1,147     1,093  

                           

Worley Claims Services, LLC(10)

 

Insurance Adjustment Management and Services Provider

                       

     

LIBOR Plus 8.00% (Floor 1.00%), Current Coupon 9.00%, Secured Debt (Maturity—October 31, 2020)(9)

    6,386     6,342     6,386  

                           

68


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

YP Holdings LLC(11)

 

Online and Offline Advertising Operator

                       

     

LIBOR Plus 11.00% (Floor 1.25%), Current Coupon 12.25%, Secured Debt (Maturity—June 4, 2018)(9)

    11,428     10,969     11,398  

                           

Zilliant Incorporated

 

Price Optimization and Margin Management Solutions

                       

     

Preferred Stock (186,777 shares)

          154     260  

     

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

          1,071     1,190  

                  1,225     1,450  

Subtotal Non-Control/Non-Affiliate Investments (51.4% of total investments at fair value)

        $ 1,037,510   $ 1,026,676  

Total Portfolio Investments, December 31, 2016

        $ 1,871,883   $ 1,996,906  

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

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

(3)
See Note C for a summary of geographic location of portfolio companies.

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

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

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

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

(8)
Income producing through dividends or distributions.

(9)
Index based floating interest rate is subject to contractual minimum interest rate. A majority of the variable rate loans in the Company's investment portfolio bear interest at a rate that may be determined by reference to either LIBOR or an alternate Base Rate (commonly based on the Federal Funds Rate or the Prime Rate), which typically resets semi-annually, quarterly, or monthly at the borrower's option. The borrower may also elect to have multiple interest reset periods for each loan. For each such loan, the Company has provided the weighted average annual stated interest rate in effect at December 31, 2016. As noted in this schedule, 64% (based on the par amount of the loans) of the loans contain LIBOR floors which range between 0.50% and 2.25%, with a weighted-average LIBOR floor of approximately 1.04%.

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

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

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

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

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

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

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

69


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

December 31, 2016

(dollars in thousands)

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

(18)
Investment value was determined using significant unobservable inputs, unless otherwise noted.

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

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

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

(22)
The Company has entered into an intercreditor agreement that entitles the Company to the "last out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a higher interest rate than the contractual stated interest rate of LIBOR plus 7.50% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such higher rate.

(23)
The Company has entered into an intercreditor agreement that entitles the Company to the "first out" tranche of the first lien secured loans, whereby the "first out" tranche will receive priority as to the "last out" tranche with respect to payments of principal, interest, and any other amounts due thereunder. Therefore, the Company receives a lower interest rate than the contractual stated interest rate of LIBOR plus 6.64% (Floor 1.00%) per the Credit Agreement and the Consolidated Schedule of Investments above reflects such lower rate.

(26)
Investment fair value was determined using observable inputs in non-active markets for which sufficient observable inputs were available. See note C for further discussion.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A—ORGANIZATION AND BASIS OF PRESENTATION

1.     Organization

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

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

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

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

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

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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

2.     Basis of Presentation

        Main Street's consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). The Company is an investment company following accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services-Investment Company ("ASC 946"). For each of the periods presented herein, Main Street's consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of Main Street's investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments and the investment in the External Investment Manager (see Note C—Fair Value Hierarchy for Investments and Debentures—Portfolio Composition—Investment Portfolio Composition for additional discussion of Main Street's Investment Portfolio and definitions for the terms Private Loan and Other Portfolio). Main Street's results of operations for the three and nine months ended September 30, 2017 and 2016, cash flows for the nine months ended September 30, 2017 and 2016, and financial position as of September 30, 2017 and December 31, 2016, are presented on a consolidated basis. The effects of all intercompany transactions between Main Street and its consolidated subsidiaries have been eliminated in consolidation.

        The accompanying unaudited consolidated financial statements of Main Street are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2017 and 2016 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and ASC 946, Main Street is precluded from consolidating other entities in which Main Street has equity investments, including those in which it has a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if Main Street holds a controlling interest in an operating company that provides all or substantially all of its services directly to Main Street or to its portfolio companies. Accordingly, as noted above, MSCC's consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. Main Street has determined that all of its portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, Main Street's Investment Portfolio is carried on the consolidated balance sheet at fair value, as discussed further in Note B, with any adjustments to fair value recognized as "Net Change in Unrealized Appreciation (Depreciation)" on the consolidated statements of operations until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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

NOTE B—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

1.     Valuation of the Investment Portfolio

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

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

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

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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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

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

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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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

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

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

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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

financial advisory services firm on its investments in one or more LMM portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a LMM portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at Main Street's determination of fair value on its investments in a total of 38 LMM portfolio companies for the nine months ended September 30, 2017, representing approximately 65% of the total LMM portfolio at fair value as of September 30, 2017, and on a total of 46 LMM portfolio companies for the nine months ended September 30, 2016, representing approximately 75% of the total LMM portfolio at fair value as of September 30, 2016. Excluding its investments in new LMM portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment as of September 30, 2017 and 2016, as applicable, and its investments in the LMM portfolio companies that were not reviewed because their equity is publicly traded or they hold real estate for which a third-party appraisal is obtained on at least an annual basis, the percentage of the LMM portfolio reviewed and certified by its independent financial advisory services firm for the nine months ended September 30, 2017 and 2016 was 72% and 80% of the total LMM portfolio at fair value as of September 30, 2017 and 2016, respectively.

        For valuation purposes, all of Main Street's Middle Market portfolio investments are non-control investments. To the extent sufficient observable inputs are available to determine fair value, Main Street uses observable inputs to determine the fair value of these investments through obtaining third-party quotes or other independent pricing. For Middle Market portfolio investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Middle Market debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method and such Middle Market equity investments in a current hypothetical sale using the Waterfall valuation method. Because the vast majority of the Middle Market portfolio investments are typically valued using third-party quotes or other independent pricing services (including 96% and 94% of the Middle Market portfolio investments as of September 30, 2017 and December 31, 2016, respectively), Main Street does not generally consult with any financial advisory services firms in connection with determining the fair value of its Middle Market investments.

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

        In addition to its internal valuation process, in arriving at estimates of fair value for its investments in its Private Loan portfolio companies, Main Street, among other things, consults with a nationally recognized independent financial advisory services firm. The nationally recognized independent financial advisory services firm analyzes and provides observations and recommendations and an assurance certification regarding the Company's determinations of the fair value of its Private Loan portfolio company investments. The nationally recognized independent financial advisory services firm is generally consulted relative to Main Street's investments in each Private Loan portfolio company at least once every calendar year, and for Main Street's investments in new Private Loan portfolio companies, at least once in the twelve-month period subsequent to the initial investment. In certain

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

instances, Main Street may determine that it is not cost-effective, and as a result is not in its stockholders' best interest, to consult with the nationally recognized independent financial advisory services firm on its investments in one or more Private Loan portfolio companies. Such instances include, but are not limited to, situations where the fair value of Main Street's investment in a Private Loan portfolio company is determined to be insignificant relative to the total Investment Portfolio. Main Street consulted with and received an assurance certification from its independent financial advisory services firm in arriving at its determination of fair value on its investments in a total of 19 Private Loan portfolio companies for the nine months ended September 30, 2017, representing approximately 44% of the total Private Loan portfolio at fair value as of September 30, 2017, and on a total of 20 Private Loan portfolio companies for the nine months ended September 30, 2016, representing approximately 56% of the total Private Loan portfolio at fair value as of September 30, 2016. Excluding its investments in new Private Loan portfolio companies which have not been in the Investment Portfolio for at least twelve months subsequent to the initial investment as of September 30, 2017 and 2016, as applicable, and investments in its Private Loan portfolio companies that were not reviewed because the investment is valued based upon third-party quotes or other independent pricing, the percentage of the Private Loan portfolio reviewed and certified by its independent financial advisory services firm for the nine months ended September 30, 2017 and 2016 was 74% and 80% of the total Private Loan portfolio at fair value as of September 30, 2017 and 2016, respectively.

        For valuation purposes, all of Main Street's Other Portfolio investments are non-control investments. Main Street's Other Portfolio investments comprised 4.6% and 5.0% of Main Street's Investment Portfolio at fair value as of September 30, 2017 and December 31, 2016, respectively. Similar to the LMM investment portfolio, market quotations for Other Portfolio equity investments are generally not readily available. For Other Portfolio equity investments, Main Street generally determines the fair value of its investments using the NAV valuation method. For its Other Portfolio debt investments for which it has determined that third-party quotes or other independent pricing are not available or appropriate, Main Street generally estimates the fair value based on the assumptions that it believes hypothetical market participants would use to value such Other Portfolio debt investments in a current hypothetical sale using the Yield-to-Maturity valuation method. For its Other Portfolio debt investments for which third-party quotes or other independent pricing are available and appropriate, Main Street determines the fair value of these investments through obtaining third-party quotes or other independent pricing to the extent that these inputs are available and appropriate to determine fair value.

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

        Due to the inherent uncertainty in the valuation process, Main Street's determination of fair value for its Investment Portfolio may differ materially from the values that would have been determined had a ready market for the securities existed. In addition, changes in the market environment, portfolio company performance and other events that may occur over the lives of the investments may cause the

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

gains or losses ultimately realized on these investments to be materially different than the valuations currently assigned. Main Street determines the fair value of each individual investment and records changes in fair value as unrealized appreciation or depreciation.

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

        The Board of Directors of Main Street has the final responsibility for overseeing, reviewing and approving, in good faith, Main Street's determination of the fair value for its Investment Portfolio, as well as its valuation procedures, consistent with 1940 Act requirements. Main Street believes its Investment Portfolio as of September 30, 2017 and December 31, 2016 approximates fair value as of those dates based on the markets in which Main Street operates and other conditions in existence on those reporting dates.

2.     Use of Estimates

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

3.     Cash and Cash Equivalents

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

        At September 30, 2017, cash balances totaling $26.5 million exceeded Federal Deposit Insurance Corporation insurance protection levels, subjecting the Company to risk related to the uninsured balance. All of the Company's cash deposits are held at large, established, high credit quality financial institutions and management believes that the risk of loss associated with any uninsured balances is remote.

4.     Interest, Dividend and Fee Income

        Main Street records interest and dividend income on the accrual basis to the extent amounts are expected to be collected. Dividend income is recorded as dividends are declared by the portfolio company or at the point an obligation exists for the portfolio company to make a distribution. In accordance with Main Street's valuation policies, Main Street evaluates accrued interest and dividend income periodically for collectability. When a loan or debt security becomes 90 days or more past due, and if Main Street otherwise does not expect the debtor to be able to service all of its debt or other

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

obligations, Main Street will generally place the loan or debt security on non-accrual status and cease recognizing interest income on that loan or debt security until the borrower has demonstrated the ability and intent to pay contractual amounts due. If a loan or debt security's status significantly improves regarding the debtor's ability to service the debt or other obligations, or if a loan or debt security is sold or written off, Main Street removes it from non-accrual status.

        As of September 30, 2017, Main Street's total Investment Portfolio had six investments on non-accrual status, which comprised approximately 0.4% of its fair value and 2.7% of its cost. As of December 31, 2016, Main Street's total Investment Portfolio had four investments on non-accrual status, which comprised approximately 0.6% of its fair value and 3.0% of its cost.

        Main Street holds certain debt and preferred equity instruments in its Investment Portfolio that contain payment-in-kind ("PIK") interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the PIK interest and cumulative dividends in cash. Main Street stops accruing PIK interest and cumulative dividends and writes off any accrued and uncollected interest and dividends in arrears when it determines that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2017 and 2016, (i) approximately 1.9% and 4.0%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.8% and 1.8%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2017 and 2016, (i) approximately 2.7% and 3.7%, respectively, of Main Street's total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.8% and 1.1%, respectively, of Main Street's total investment income was attributable to cumulative dividend income not paid currently in cash.

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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

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

 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2017   2016   2017   2016  
 
  (dollars in thousands)
 

Interest, fee and dividend income:

                         

Interest income

  $ 39,814   $ 35,580   $ 117,340   $ 101,181  

Dividend income

    10,088     9,730     25,198     25,094  

Fee income

    1,884     1,284     7,406     5,059  

Total interest, fee and dividend income

  $ 51,786   $ 46,594   $ 149,944   $ 131,334  

5.     Deferred Financing Costs

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

6.     Equity Offering Costs

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

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

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

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

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

        To maintain RIC tax treatment (as discussed in Note B.9. below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though Main Street may not have collected the interest income. For the three months ended September 30, 2017 and 2016, approximately 3.8% and 3.2%, respectively, of Main Street's total investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any premium reduction. For the nine months ended September 30, 2017 and 2016, approximately 3.7% and 3.0%, respectively, of Main Street's total investment income was attributable to interest income from the accretion of discounts associated with debt investments, net of any premium reduction.

8.     Share-Based Compensation

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

        Effective January 1, 2016, Main Street elected early adoption of Accounting Standards Update ("ASU") 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting ("ASU 2016-09," as discussed further below in Note B.13.). ASU 2016-09 requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement and no longer delay recognition of a tax benefit until the tax benefit is realized through a reduction to taxes payable. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. Additionally, ASU 2016-09 allows an entity to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest, net of forfeitures, (current GAAP) or account for forfeitures when they occur. Amendments related to the timing of when excess tax benefits are recognized, minimum statutory withholding requirements, forfeitures and intrinsic value should be applied using a modified retrospective transition method by means of a cumulative-effect adjustment to equity as of the beginning of the period in which the guidance is adopted. As such, Main Street recorded a $1.8 million adjustment to "Net Unrealized Appreciation, Net of Income Taxes" on the consolidated balance sheet to capture the cumulative tax effect as of January 1, 2016. Main Street has elected to account for forfeitures as they occur and this change had no impact on its consolidated financial statements. The additional amendments (cash flows classification, minimum statutory tax withholding requirements and classification of awards as either a liability or equity) did not have an effect on Main Street's consolidated financial statements.

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9.     Income Taxes

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

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

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

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

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

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

        Realized gains or losses are measured by the difference between the net proceeds from the sale or redemption of an investment or a financial instrument and the cost basis of the investment or financial instrument, without regard to unrealized appreciation or depreciation previously recognized, and includes investments written-off during the period net of recoveries and realized gains or losses from in-kind redemptions. Net change in unrealized appreciation or depreciation reflects the net change in the fair value of the Investment Portfolio and financial instruments and the reclassification of any prior period unrealized appreciation or depreciation on exited investments and financial instruments to realized gains or losses.

11.   Fair Value of Financial Instruments

        Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Main Street believes that the carrying amounts of its financial instruments, consisting of cash and cash equivalents, receivables, payables and other liabilities approximate the fair values of such items due to the short-term nature of these instruments.

        As part of Main Street's acquisition of the majority of the equity interests of MSC II in January 2010 (the "MSC II Acquisition"), Main Street elected the fair value option under ASC 825, Financial Instruments ("ASC 825") relating to accounting for debt obligations at their fair value, for the MSC II SBIC debentures acquired as part of the acquisition accounting related to the MSC II Acquisition and values those obligations as discussed further in Note C. In order to provide for a more consistent basis of presentation, Main Street has continued to elect the fair value option for SBIC debentures issued by MSC II subsequent to the MSC II Acquisition. When the fair value option is elected for a given SBIC debenture, the deferred loan costs associated with the debenture are fully expensed in the current period to "Net Change in Unrealized Appreciation (Depreciation)—SBIC debentures" as part of the fair value adjustment. Interest incurred in connection with SBIC debentures which are valued at fair value is included in interest expense.

12.   Earnings per Share

        Basic and diluted per share calculations are computed utilizing the weighted-average number of shares of common stock outstanding for the period. In accordance with ASC 260, Earnings Per Share, the unvested shares of restricted stock awarded pursuant to Main Street's equity compensation plans are participating securities and, therefore, are included in the basic earnings per share calculation. As a result, for all periods presented, there is no difference between diluted earnings per share and basic earnings per share amounts.

13.   Recently Issued or Adopted Accounting Standards

        In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition,

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and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. Main Street expects to identify similar performance obligations under ASC 606 as compared with deliverables and separate units of account previously identified. As a result, Main Street expects timing of its revenue recognition to remain the same.

        In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires debt financing costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the related debt liability, similar to the presentation of debt discounts. Additionally in August 2015, the FASB issued ASU 2015-15, Interest—Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which provides further clarification on the same topic and states that the SEC would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of the deferred costs over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. Main Street adopted the guidance for debt arrangements that are not line-of-credit arrangements as of June 30, 2017. Comparative financial statements of prior interim and annual periods have been adjusted to apply the new method retrospectively. As a result of the adoption, Main Street reclassified $7.9 million of deferred financing costs assets to a direct deduction from the related debt liability on the consolidated balance sheet as of December 31, 2016. The adoption of this guidance had no impact on net assets, the consolidated statements of operations or the consolidated statements of cash flows.

        In May 2015, the FASB issued ASU 2015-07, Fair Value Measurements—Disclosures for Certain Entities that Calculate Net Asset Value per Share. This amendment updates guidance intended to

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(Unaudited)

eliminate the diversity in practice surrounding how investments measured at net asset value under the practical expedient with future redemption dates have been categorized in the fair value hierarchy. Under the updated guidance, investments for which fair value is measured at net asset value per share using the practical expedient should no longer be categorized in the fair value hierarchy, while investments for which fair value is measured at net asset value per share but the practical expedient is not applied should continue to be categorized in the fair value hierarchy. The updated guidance requires retrospective adoption for all periods presented and is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. Main Street adopted this standard during the three months ended March 31, 2016. There was no impact of the adoption of this new accounting standard on Main Street's consolidated financial statements as none of its investments are measured through the use of the practical expedient.

        In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The new guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early application is permitted. While Main Street continues to assess the effect of adoption, Main Street currently believes the most significant change relates to the recognition of a new right-of-use asset and lease liability on its consolidated balance sheet for its office space operating lease. Main Street currently has one operating lease for office space and does not expect a significant change in the leasing activity between now and adoption. See further discussion of the operating lease obligation in Note M.

        In March 2016, the FASB issued ASU 2016-09, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The new guidance is effective for annual periods beginning after December 15, 2016, and interim periods therein. Early application is permitted. Main Street elected to early adopt this standard during the three months ended March 31, 2016. See further discussion of the impact of the adoption of this standard in Note B.8.

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein. Early application is permitted. The impact of the adoption of this new accounting standard on Main Street's consolidated financial statements is not expected to be material.

        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by Main Street as of the specified effective date. Main Street believes that the impact of recently issued standards and any that are not yet effective will not have a material impact on its consolidated financial statements upon adoption.

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NOTE C—FAIR VALUE HIERARCHY FOR INVESTMENTS AND DEBENTURES—PORTFOLIO COMPOSITION

        ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. Main Street accounts for its investments at fair value.

        In accordance with ASC 820, Main Street has categorized its investments based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical investments (Level 1) and the lowest priority to unobservable inputs (Level 3).

        Investments recorded on Main Street's balance sheet are categorized based on the inputs to the valuation techniques as follows:

        As required by ASC 820, when the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety. For example, a Level 3 fair value measurement may include inputs that are observable (Levels 1 and 2) and unobservable (Level 3). Therefore, unrealized appreciation and depreciation related to such investments categorized within the Level 3 tables below may include changes in fair value that are attributable to both observable inputs (Levels 1 and 2) and unobservable inputs (Level 3). Main Street conducts reviews of

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fair value hierarchy classifications on a quarterly basis. During the classification process, Main Street may determine that it is appropriate to transfer investments between fair value hierarchy Levels. These transfers occur when Main Street has concluded that it is appropriate for the classification of an individual asset to be changed due to a change in the factors used to determine the selection of the Level. Any such changes are deemed to be effective during the quarter in which the transfer occurs.

        As of September 30, 2017, all of Main Street's LMM portfolio investments consisted of illiquid securities issued by private companies. As a result, as of September 30, 2017, the fair value determination for all of Main Street's LMM portfolio investments primarily consisted of unobservable inputs. As a result, all of Main Street's LMM portfolio investments were categorized as Level 3 as of September 30, 2017. As of December 31, 2016, all of Main Street's LMM portfolio investments except for the equity investment in one portfolio company consisted of illiquid securities issued by private companies. The investment which was the exception was in a company with publicly traded equity. As a result, as of December 31, 2016, the fair value determination for Main Street's LMM portfolio investments primarily consisted of unobservable inputs. The fair value determination for the publicly traded equity security consisted of observable inputs in non-active markets for which sufficient observable inputs were available to determine the fair value. As a result, all of Main Street's LMM portfolio investments were categorized as Level 3 as of December 31, 2016, except for the one publicly traded equity security which was categorized as Level 2.

        As of September 30, 2017 and December 31, 2016, Main Street's Middle Market portfolio investments consisted primarily of investments in secured and unsecured debt investments and independently rated debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Middle Market portfolio investments were categorized as Level 3 as of September 30, 2017 and December 31, 2016.

        As of September 30, 2017 and December 31, 2016, Main Street's Private Loan portfolio investments primarily consisted of investments in interest-bearing secured debt investments. The fair value determination for these investments consisted of a combination of observable inputs in non-active markets for which sufficient observable inputs were not available to determine the fair value of these investments and unobservable inputs. As a result, all of Main Street's Private Loan portfolio investments were categorized as Level 3 as of September 30, 2017 and December 31, 2016.

        As of September 30, 2017 and December 31, 2016, Main Street's Other Portfolio investments consisted of illiquid securities issued by private companies. The fair value determination for these investments primarily consisted of unobservable inputs. As a result, all of Main Street's Other Portfolio investments were categorized as Level 3 as of September 30, 2017 and December 31, 2016.

        The fair value determination of each portfolio investment categorized as Level 3 required one or more of the following unobservable inputs:

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        The significant unobservable inputs used in the fair value measurement of Main Street's LMM equity securities, which are generally valued through an average of the discounted cash flow technique and the market comparable/enterprise value technique (unless one of these approaches is determined to not be appropriate), are (i) EBITDA multiples and (ii) the weighted-average cost of capital ("WACC"). Significant increases (decreases) in EBITDA multiple inputs in isolation would result in a significantly higher (lower) fair value measurement. On the contrary, significant increases (decreases) in WACC inputs in isolation would result in a significantly lower (higher) fair value measurement. The significant unobservable inputs used in the fair value measurement of Main Street's LMM, Middle Market, Private Loan and Other Portfolio debt securities are (i) risk adjusted discount rates used in the Yield-to-Maturity valuation technique (described in Note B.1.—Valuation of the Investment Portfolio) and (ii) the percentage of expected principal recovery. Significant increases (decreases) in any of these discount rates in isolation would result in a significantly lower (higher) fair value measurement. Significant increases (decreases) in any of these expected principal recovery percentages in isolation would result in a significantly higher (lower) fair value measurement. However, due to the nature of certain investments, fair value measurements may be based on other criteria, such as third-party appraisals of collateral and fair values as determined by independent third parties, which are not presented in the tables below.

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        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 portfolio investments as of September 30, 2017 and December 31, 2016:

Type of Investment
  Fair Value
as of
September 30,
2017
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 606,493   Discounted cash flow   WACC   9.9% - 22.7%     12.4%     12.8%  

        Market comparable /
Enterprise Value
  EBITDA multiple(1)   4.5x - 8.5x(2)     7.3x     6.0x  

Debt investments

  $ 893,108   Discounted cash flow   Risk adjusted discount factor   7.1% - 15.2%(2)     10.9%     10.6%  

            Expected principal recovery percentage   3.0% - 100.0%     99.8%     100.0%  

Debt investments

  $ 670,380   Market approach   Third-party quote   10.0 - 103.3              

Total Level 3 investments

  $ 2,169,981                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 4.0x - 17.5x and the range for risk adjusted discount factor is 4.4% - 28.1%.

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.
Type of Investment
  Fair Value
as of
December 31,
2016
(in thousands)
  Valuation Technique   Significant Unobservable Inputs   Range(3)   Weighted
Average(3)
  Median(3)  

Equity investments

  $ 567,003   Discounted cash flow   WACC   10.4% - 23.1%     13.0%     13.7%  

        Market comparable / Enterprise Value   EBITDA multiple(1)   4.5x - 8.5x(2)     7.1x     6.0x  

Debt investments

  $ 808,895   Discounted cash flow   Risk adjusted discount factor   7.4% - 15.9%(2)     11.8%     11.6%  

            Expected principal recovery percentage   3.0% - 100.0%     99.7%     100.0%  

Debt investments

  $ 618,928   Market approach   Third-party quote   22.5 - 108.0              

Total Level 3 investments

  $ 1,994,826                          

(1)
EBITDA may include proforma adjustments and/or other addbacks based on specific circumstances related to each investment.

(2)
Range excludes outliers that are greater than one standard deviation from the mean. Including these outliers, the range for EBITDA multiple is 3.3x - 17.5x and the range for risk adjusted discount factor is 4.8% - 38.0%.

(3)
Does not include investments for which the valuation technique does not include the use of the applicable fair value input.

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        The following tables provide a summary of changes in fair value of Main Street's Level 3 portfolio investments for the nine month periods ended September 30, 2017 and 2016 (amounts in thousands):

Type of Investment
  Fair Value
as of
December 31,
2016
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2017
 

Debt

  $ 1,427,823   $   $ (556,538 ) $ 701,633   $ 12,988   $ (16,362 ) $ (6,056 ) $ 1,563,488  

Equity

    549,453         (41,250 )   68,286     (27,562 )   39,244     6,873     595,044  

Equity Warrant

    17,550         (3,261 )   331     (1,542 )   (812 )   (817 )   11,449  

  $ 1,994,826   $   $ (601,049 ) $ 770,250   $ (16,116 ) $ 22,070   $   $ 2,169,981  

(1)
Includes the impact of non-cash conversions.
Type of Investment
  Fair Value
as of
December 31,
2015
  Transfers
Into Level 3
Hierarchy
  Redemptions/
Repayments
  New
Investments
  Net Changes
from
Unrealized
to Realized
  Net
Unrealized
Appreciation
(Depreciation)
  Other(1)   Fair Value
as of
September 30,
2016
 

Debt

    1,265,544         (289,261 )   385,476     34,567     (3,893 )   (5,998 )   1,386,435  

Equity

    519,966         (14,797 )   61,543     (59,681 )   3,821     5,998     516,850  

Equity Warrant

    10,646         (1,011 )   4,750     1,011     (574 )       14,822  

    1,796,156         (305,069 )   451,769     (24,103 )   (646 )       1,918,107  

(1)
Includes the impact of non-cash conversions.

        As of September 30, 2017 and December 31, 2016, the fair value determination for the SBIC debentures recorded at fair value primarily consisted of unobservable inputs. As a result, the SBIC debentures which are recorded at fair value were categorized as Level 3. Main Street determines the fair value of these instruments primarily using a Yield-to-Maturity approach that analyzes the discounted cash flows of interest and principal for each SBIC debenture recorded at fair value based on estimated market interest rates for debt instruments of similar structure, terms, and maturity. Main Street's estimate of the expected repayment date of principal for each SBIC debenture recorded at fair value is the legal maturity date of the instrument. The significant unobservable inputs used in the fair value measurement of Main Street's SBIC debentures recorded at fair value are the estimated market interest rates used to fair value each debenture using the yield valuation technique described above. Significant increases (decreases) in the estimated market interest rates in isolation would result in a significantly lower (higher) fair value measurement.

        The following tables provide a summary of the significant unobservable inputs used to fair value Main Street's Level 3 SBIC debentures as of September 30, 2017 and December 31, 2016 (amounts in thousands):

Type of Instrument
  Fair Value as of
September 30, 2017
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 49,412   Discounted cash flow   Estimated market interest rates   4.1% - 4.9%     4.3 %

 

Type of Instrument
  Fair Value as of
December 31, 2016
  Valuation Technique   Significant Unobservable Inputs   Range   Weighted
Average
 

SBIC debentures

  $ 74,803   Discounted cash flow   Estimated market interest rates   3.4% - 5.3%     4.2 %

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        The following tables provide a summary of changes for the Level 3 SBIC debentures recorded at fair value for the nine month periods ended September 30, 2017 and 2016 (amounts in thousands):

Type of Instrument
  Fair Value as of
December 31, 2016
  Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30, 2017
 

SBIC debentures at fair value

  $ 74,803   $ (25,200 ) $ 5,217   $   $ (5,408 ) $ 49,412  

 

Type of Instrument
  Fair Value as of
December 31, 2015
  Repayments   Net
Realized
Loss
  New SBIC
Debentures
  Net
Unrealized
(Appreciation)
Depreciation
  Fair Value as of
September 30, 2016
 

SBIC debentures at fair value

  $ 73,860   $   $   $   $ 820   $ 74,680  

        At September 30, 2017 and December 31, 2016, Main Street's investments and SBIC debentures at fair value were categorized as follows in the fair value hierarchy for ASC 820 purposes:

 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At September 30, 2017
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 938,042   $   $   $ 938,042  

Middle Market portfolio investments

    607,476             607,476  

Private Loan portfolio investments

    485,929             485,929  

Other Portfolio investments

    99,230             99,230  

External Investment Manager

    39,304             39,304  

Total portfolio investments

    2,169,981             2,169,981  

Marketable securities and idle funds investments

                 

Total investments

  $ 2,169,981   $   $   $ 2,169,981  

SBIC debentures at fair value

  $ 49,412   $   $   $ 49,412  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)


 
   
  Fair Value Measurements  
 
   
  (in thousands)
 
At December 31, 2016
  Fair Value   Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
  Significant Other
Observable Inputs
(Level 2)
  Significant
Unobservable Inputs
(Level 3)
 

LMM portfolio investments

  $ 892,592   $   $ 2,080   $ 890,512  

Middle Market portfolio investments

    630,578             630,578  

Private Loan portfolio investments

    342,867             342,867  

Other Portfolio investments

    100,252             100,252  

External Investment Manager

    30,617             30,617  

Total portfolio investments

    1,996,906         2,080     1,994,826  

Marketable securities and idle funds investments

                 

Total investments

  $ 1,996,906   $   $ 2,080   $ 1,994,826  

SBIC debentures at fair value

  $ 74,803   $   $   $ 74,803  

Investment Portfolio Composition

        Main Street's LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Main Street's LMM portfolio companies generally have annual revenues between $10 million and $150 million, and its LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, generally bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio investments, Main Street receives nominally priced equity warrants and/or makes direct equity investments in connection with a debt investment.

        Main Street's Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in Main Street's LMM portfolio. Main Street's Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and its Middle Market investments generally range in size from $3 million to $15 million. Main Street's Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Main Street's private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments Main Street holds in its LMM portfolio and Middle Market portfolio. Main Street's Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Main Street's other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, Main Street may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds. For Other Portfolio investments, Main Street generally receives distributions related to the assets held by the portfolio company. Those assets are typically expected to be liquidated over a five to ten year period.

        Main Street's external asset management business is conducted through its External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. Main Street entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, Main Street shares employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and Main Street allocates the related expenses to the External Investment Manager pursuant to the sharing agreement. Main Street's total expenses for the three months ended September 30, 2017 and 2016 are net of expenses allocated to the External Investment Manager of $1.7 million and $1.2 million, respectively. Main Street's total expenses for the nine months ended September 30, 2017 and 2016 are net of expenses allocated to the External Investment Manager of $4.8 million and $3.7 million, respectively.

        Investment income, consisting of interest, dividends and fees, can fluctuate dramatically due to various factors, including the level of new investment activity, repayments of debt investments or sales of equity interests. Investment income in any given year could also be highly concentrated among several portfolio companies. For the three and nine months ended September 30, 2017 and 2016, Main Street did not record investment income from any single portfolio company in excess of 10% of total investment income.

        The following tables provide a summary of Main Street's investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2017 and December 31, 2016 (this information

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2017  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    71     68     56  

Fair value

  $ 938.0   $ 607.5   $ 485.9  

Cost

  $ 804.6   $ 633.8   $ 505.6  

% of portfolio at cost—debt

    68.1%     96.9%     94.5%  

% of portfolio at cost—equity

    31.9%     3.1%     5.5%  

% of debt investments at cost secured by first priority lien

    96.3%     90.2%     91.5%  

Weighted-average annual effective yield(b)

    11.9%     8.7%     9.3%  

Average EBITDA(c)

  $ 4.3   $ 84.8   $ 38.0  

(a)
At September 30, 2017, Main Street had equity ownership in approximately 99% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 38%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2017, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will realize on its investment because it does not reflect Main Street's expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including seven LMM portfolio companies, two Middle Market portfolio companies and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street's investments in these

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  As of December 31, 2016  
 
  LMM(a)   Middle Market   Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    73     78     46  

Fair value

  $ 892.6   $ 630.6   $ 342.9  

Cost

  $ 760.3   $ 646.8   $ 357.7  

% of total investments at cost—debt

    69.1%     97.2%     93.5%  

% of total investments at cost—equity

    30.9%     2.8%     6.5%  

% of debt investments at cost secured by first priority lien

    92.1%     89.1%     89.0%  

Weighted-average annual effective yield(b)

    12.5%     8.5%     9.6%  

Average EBITDA(c)

  $ 5.9   $ 98.6   $ 22.7  

(a)
At December 31, 2016, Main Street had equity ownership in approximately 99% of its LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 36%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2016, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of Main Street's common stock will realize on its investment because it does not reflect Main Street's expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including five LMM portfolio companies, one Middle Market portfolio company and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for Main Street's investments in these portfolio companies.

        As of September 30, 2017, Main Street had Other Portfolio investments in eleven companies, collectively totaling approximately $99.2 million in fair value and approximately $105.6 million in cost basis and which comprised approximately 4.6% of Main Street's Investment Portfolio at fair value. As of December 31, 2016, Main Street had Other Portfolio investments in ten companies, collectively totaling approximately $100.3 million in fair value and approximately $107.1 million in cost basis and which comprised approximately 5.0% of Main Street's Investment Portfolio at fair value.

        As discussed further in Note A.1., Main Street holds an investment in the External Investment Manager, a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2017, there was no cost basis in this investment and the investment had a fair value of approximately $39.3 million, which comprised approximately 1.8% of Main Street's Investment Portfolio at fair value. As of December 31, 2016, there was no cost basis in this investment and the investment had a fair value of approximately $30.6 million, which comprised approximately 1.5% of Main Street's Investment Portfolio at fair value.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2017 and December 31, 2016 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30, 2017   December 31, 2016  

First lien debt

    78.2%     76.1%  

Equity

    14.8%     14.5%  

Second lien debt

    5.8%     7.7%  

Equity warrants

    0.8%     1.1%  

Other

    0.4%     0.6%  

    100.0%     100.0%  

 

Fair Value:
  September 30, 2017   December 31, 2016  

First lien debt

    71.1%     68.7%  

Equity

    22.5%     22.6%  

Second lien debt

    5.4%     7.2%  

Equity warrants

    0.6%     0.9%  

Other

    0.4%     0.6%  

    100.0%     100.0%  

        The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by geographic region of the United States and other countries at cost and fair value as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments, as of September 30, 2017 and December 31, 2016 (this information excludes the Other Portfolio investments and the External Investment Manager). The geographic composition is determined by the location of the corporate headquarters of the portfolio company.

Cost:
  September 30, 2017   December 31, 2016  

Southwest

    26.4%     29.7%  

Midwest

    23.1%     23.0%  

West

    18.9%     16.1%  

Northeast

    15.1%     14.8%  

Southeast

    13.1%     13.1%  

Canada

    2.3%     1.7%  

Other Non-United States

    1.1%     1.6%  

    100.0%     100.0%  

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)


Fair Value:
  September 30, 2017   December 31, 2016  

Southwest

    26.6%     31.0%  

West

    21.6%     18.3%  

Midwest

    21.4%     21.2%  

Northeast

    14.8%     13.9%  

Southeast

    12.5%     12.7%  

Canada

    2.0%     1.4%  

Other Non-United States

    1.1%     1.5%  

    100.0%     100.0%  

        Main Street's LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments are in companies conducting business in a variety of industries. The following tables summarize the composition of Main Street's total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments by industry at cost and fair value

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

as of September 30, 2017 and December 31, 2016 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30, 2017   December 31, 2016  

Energy Equipment & Services

    6.9%     7.5%  

Hotels, Restaurants & Leisure

    6.6%     6.5%  

Machinery

    6.3%     5.6%  

Construction & Engineering

    6.1%     5.3%  

Specialty Retail

    5.2%     4.4%  

Media

    4.5%     5.7%  

Commercial Services & Supplies

    4.5%     5.0%  

Electronic Equipment, Instruments & Components

    4.2%     4.5%  

Professional Services

    3.6%     1.4%  

Health Care Providers & Services

    3.5%     3.0%  

Diversified Telecommunication Services

    3.1%     3.3%  

Leisure Equipment & Products

    3.1%     0.9%  

IT Services

    3.0%     3.9%  

Diversified Consumer Services

    2.9%     2.8%  

Internet Software & Services

    2.7%     3.6%  

Computers & Peripherals

    2.7%     2.2%  

Software

    2.2%     2.6%  

Health Care Equipment & Supplies

    2.0%     2.3%  

Communications Equipment

    2.0%     2.3%  

Aerospace & Defense

    2.0%     0.9%  

Distributors

    1.9%     1.1%  

Diversified Financial Services

    1.9%     2.3%  

Food Products

    1.9%     2.6%  

Building Products

    1.9%     2.1%  

Oil, Gas & Consumable Fuels

    1.8%     1.2%  

Auto Components

    1.6%     3.0%  

Construction Materials

    1.6%     0.7%  

Internet & Catalog Retail

    1.3%     0.7%  

Road & Rail

    1.0%     1.5%  

Real Estate Management & Development

    1.0%     0.7%  

Air Freight & Logistics

    1.0%     1.0%  

Consumer Finance

    0.7%     1.5%  

Other(1)

    5.3%     7.9%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Fair Value:
  September 30, 2017   December 31, 2016  

Machinery

    7.4%     6.7%  

Hotels, Restaurants & Leisure

    6.5%     6.5%  

Construction & Engineering

    6.2%     5.6%  

Diversified Consumer Services

    6.2%     5.5%  

Energy Equipment & Services

    5.7%     5.8%  

Specialty Retail

    5.2%     4.6%  

Commercial Services & Supplies

    4.2%     5.0%  

Media

    4.1%     5.2%  

Electronic Equipment, Instruments & Components

    3.8%     3.9%  

Professional Services

    3.5%     1.3%  

Health Care Providers & Services

    3.3%     2.9%  

IT Services

    3.1%     3.7%  

Computers & Peripherals

    3.0%     2.3%  

Leisure Equipment & Products

    2.9%     0.9%  

Diversified Telecommunication Services

    2.7%     2.5%  

Internet Software & Services

    2.6%     3.5%  

Software

    2.2%     2.6%  

Health Care Equipment & Supplies

    2.1%     2.4%  

Communications Equipment

    2.0%     2.3%  

Aerospace & Defense

    1.9%     0.8%  

Diversified Financial Services

    1.8%     2.3%  

Distributors

    1.8%     1.1%  

Food Products

    1.8%     2.4%  

Building Products

    1.8%     1.9%  

Construction Materials

    1.8%     1.0%  

Oil, Gas & Consumable Fuels

    1.5%     1.1%  

Auto Components

    1.4%     2.9%  

Air Freight & Logistics

    1.2%     1.1%  

Real Estate Management & Development

    1.1%     0.7%  

Internet & Catalog Retail

    1.1%     0.6%  

Road & Rail

    1.0%     2.5%  

Consumer Finance

    0.6%     1.3%  

Other(1)

    4.5%     7.1%  

    100.0%     100.0%  

(1)
Includes various industries with each industry individually less than 1.0% of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at each date.

        At September 30, 2017 and December 31, 2016, Main Street had no portfolio investment that was greater than 10% of the Investment Portfolio at fair value.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

Unconsolidated Significant Subsidiaries

        In accordance with Rules 3-09 and 4-08(g) of Regulation S-X, Main Street must determine which of its unconsolidated controlled portfolio companies, if any, are considered "significant subsidiaries." In evaluating these unconsolidated controlled portfolio companies, there are three tests utilized to determine if any of Main Street's Control Investments (as defined in Note A, including those unconsolidated portfolio companies defined as Control Investments in which Main Street does not own greater than 50% of the voting securities) are considered significant subsidiaries: the investment test, the asset test and the income test. Rule 3-09 of Regulation S-X, as interpreted by the SEC, requires Main Street to include separate audited financial statements of an unconsolidated majority-owned subsidiary (Control Investments in which Main Street owns greater than 50% of the voting securities) in an annual report if any of the three tests exceed 20% of Main Street's total investments at fair value, total assets or total income, respectively. Rule 4-08(g) of Regulation S-X requires summarized financial information of a Control Investment in an annual report if any of the three tests exceeds 10% of Main Street's annual total amounts and Rule 10-01(b)(1) of Regulation S-X requires summarized financial information in a quarterly report if any of the three tests exceeds 20% of Main Street's year-to-date total amounts.

        As of September 30, 2017 and December 31, 2016, Main Street had no single investment that represented greater than 20% of its total Investment Portfolio at fair value and no single investment whose total assets represented greater than 20% of its total assets. After performing the income test for the nine months ended September 30, 2017 and 2016, Main Street determined that the income from no single investment generated more than 20% of Main Street's total income.

NOTE D—EXTERNAL INVESTMENT MANAGER

        As discussed further in Note A.1., the External Investment Manager provides investment management and other services to External Parties. The External Investment Manager is accounted for as a portfolio investment of MSCC since the External Investment Manager conducts all of its investment management activities for External Parties.

        During May 2012, Main Street entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-listed BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow it to own a registered investment adviser, Main Street assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on MSCC's ability to meet the source-of-income requirement necessary for it to maintain its RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. The External Investment Manager has conditionally agreed to waive a limited amount of the incentive fees otherwise earned. During the three months ended September 30, 2017 and 2016, the External Investment Manager earned $2.8 million and $2.5 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2017 and 2016, the External Investment Manager earned $8.1 million and $7.1 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The investment in the External Investment Manager is accounted for using fair value accounting, with the fair value determined by Main Street and approved, in good faith, by Main Street's Board of Directors. Main Street determines the fair value of the External Investment Manager using the Waterfall valuation method under the market approach (see further discussion in Note B.1.). Any change in fair value of the investment in the External Investment Manager is recognized on Main Street's consolidated statements of operations in "Net Change in Unrealized Appreciation (Depreciation)—Portfolio investments."

        The External Investment Manager is an indirect wholly owned subsidiary of MSCC through a Taxable Subsidiary and is a disregarded entity for tax purposes. The External Investment Manager has entered into a tax sharing agreement with its Taxable Subsidiary owner. Since the External Investment Manager is accounted for as a portfolio investment of MSCC and is not included as a consolidated subsidiary of MSCC in MSCC's consolidated financial statements, and as a result of the tax sharing agreement with its Taxable Subsidiary owner, for financial reporting purposes the External Investment Manager is treated as if it is taxed at normal corporate tax rates based on its taxable income and, as a result of its activities, may generate income tax expense or benefit. Main Street owns the External Investment Manager through the Taxable Subsidiary to allow MSCC to continue to comply with the "source-income" requirements contained in the RIC tax provisions of the Code. The taxable income, or loss, of the External Investment Manager may differ from its book income, or loss, due to temporary book and tax timing differences and permanent differences. As a result of the above described financial reporting and tax treatment, the External Investment Manager provides for any income tax expense, or benefit, and any tax assets or liabilities in its separate financial statements.

        Main Street shares employees with the External Investment Manager and allocates costs related to such shared employees to the External Investment Manager generally based on a combination of the direct time spent, new investment origination activity and assets under management, depending on the nature of the expense. For the three months ended September 30, 2017 and 2016, Main Street allocated $1.7 million and $1.2 million of total expenses, respectively, to the External Investment Manager. For the nine months ended September 30, 2017 and 2016, Main Street allocated $4.8 million and $3.7 million of total expenses, respectively, to the External Investment Manager. The total contribution of the External Investment Manager to Main Street's net investment income consists of the combination of the expenses allocated to the External Investment Manager and dividend income received from the External Investment Manager. For the three months ended September 30, 2017 and 2016, the total contribution to Main Street's net investment income was $2.4 million and $2.0 million, respectively. For the nine months ended September 30, 2017 and 2016, the total contribution to Main Street's net investment income was $6.9 million and $5.8 million, respectively. Summarized financial information from the separate financial statements of the External Investment Manager as of

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

September 30, 2017 and December 31, 2016 and for the three and nine months ended September 30, 2017 and 2016 is as follows:

 
  As of
September 30,
2017
  As of
December 31,
2016
 
 
  (dollars in thousands)
 

Cash

  $   $  

Accounts receivable—HMS Income

    2,842     2,496  

Total assets

  $ 2,842   $ 2,496  

Accounts payable to MSCC and its subsidiaries

  $ 2,007   $ 1,635  

Dividend payable to MSCC and its subsidiaries

    712     719  

Taxes payable

    123     142  

Equity

         

Total liabilities and equity

  $ 2,842   $ 2,496  

 

 
  Three Months
Ended
September 30,
  Nine Months Ended
September 30,
 
 
  2017   2016   2017   2016  
 
   
   
  (dollars in thousands)
 

Management fee income

  $ 2,789   $ 2,471   $ 8,083   $ 7,058  

Expenses allocated from MSCC or its subsidiaries: Salaries, share-based compensation and other personnel costs

   
(1,033

)
 
(833

)
 
(2,978

)
 
(2,522

)

Other G&A expenses

    (631 )   (391 )   (1,838 )   (1,217 )

Total allocated expenses

    (1,664 )   (1,224 )   (4,816 )   (3,739 )

Pre-tax income

    1,125     1,247     3,267     3,319  

Tax expense

    (413 )   (454 )   (1,135 )   (1,210 )

Net income

  $ 712   $ 793   $ 2,132   $ 2,109  

NOTE E—SBIC DEBENTURES

        Due to each of the Funds' status as a licensed SBIC, Main Street has the ability to issue, through the Funds, debentures guaranteed by the SBA up to a maximum amount of $350.0 million through its three existing SBIC licenses. SBIC debentures payable were $274.8 million and $240.0 million at September 30, 2017 and December 31, 2016, respectively. SBIC debentures provide for interest to be paid semiannually, with principal due at the applicable 10-year maturity date of each debenture. During the nine months ended September 30, 2017, Main Street issued $60.0 million of SBIC debentures and opportunistically prepaid $25.2 million of existing SBIC debentures as part of an effort to manage the maturity dates of the oldest SBIC debentures, leaving $75.2 million of additional capacity under Main Street's SBIC licenses as of September 30, 2017. As a result of this prepayment, Main Street recognized a realized loss of $5.2 million due to the previously recognized gain recorded as a result of recording the MSC II debentures at fair value on the date of the acquisition of MSC II. The effect of the realized loss is offset by the reversal of all previously recognized unrealized depreciation due to fair

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(Unaudited)

value adjustments since the date of the acquisition. Main Street expects to issue new SBIC debentures under the SBIC program in the future in an amount up to the regulatory maximum amount of $350.0 million for affiliated SBIC funds. The weighted-average annual interest rate on the SBIC debentures was 3.8% and 4.1% as of September 30, 2017 and December 31, 2016, respectively. The first principal maturity due under the existing SBIC debentures is in 2019 and the weighted-average remaining duration as of September 30, 2017 was approximately 5.8 years. For the three months ended September 30, 2017 and 2016, Main Street recognized interest expense attributable to the SBIC debentures of $2.7 million and $2.5 million, respectively. For the nine months ended September 30, 2017 and 2016, Main Street recognized interest expense attributable to the SBIC debentures of $7.7 million and $7.5 million, respectively. Main Street has incurred upfront leverage and other miscellaneous fees of approximately 3.4% of the debenture principal amount. In accordance with SBA regulations, the Funds are precluded from incurring additional non-SBIC debt without the prior approval of the SBA.

        As of September 30, 2017, the recorded value of the SBIC debentures was $269.3 million which consisted of (i) $49.4 million recorded at fair value or $0.6 million less than the $50.0 million par value of the SBIC debentures issued in MSC II, (ii) $149.8 million par value of SBIC debentures outstanding held in MSMF, with a recorded value of $147.4 million that was net of unamortized debt issuance costs of $2.4 million and (iii) $75.0 million par value of SBIC debentures outstanding held in MSC III with a recorded value of $72.6 million that was net of unamortized debt issuance costs of $2.4 million. As of September 30, 2017, if Main Street had adopted the fair value option under ASC 825 for all of its SBIC debentures, Main Street estimates the fair value of its SBIC debentures would be approximately $256.0 million or $18.8 million less than the $274.8 million par value of the SBIC debentures.

NOTE F—CREDIT FACILITY

        Main Street maintains the Credit Facility to provide additional liquidity to support its investment and operational activities. The Credit Facility was amended in September 2017 to increase total commitments to $585.0 million from a diversified group of fifteen lenders. The Credit Facility matures in September 2021 and contains an accordion feature which allows Main Street to increase the total commitments under the facility to up to $750.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear interest, subject to Main Street's election, on a per annum basis at a rate equal to the applicable LIBOR rate (1.23% as of September 30, 2017) plus (i) 1.875% (or the applicable base rate (Prime Rate of 4.25% as of September 30, 2017) plus 0.875%) as long as Main Street maintains an investment grade rating and meets certain agreed upon excess collateral and maximum leverage requirements, (ii) 2.0% (or the applicable base rate plus 1.0%) if Main Street maintains an investment grade rating but does not meet certain excess collateral and maximum leverage requirements or (iii) 2.25% (or the applicable base rate plus 1.25%) if Main Street does not maintain an investment grade rating. Main Street pays unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding the equity ownership or assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2021, and

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval.

        At September 30, 2017, Main Street had $355.0 million in borrowings outstanding under the Credit Facility. As of September 30, 2017, if Main Street had adopted the fair value option under ASC 825 for its Credit Facility, Main Street estimates its fair value would approximate its recorded value. Main Street recognized interest expense related to the Credit Facility, including unused commitment fees and amortization of deferred issuance costs, of $3.1 million and $2.5 million for the three months ended September 30, 2017 and 2016, respectively, and $8.3 million and $6.7 million for the nine month periods ended September 30, 2017 and 2016, respectively. As of September 30, 2017, the interest rate on the Credit Facility was 3.1%. The average interest rate was 3.1% and 2.9% for the three and nine months ended September 30, 2017. As of September 30, 2017, Main Street was in compliance with all financial covenants of the Credit Facility.

NOTE G—NOTES

        In April 2013, Main Street issued $92.0 million, including the underwriters full exercise of their option to purchase additional principal amounts to cover over-allotments, in aggregate principal amount of 6.125% Notes due 2023 (the "6.125% Notes"). The 6.125% Notes are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 6.125% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 6.125% Notes mature on April 1, 2023, and may be redeemed in whole or in part at any time or from time to time at Main Street's option on or after April 1, 2018. The 6.125% Notes bear interest at a rate of 6.125% per year payable quarterly on January 1, April 1, July 1 and October 1 of each year. The total net proceeds to Main Street from the 6.125% Notes, after underwriting discounts and estimated offering expenses payable by Main Street, were approximately $89.0 million. Main Street has listed the 6.125% Notes on the New York Stock Exchange under the trading symbol "MSCA." Main Street may from time to time repurchase the 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2017, the outstanding balance of the 6.125% Notes was $90.7 million and the recorded value of $89.0 million was net of unamortized debt issuance costs of $1.7 million. As of September 30, 2017, if Main Street had adopted the fair value option under ASC 825 for the 6.125% Notes, Main Street estimates the fair value would be approximately $93.9 million. Main Street recognized interest expense related to the 6.125% Notes, including amortization of deferred issuance costs, of $1.5 million for each of the three months ended September 30, 2017 and 2016, and $4.4 million for each of the nine months ended September 30, 2017 and 2016.

        The indenture governing the 6.125% Notes (the "6.125% Notes Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 6.125% Notes and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

limitations and exceptions that are described in the 6.125% Notes Indenture. As of September 30, 2017, Main Street was in compliance with these covenants.

        In November 2014, Main Street issued $175.0 million in aggregate principal amount of 4.50% unsecured notes due 2019 (the "4.50% Notes") at an issue price of 99.53%. The 4.50% Notes are unsecured obligations and rank pari passu with Main Street's current and future unsecured indebtedness; senior to any of its future indebtedness that expressly provides it is subordinated to the 4.50% Notes; effectively subordinated to all of its existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under its Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of its subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes mature on December 1, 2019, and may be redeemed in whole or in part at any time at Main Street's option subject to certain make-whole provisions. The 4.50% Notes bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year. The total net proceeds from the 4.50% Notes, resulting from the issue price and after underwriting discounts and estimated offering expenses payable by us, were approximately $171.2 million. Main Street may from time to time repurchase the 4.50% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2017, the outstanding balance of the 4.50% Notes was $175.0 million and the recorded value of $173.4 million was net of unamortized debt issuance costs of $1.6 million. As of September 30, 2017, if Main Street had adopted the fair value option under ASC 825 for the 4.50% Notes, Main Street estimates its fair value would be approximately $176.7 million. Main Street recognized interest expense related to the 4.50% Notes, including amortization of unamortized deferred issuance costs, of $2.1 million for each of the three months ended September 30, 2017 and 2016, and $6.4 million for each of the nine months ended September 30, 2017 and 2016.

        The indenture governing the 4.50% Notes (the "4.50% Notes Indenture") contains certain covenants, including covenants requiring Main Street's compliance with (regardless of whether Main Street is subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring Main Street to provide financial information to the holders of the 4.50% Notes and the Trustee if Main Street ceases to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes Indenture. As of September 30, 2017, Main Street was in compliance with these covenants.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE H—FINANCIAL HIGHLIGHTS

 
  Nine Months Ended
September 30,
 
 
  2017   2016  

Per Share Data:

             

NAV at the beginning of the period

  $ 22.10   $ 21.24  

Net investment income(1)

    1.74     1.66  

Net realized gain(1)(2)

    0.40     0.65  

Net change in net unrealized appreciation (depreciation)(1)(2)

    0.02     (0.56 )

Income tax benefit (provision)(1)(2)

    (0.22 )   0.01  

Net increase in net assets resulting from operations(1)

    1.94     1.76  

Dividends paid from net investment income

    (1.46 )   (1.06 )

Distributions from capital gains

    (0.48 )   (0.84 )

Total dividends paid

    (1.94 )   (1.90 )

Impact of the net change in monthly dividends declared prior to the end of the period and paid in the subsequent period

    (0.01 )   (0.01 )

Accretive effect of stock offerings (issuing shares above NAV per share)

    0.84     0.42  

Accretive effect of DRIP issuance (issuing shares above NAV per share)

    0.04     0.06  

Other(3)

    0.05     0.05  

NAV at the end of the period

  $ 23.02   $ 21.62  

Market value at the end of the period

  $ 39.75   $ 34.33  

Shares outstanding at the end of the period

    57,756,193     52,931,917  

(1)
Based on weighted-average number of common shares outstanding for the period.

(2)
Net realized gains or losses, net change in unrealized appreciation or depreciation, and income taxes can fluctuate significantly from period to period.

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(Unaudited)

(3)
Includes the impact of the different share amounts as a result of calculating certain per share data based on the weighted-average basic shares outstanding during the period and certain per share data based on the shares outstanding as of a period end or transaction date.
 
  Nine Months Ended
September 30,
 
 
  2017   2016  
 
  (dollars in thousands)
 

NAV at end of period

  $ 1,329,666   $ 1,144,350  

Average NAV

  $ 1,264,457   $ 1,097,839  

Average outstanding debt

  $ 846,255   $ 792,966  

Ratio of total expenses, including income tax expense, to average NAV(1)(2)

    5.10%     4.11%  

Ratio of operating expenses to average NAV(2)(3)

    4.12%     4.20%  

Ratio of operating expenses, excluding interest expense, to average NAV(2)(3)

    2.00%     1.92%  

Ratio of net investment income to average NAV(2)

    7.74%     7.78%  

Portfolio turnover ratio(2)

    28.31%     18.11%  

Total investment return(2)(4)

    13.68%     25.35%  

Total return based on change in NAV(2)(5)

    9.09%     8.49%  

(1)
Total expenses are the sum of operating expenses and net income tax provision/benefit. Net income tax provision/benefit includes the accrual of net deferred tax provision/benefit relating to the net unrealized appreciation/depreciation on portfolio investments held in Taxable Subsidiaries and due to the change in the loss carryforwards, which are non-cash in nature and may vary significantly from period to period. Main Street is required to include net deferred tax provision/benefit in calculating its total expenses even though these net deferred taxes are not currently payable/receivable.

(2)
Not annualized.

(3)
Unless otherwise noted, operating expenses include interest, compensation, general and administrative and share-based compensation expenses, net of expenses allocated to the External Investment Manager.

(4)
Total investment return based on purchase of stock at the current market price on the first day and a sale at the current market price on the last day of each period reported on the table and assumes reinvestment of dividends at prices obtained by Main Street's dividend reinvestment plan during the period. The return does not reflect any sales load that may be paid by an investor.

(5)
Total return based on change in net asset value was calculated using the sum of ending net asset value plus dividends to stockholders and other non-operating changes during the period, as divided by the beginning net asset value. Non-operating changes include any items that affect net asset value other than the net increase in net assets resulting from operations, such as the effects of stock offerings, shares issued under the DRIP and equity incentive plans and other miscellaneous items.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE I—DIVIDENDS, DISTRIBUTIONS AND TAXABLE INCOME

        Main Street paid regular monthly dividends of $0.185 per share for each month of January through September 2017, totaling $31.5 million, or $0.555 per share, for the three months ended September 30, 2017, and $92.9 million, or $1.665 per share, for the nine months ended September 30, 2017. The third quarter 2017 regular monthly dividends represent a 2.8% increase from the regular monthly dividends paid for the third quarter of 2016. Additionally, Main Street paid a $0.275 per share semi-annual supplemental dividend, totaling $15.6 million, in June 2017 compared to $14.2 million, or $0.275 per share, paid in June 2016. The regular monthly dividends equaled a total of approximately $28.3 million, or $0.540 per share, for the three months ended September 30, 2016, and $83.1 million, or $1.620 per share, for the nine months ended September 30, 2016.

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

        The determination of the tax attributes for Main Street's distributions is made annually, based upon its taxable income for the full year and distributions paid for the full year. Therefore, a determination made on an interim basis may not be representative of the actual tax attributes of distributions for a full year. Ordinary dividend distributions from a RIC do not qualify for the 20% maximum tax rate (plus a 3.8% Medicare surtax, if applicable) on dividend income from domestic corporations and qualified foreign corporations, except to the extent that the RIC received the income in the form of qualifying dividends from domestic corporations and qualified foreign corporations. The tax attributes for distributions will generally include both ordinary income and capital gains, but may also include qualified dividends or return of capital.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        Listed below is a reconciliation of "Net increase in net assets resulting from operations" to taxable income and to total distributions declared to common stockholders for the nine months ended September 30, 2017 and 2016.

 
  Nine Months Ended
September 30,
 
 
  2017   2016  
 
  (estimated, dollars
in thousands)

 

Net increase in net assets resulting from operations

  $ 109,180   $ 90,907  

Book tax difference from share-based compensation expense

    (3,352 )   (708 )

Net change in net unrealized (appreciation) depreciation

    (1,050 )   28,829  

Income tax provision (benefit)

    12,383     (1,018 )

Pre-tax book loss not consolidated for tax purposes

    1,386     16,771  

Book income and tax income differences, including debt origination, structuring fees, dividends, realized gains (losses) and changes in estimates

    2,711     (4,141 )

Estimated taxable income(1)

    121,258     130,640  

Taxable income earned in prior year and carried forward for distribution in current year

    42,362     29,683  

Taxable income earned prior to period end and carried forward for distribution next period

    (65,233 )   (72,094 )

Dividend payable as of period end and paid in the following period

    10,934     9,783  

Total distributions accrued or paid to common stockholders

  $ 109,321   $ 98,012  

(1)
Main Street's taxable income for each period is an estimate and will not be finally determined until the company files its tax return for each year. Therefore, the final taxable income, and the taxable income earned in each period and carried forward for distribution in the following period, may be different than this estimate.

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

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

        The income tax expense, or benefit, and the related tax assets and liabilities generated by the Taxable Subsidiaries, if any, are reflected in Main Street's consolidated financial statements. For the three months ended September 30, 2017, Main Street recognized a net income tax provision of $4.6 million, principally consisting of a deferred tax provision of $3.8 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, and a $0.8 million current tax expense, which is primarily related to a $0.5 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.3 million provision for current U.S. federal income and state taxes. For the nine months ended September 30, 2017, Main Street recognized a net income tax provision of $12.4 million, principally consisting of a deferred tax provision of $9.9 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book-tax differences, and $2.5 million current tax expense, which is primarily related to a $1.6 million accrual for excise tax on Main Street's estimated undistributed taxable income and $0.9 million provision for current U.S. federal income and state taxes. For the three months ended September 30, 2016, Main Street recognized a net income tax benefit of $0.5 million, principally consisting of a deferred tax benefit of $1.4 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and other temporary book tax differences, partially offset by a $0.9 million current tax expense, which is primarily related to a $1.0 million accrual for excise tax on Main Street's estimated undistributed taxable income. For the nine months ended September 30, 2016, Main Street recognized a net income tax benefit of $1.0 million, principally consisting of a deferred tax benefit of $3.4 million, which is primarily the result of the net activity relating to the portfolio investments held in the Taxable Subsidiaries, including changes in the loss carryforwards, changes in net unrealized appreciation or depreciation and temporary book tax differences, partially offset by a $2.4 million current tax expense which is composed of a (i) $2.1 million accrual for excise tax on Main Street's estimated undistributed taxable income and (ii) $0.3 million of accruals for current U.S. federal income and state taxes.

        The net deferred tax liability at September 30, 2017 was $1.2 million compared to a net deferred tax asset of $9.1 million at December 31, 2016, primarily related to loss carryforwards, timing differences in net unrealized appreciation or depreciation and other temporary book-tax differences relating to portfolio investments held by the Taxable Subsidiaries. In addition, during the three months ended March 31, 2016, Main Street recorded a one-time $1.8 million increase to deferred tax assets for previously unrecognized excess tax benefits associated with share-based compensation due to the early adoption of the accounting standard ASU 2016-09 (See further discussion in Note B.8.). For the nine months ended September 30, 2017, the Taxable Subsidiaries utilized capital loss carryforwards totaling approximately $1.7 million. As of September 30, 2017, for U.S. federal income tax purposes, the Taxable Subsidiaries had a capital loss carryforward of $12.8 million which, if unused, will expire in taxable years 2020 and 2021. At September 30, 2017, for U.S. federal income tax purposes, the Taxable Subsidiaries had a net operating loss carryforward which, if unused, will expire in various taxable years from 2029 through 2037. The timing and manner in which Main Street will utilize any loss carryforwards in any year, or in total, may be limited in the future under the provisions of the Code.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE J—COMMON STOCK

        During November 2015, Main Street commenced a program with certain selling agents through which it can sell shares of its common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the nine months ended September 30, 2017, Main Street sold 3,119,247 shares of its common stock at a weighted-average price of $38.33 per share and raised $119.5 million of gross proceeds under the ATM Program. Net proceeds were $118.1 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2017, sales transactions representing 75,404 shares had not settled and are not included in shares issued and outstanding on the face of the consolidated balance sheet, but are included in the weighted-average shares outstanding in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of September 30, 2017, there were 2,737,081 shares available for sale under the ATM Program.

        During the year ended December 31, 2016, Main Street sold 3,324,646 shares of its common stock at a weighted-average price of $34.17 per share and raised $113.6 million of gross proceeds under the ATM Program. Net proceeds were $112.0 million after commissions to the selling agents on shares sold and offering costs. As of December 31, 2016, sales transactions representing 42,413 shares had not settled and were not included in shares issued and outstanding on the face of the consolidated balance sheet, but were included in the weighted-average shares outstanding in the consolidated statements of operations and in the shares used to calculate net asset value per share.

NOTE K—DIVIDEND REINVESTMENT PLAN ("DRIP")

        Main Street's DRIP provides for the reinvestment of dividends on behalf of its stockholders, unless a stockholder has elected to receive dividends in cash. As a result, if Main Street declares a cash dividend, the company's stockholders who have not "opted out" of the DRIP by the dividend record date will have their cash dividend automatically reinvested into additional shares of MSCC common stock. The share requirements of the DRIP may be satisfied through the issuance of shares of common stock or through open market purchases of common stock. Newly issued shares will be valued based upon the final closing price of MSCC's common stock on the valuation date determined for each dividend by Main Street's Board of Directors. Shares purchased in the open market to satisfy the DRIP requirements will be valued based upon the average price of the applicable shares purchased, before any associated brokerage or other costs. Main Street's DRIP is administered by its transfer agent on behalf of Main Street's record holders and participating brokerage firms. Brokerage firms and other financial intermediaries may decide not to participate in Main Street's DRIP but may provide a similar dividend reinvestment plan for their clients.

        For the nine months ended September 30, 2017, $6.1 million of the total $108.4 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 158,301 newly issued shares. For the nine months ended September 30, 2016, $10.6 million of the total $97.3 million in dividends paid to stockholders represented DRIP participation. During this period, the DRIP participation requirements were satisfied with the issuance of 339,544 newly issued shares. The shares disclosed above relate only to Main Street's DRIP and exclude any activity related to broker-managed dividend reinvestment plans.

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Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE L—SHARE-BASED COMPENSATION

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

        Main Street's Board of Directors approves the issuance of shares of restricted stock to Main Street employees pursuant to the Main Street Capital Corporation 2015 Equity and Incentive Plan (the "Equity and Incentive Plan"). These shares generally vest over a three-year period from the grant date. The fair value is expensed over the service period, starting on the grant date. The following table summarizes the restricted stock issuances approved by Main Street's Board of Directors under the Equity and Incentive Plan, net of shares forfeited, if any, and the remaining shares of restricted stock available for issuance as of September 30, 2017.

Restricted stock authorized under the plan

    3,000,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (900 )

Year ended December 31, 2016

    (260,514 )

Nine months ended September 30, 2017

    (223,868 )

Restricted stock available for issuance as of September 30, 2017

    2,514,718  

        As of September 30, 2017, the following table summarizes the restricted stock issued to Main Street's non-employee directors and the remaining shares of restricted stock available for issuance pursuant to the Main Street Capital Corporation 2015 Non-Employee Director Restricted Stock Plan. These shares are granted upon appointment or election to the board and vest on the day immediately preceding the annual meeting of stockholders following the respective grant date and are expensed over such service period.

Restricted stock authorized under the plan

    300,000  

Less net restricted stock granted during:

       

Year ended December 31, 2015

    (6,806 )

Year ended December 31, 2016

    (6,748 )

Nine months ended September 30, 2017

    (5,201 )

Restricted stock available for issuance as of September 30, 2017

    281,245  

        For the three months ended September 30, 2017 and 2016, Main Street recognized total share-based compensation expense of $2.5 million and $2.1 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors, and, for the nine months ended September 30, 2017 and 2016, Main Street recognized total share-based compensation expense of $7.5 million and $6.0 million, respectively, related to the restricted stock issued to Main Street employees and non-employee directors.

        As of September 30, 2017, there was $13.3 million of total unrecognized compensation expense related to Main Street's non-vested restricted shares. This compensation expense is expected to be recognized over a remaining weighted-average period of approximately 1.9 years as of September 30, 2017.

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

NOTE M—COMMITMENTS AND CONTINGENCIES

        At September 30, 2017, Main Street had the following outstanding commitments (in thousands):

 
  Amount  

Investments with equity capital commitments that have not yet funded:

       

Congruent Credit Opportunities Funds

       

Congruent Credit Opportunities Fund II, LP

  $ 8,488  

Congruent Credit Opportunities Fund III, LP

    12,131  

  $ 20,619  

Encap Energy Fund Investments

   
 
 

EnCap Energy Capital Fund VIII, L.P. 

  $ 419  

EnCap Energy Capital Fund IX, L.P. 

    708  

EnCap Energy Capital Fund X, L.P. 

    4,611  

EnCap Flatrock Midstream Fund II, L.P. 

    7,443  

EnCap Flatrock Midstream Fund III, L.P. 

    4,183  

  $ 17,364  

Brightwood Capital Fund Investments

   
 
 

Brightwood Capital Fund III, LP

  $ 3,000  

Brightwood Capital Fund IV, LP

    4,500  

  $ 7,500  

Freeport Fund Investments

   
 
 

Freeport First Lien Loan Fund III LP

  $ 4,941  

Freeport Financial SBIC Fund LP

    1,375  

  $ 6,316  

EIG Fund Investments

 
$

4,780
 

HPEP 3, L.P. 

 
$

4,057
 

LKCM Headwater Investments I, L.P. 

 
$

2,500
 

Copper Trail Energy Fund I, LP

 
$

2,500
 

Dos Rios Partners

   
 
 

Dos Rios Partners, LP

  $ 1,594  

Dos Rios Partners—A, LP

    506  

  $ 2,100  

I-45 SLF LLC

 
$

800
 

Access Media Holdings, LLC

 
$

779
 

Total equity commitments

  $ 69,315  

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

 
  Amount  

Investments with commitments to fund revolving loans that have not been fully drawn or term loans with additional commitments not yet funded:

       

Wireless Vision Holdings, LLC

 
$

8,289
 

Minute Key, Inc. 

    8,000  

PT Network, LLC

    7,300  

NNE Partners, LLC

    7,000  

Resolute Industrial, LLC

    5,750  

Charps, LLC

    4,000  

Hojeij Branded Foods, LLC

    3,590  

CDHA Management, LLC

    3,373  

Strike, LLC

    2,000  

Boccella Precast Products LLC

    2,000  

CST Industries Inc. 

    1,987  

Felix Investments Holdings II

    1,667  

Hawk Ridge Systems, LLC

    1,600  

Meisler Operating LLC

    1,600  

Aethon United BR LP

    1,563  

IDX Broker, LLC

    1,500  

Lamb Ventures, LLC

    1,500  

Messenger, LLC

    1,417  

TGP Holdings III LLC

    1,255  

Gamber-Johnson Holdings, LLC

    1,200  

NuStep, LLC

    1,200  

Subsea Global Solutions, LLC

    1,114  

Market Force Information, LLC

    1,088  

LaMi Products, LLC

    1,030  

CTVSH, PLLC

    800  

Apex Linen Service, Inc. 

    800  

Mystic Logistics Holdings, LLC

    800  

Pardus Oil and Gas, LLC

    663  

NRI Clinical Research, LLC

    600  

PPC/SHIFT LLC

    500  

UniTek Global Services, Inc. 

    483  

Grace Hill, LLC

    444  

Clad-Rex Steel, LLC

    400  

Gulf Publishing Holdings, LLC

    320  

Arcus Hunting LLC

    240  

OnAsset Intelligence, Inc. 

    224  

Permian Holdco 2, Inc. 

    116  

BigName Commerce, LLC

    101  

Jensen Jewelers of Idaho, LLC

    50  

Total loan commitments

  $ 77,564  

Total commitments

  $ 146,879  

        Main Street will fund its unfunded commitments from the same sources it uses to fund its investment commitments that are funded at the time they are made (which are typically through existing cash and cash equivalents and borrowings under the Credit Facility). Main Street follows a

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

process to manage its liquidity and ensure that it has available capital to fund its unfunded commitments as necessary. The Company had total unrealized depreciation of $0.1 million on the outstanding unfunded commitments as of September 30, 2017.

        Main Street has an operating lease for its office space in Houston, Texas. Total rent expense incurred by Main Street for the three months ended September 30, 2017 and 2016 was $0.2 million and $0.1 million, respectively. Total rent expense incurred by Main Street for each of the nine months ended September 30, 2017 and 2016 was $0.5 million and $0.4 million, respectively.

        The following table shows future minimum payments under Main Street's operating lease as of September 30, 2017:

For the Years Ended December 31,
  Amount  

2017

  $  

2018

    373  

2019

    749  

2020

    763  

2021

    777  

Thereafter

    5,031  

Total

  $ 7,693  

        Main Street may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise. Furthermore, third parties may try to impose liability on Main Street in connection with the activities of its portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, Main Street does not expect any current matters will materially affect its financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on Main Street's financial condition or results of operations in any future reporting period.

NOTE N—RELATED PARTY TRANSACTIONS

        As discussed further in Note D, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of Main Street's Investment Portfolio. At September 30, 2017, Main Street had a receivable of approximately $2.7 million due from the External Investment Manager which included (i) approximately $2.0 million related primarily to operating expenses incurred by MSCC or its subsidiaries required to support the External Investment Manager's business and due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion in Note D) and (ii) approximately $0.7 million of dividends declared but not paid by the External Investment Manager.

        In November 2015, Main Street's Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined

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MAIN STREET CAPITAL CORPORATION

Notes to Consolidated Financial Statements (Continued)

(Unaudited)

payout schedules or other events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2017, $3.8 million of compensation and directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $2.4 million was deferred into phantom Main Street stock units, representing 72,228 shares of Main Street's common stock. Including phantom stock units issued through dividend reinvestment, the phantom stock units outstanding as of September 30, 2017 represented 84,963 shares of Main Street's common stock. Any amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but are included in operating expenses and weighted-average shares outstanding in Main Street's consolidated statements of operations as earned.

NOTE O—SUBSEQUENT EVENTS

        In October 2017, Main Street declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2017. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that Main Street declared for the fourth quarter of 2017 of $0.190 per share for each of October, November and December 2017.

        In October 2017, Main Street declared regular monthly dividends of $0.190 per share for each month of January, February and March of 2018. These regular monthly dividends equal a total of $0.570 per share for the first quarter of 2018 and represent a 2.7% increase from the regular monthly dividends declared for the first quarter of 2017. Including the semi-annual supplemental dividend declared for December 2017 and the regular monthly dividends declared for the fourth quarter of 2017 and first quarter of 2018, Main Street will have paid $21.960 per share in cumulative dividends since its October 2007 initial public offering.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
September 30, 2017
(dollars in thousands)

Company
 
Investment(1)
  Amount of Realized Gain/(Loss)   Amount of Unrealized Gain/(Loss)   Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair Value
 

Majority-owned investments

                                               

Café Brazil, LLC

 

Member Units

 
$

 
$

(650

)

$

127
 
$

6,040
 
$

 
$

650
 
$

5,390
 

Clad-Rex Steel, LLC

  LIBOR Plus 9.50% (Floor 1.00)         121     1,163     14,337     143     800     13,680  

  Member Units         1,240     311     7,280     1,240         8,520  

  10% Secured Debt             89     1,190         13     1,177  

  Member Units                 210             210  

CMS Minerals Investments

  Preferred Member Units     1,405     (1,578 )   96     3,682         3,682      

  Member Units         (461 )   185     3,381         799     2,582  

Gamber-Johnson Holdings, LLC

  LIBOR Plus 11.00% (Floor 1.00%)         200     2,235     23,846     235     401     23,680  

  Member Units         4,040     353     18,920     4,040         22,960  

GRT Rubber Technologies LLC

  LIBOR Plus 9.00% (Floor 1.00%)         (25 )   996     13,274     25     1,269     12,030  

  Member Units         370     584     20,310     370         20,680  

Harborside Holdings, LLC

  Member Units         3,194             9,400         9,400  

Hydratec, Inc.

  Common Stock         (160 )   1,343     15,640         160     15,480  

IDX Broker, LLC

  11.5% Secured Debt         (19 )   971     10,950     19     919     10,050  

  Member Units         1,960     136     7,040     1,960         9,000  

Jensen Jewelers of Idaho, LLC

  Prime Plus 6.75% (Floor 2.00%)         (16 )   331     4,055     516     466     4,105  

  Member Units             127     4,460             4,460  

Lamb Ventures, LLC

  11% Secured Debt             709     7,657     2,795     428     10,024  

  Preferred Equity                 400             400  

  Member Units         440     40     5,990     440         6,430  

  9.5% Secured Debt         4     54     1,170     432     1,170     432  

  Member Units         (820 )   850     1,340         820     520  

Lighting Unlimited, LLC

  8% Secured Debt             29     1,514         1,514      

  Preferred Equity     (434 )   24         410     24     434      

  Warrants     (54 )   54             54     54      

  Member Units     (100 )   100             100     100      

Mid-Columbia Lumber

  10% Secured Debt             133     1,750             1,750  

Products, LLC

  12% Secured Debt             355     3,900             3,900  

  Member Units         (1,500 )   5     2,480         1,500     980  

  9.5% Secured Debt             59     836         34     802  

  Member Units         150     43     600     690         1,290  

MSC Adviser I, LLC

  Member Units         8,687     2,132     30,617     8,687         39,304  

Mystic Logistics Holdings, LLC

  12% Secured Debt         (42 )   824     9,176     42     1,450     7,768  

  Common Stock         810         5,780     810         6,590  

NRP Jones, LLC

  8% Current/4% PIK Secured Debt             1,302     13,915     1,122         15,037  

  Warrants         687         130     687     817      

  Member Units         33         410     850         1,260  

PPL RVs, Inc.

  LIBOR Plus 7.00% (Floor 0.50%)         135     1,123     17,826     174     1,900     16,100  

  Common Stock             100     11,780             11,780  

Principle Environmental, LLC

  Zero Coupon Secured Debt             738     7,438         103     7,335  

  Preferred Member Units     (63 )   2,913         5,370     2,913     63     8,220  

  Warrants         150         270     150         420  

Quality Lease Service, LLC

  8% PIK Secured Debt         (391 )   273     7,068     273     391     6,950  

  Member Units                 3,188     1,650         4,838  

The MPI Group, LLC

  9% Secured Debt         (303 )   201     2,922     1     304     2,619  

  Series A Preferred Units                              

  Warrants                              

  Member Units         90     92     2,300     90         2,390  

Uvalco Supply, LLC

  9% Secured Debt             45     872         398     474  

  Member Units     69     (69 )   146     4,640         333     4,307  

Vision Interests, Inc.

  13% Secured Debt             285     2,814         20     2,794  

  Series A Preferred Stock                 3,000             3,000  

  Common Stock                              

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Company
 
Investment(1)
  Amount of Realized Gain/(Loss)   Amount of Unrealized Gain/(Loss)   Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair Value
 

Ziegler's NYPD, LLC

  6.5% Secured Debt             51     994     1         995  

  12% Secured Debt             27     300             300  

  14% Secured Debt             292     2,750             2,750  

  Warrants         (50 )       240         50     190  

  Preferred Member Units         (700 )       4,100         700     3,400  

Other controlled investments

                                               

Access Media Holdings, LLC

 

5% Current/5% PIK Secured Debt

   
   
(1,125

)
 
1,768
   
19,700
   
865
   
1,125
   
19,440
 

  Preferred Member Units         (1,280 )       240     1,191     1,281     150  

  Member Units                              

Ameritech College

  13% Secured Debt             96     1,003         1,003      

Operations, LLC

  13% Secured Debt             285     3,025         3,025      

  Preferred Member Units     (3,321 )       198     2,291     3,900     6,191      

ASC Interests, LLC

  11% Secured Debt         (8 )   164     2,100     8     183     1,925  

  Member Units         (860 )       2,680         860     1,820  

Bond-Coat, Inc.

  12% Secured Debt         (29 )   1,085     11,596     29     29     11,596  

  Common Stock         1,770         6,660     1,770         8,430  

CBT Nuggets, LLC

  Member Units         16,370     5,155     55,480     16,370         71,850  

Charps, LLC

  12% Secured Debt             1,794         19,017     800     18,217  

  Preferred Member Units                     400         400  

Copper Trail Energy Fund I, LP

  Member Units                     2,500         2,500  

Datacom, LLC

  8% Secured Debt             72     900     720     270     1,350  

  5.25% Current / 5.25% PIK Secured Debt         (116 )   963     11,049     437     116     11,370  

  Class A Preferred Member Units         (8 )       1,368         8     1,360  

  Class B Preferred Member Units         (1,529 )       1,529         1,529      

Garreco, LLC

  LIBOR Plus 10.00% (Floor 1.00%)             534     5,219     985     526     5,678  

  Member Units         680         1,150     680         1,830  

Gulf Manufacturing, LLC

  9% PIK Secured Debt             51     777         777      

  Member Units         1,910     281     8,770     1,910         10,680  

Gulf Publishing Holdings, LLC

  LIBOR Plus 9.50% (Floor 1.00%)             2         80         80  

  12% Secured Debt             1,142     9,911     2,786         12,697  

  Member Units         649     40     3,124     1,206         4,330  

Harrison Hydra-Gen, Ltd.

  Common Stock         (320 )       3,120         320     2,800  

Hawthorne Customs and

  Member Units     (159 )   309         280     309     589      

Dispatch Services, LLC

  Member Units     632     (825 )   127     2,040         2,040      

HW Temps LLC

  LIBOR Plus 13.00% (Floor 1.00%)             1,095     10,500     13     600     9,913  

  Preferred Member Units             105     3,940             3,940  

Indianapolis Aviation

  15% Secured Debt             292     3,100         3,100      

Partners, LLC

  Warrants     2,385     (1,520 )       2,649         2,649      

KBK Industries, LLC

  10% Secured Debt             81     1,250     100     600     750  

  12.5% Secured Debt             571     5,889     11         5,900  

  Member Units         837     75     2,780     1,280         4,060  

Marine Shelters Holdings, LLC

  12% PIK Secured Debt         (2,551 )       9,387         9,387      

  Preferred Member Units     (101 )               100     100      

Market Force Information, LLC

  LIBOR Plus 7.00% (Floor 1.00%)             9         512         512  

  LIBOR Plus 11.00% (Floor 1.00%)             767         23,293         23,293  

  Member Units                     14,700         14,700  

MH Corbin Holding LLC

  10% Secured Debt             1,003     13,197     21     524     12,694  

  Preferred Member Units             105     6,000             6,000  

NAPCO Precast, LLC

  LIBOR Plus 8.50%             621         11,433         11,433  

  Prime Plus 2.00% (Floor 7.00%)         (20 )   122     2,713     20     2,733      

  18% Secured Debt         (30 )   327     3,952     31     3,983      

  Member Units         (90 )   264     10,920         90     10,830  

NRI Clinical Research, LLC

  LIBOR Plus 6.50% (Floor 1.50%)             27     200     200         400  

  14% Secured Debt         (33 )   508     4,261     34     90     4,205  

  Warrants         (180 )       680         180     500  

  Member Units         38         2,462     360     322     2,500  

NuStep, LLC

  12% Secured Debt             2,003         20,411         20,411  

  Preferred Member Units                     10,200         10,200  

OMi Holdings, Inc.

  Common Stock         (340 )   672     13,080         340     12,740  

Pegasus Research Group, LLC

  Member Units         730     207     8,620     730         9,350  

River Aggregates, LLC

  Zero Coupon Secured Debt             59     627     59         686  

  Member Units         (190 )       4,600         190     4,410  

  Member Units                 2,510             2,510  

SoftTouch Medical

  LIBOR Plus 9.00% (Floor 1.00%)         (11 )   557     7,140     11     11     7,140  

Holdings LLC

  Member Units         370     758     9,170     370         9,540  

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Table of Contents

Company
 
Investment(1)
  Amount of Realized Gain/(Loss)   Amount of Unrealized Gain/(Loss)   Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair Value
 

Other

                                               

Amounts related to investments transferred to or from other 1940 Act classification during the period

                (220 )   (9,919 )            

      $ 259   $ 31,216   $ 42,720   $ 594,282   $ 178,985   $ 67,313   $ 715,873  

Affiliate Investments

                                               

AFG Capital Group, LLC

 

Warrants

 
$

 
$

80
 
$

 
$

670
 
$

80
 
$

 
$

750
 

  Member Units         380     26     2,750     380         3,130  

Barfly Ventures, LLC

  12% Secured Debt         154     734     5,827     2,862         8,689  

  Options         290         490     290         780  

  Warrants         160         280     160         440  

BBB Tank Services, LLC

  LIBOR Plus 9.50% (Floor 1.00%)             65     797             797  

  15% Secured Debt             463     3,991     4         3,995  

  Member Units         (220 )       800         220     580  

Boccella Precast Products LLC

  LIBOR Plus 10.0% (Floor 1.00%)             718         16,223         16,223  

  Member Units             7         2,160         2,160  

Boss Industries, LLC

  Preferred Member Units         786     266     2,800     930         3,730  

Bridge Capital Solutions

  13% Secured Debt             939     5,610     200         5,810  

Corporation

  Warrants                 3,370             3,370  

  13% Secured Debt         (1 )   100     1,000     1     1     1,000  

  Preferred Member Units             75     1,000             1,000  

Buca C, LLC

  LIBOR Plus 7.25% (Floor 1.00%)         (167 )   1,420     22,671     40     1,633     21,078  

  Preferred Member Units         (728 )   177     4,660     177     727     4,110  

CAI Software LLC

  12% Secured Debt         (6 )   326     3,683     6     206     3,483  

  Member Units         560     59     2,480     560         3,040  

CapFusion, LLC

  13% Secured Debt         (3,582 )   1,401     13,202     138     6,662     6,678  

  Warrants         (1,200 )       1,200         1,200      

Chandler Signs Holdings, LLC

  12% Secured Debt         (5 )   415     4,500     5     5     4,500  

  Class A Units         (590 )   63     3,240         590     2,650  

Condit Exhibits, LLC

  Member Units             61     1,840             1,840  

Congruent Credit Opportunities

  LP Interests (Fund II)         (3 )   2     1,518         3     1,515  

Funds

  LP Interests (Fund III)         418     1,144     16,181     2,533         18,714  

Daseke, Inc.

  12% Current / 2.5% PIK Secured Debt         (167 )   676     21,799     255     22,054      

  Common Stock     22,859     (18,849 )       24,063         24,063      

Dos Rios Partners

  LP Interests (Dos Rios Partners, LP)         1,502         4,925     1,502         6,427  

  LP Interests (Dos Rios Partners—A, LP)         445         1,444     445         1,889  

Dos Rios Stone Products LLC

  Class A Units         (200 )       2,070         200     1,870  

East Teak Fine Hardwoods, Inc.

  Common Stock         (230 )   50     860         230     630  

East West Copolymer &

  12% Current/2% PIK Secured Debt         (2,665 )       8,630         8,630      

Rubber, LLC

  Warrants                              

EIG Fund Investments

  LP Interests (EIG Global Private Debt fund-A, L.P.)     71     (48 )   90     2,804     352     2,909     247  

  LP Interests (EIG Traverse Co-Investment, L.P.)         (100 )   1,534     9,905         9,905      

Freeport Financial Fund Investments

  LP Interests (Freeport Financial SBIC Fund LP)         (101 )   306     5,620         101     5,519  

  LP Interests (Freeport First Lien Loan Fund III LP)         (52 )   503     4,763     2,796     52     7,507  

Gault Financial, LLC (RMB

  10.5% Current Secured Debt         1,016     976     11,079     1,017     454     11,642  

Capital, LLC)

  Warrants                              

Glowpoint, Inc.

  12% Secured Debt     (6,450 )   4,951     685     3,997     5,003     9,000      

  Common Stock     (3,974 )   1,878         2,080     1,878     3,958      

Guerdon Modular

  13% Secured Debt             1,084     10,594     28         10,622  

Holdings, Inc.

  Preferred Stock         (190 )       1,140         190     950  

  Common Stock         (80 )       80         80      

HPEP 3, L.P.

  LP Interests (HPEP 3, L.P.)                     943         943  

  LP Interests (2717 MH, L.P.)                     400         400  

Hawk Ridge Systems, LLC

  10% Secured Debt             774     9,901     16     500     9,417  

  Preferred Member Units         380     265     2,850     380         3,230  

  Preferred Member Units         20     6     150     20         170  

Houston Plating and

  8% Unsecured Convertible Debt         80     104         3,080         3,080  

Coatings, LLC

  Member Units         810     4     4,000     1,560         5,560  

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Company
 
Investment(1)
  Amount of Realized Gain/(Loss)   Amount of Unrealized Gain/(Loss)   Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2016
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2017
Fair Value
 

I-45 SLF LLC

  Member Units         311     2,148     14,586     2,311         16,897  

Indianhead Pipeline

  12% Secured Debt             947     5,079     563     5,642      

Services, LLC

  Preferred Member Units         (338 )   514     2,677     514     3,191      

  Warrants     134     459             459     459      

  Member Units     272     1             1     1      

L.F. Manufacturing Holdings, LLC

  Member Units         470         1,380     470         1,850  

Meisler Operating LLC

  LIBOR Plus 8.50% (Floor 1.00%)             818         16,626         16,626  

  Member Units                     3,200         3,200  

OnAsset Intelligence, Inc.

  12% PIK Secured Debt     (28 )       424     4,519     424         4,943  

  10% PIK Secured Debt             1         47         47  

  Preferred Stock                              

  Warrants                              

OPI International Ltd.

  10% Unsecured Debt     (86 )   (473 )   16     473         473      

  Common Stock         (1,600 )       1,600         1,600      

PCI Holding Company, Inc.

  12% Secured Debt         (102 )   1,522     13,000     333     427     12,906  

  Preferred Stock         (1,368 )   548     5,370     548     1,368     4,550  

  Preferred Stock         870             2,610         2,610  

Rocaceia, LLC (Quality Lease

  12% Secured Debt                 250             250  

and Rental Holdings, LLC)

  Preferred Member Units                              

Tin Roof Acquisition Company

  12% Secured Debt             1,248     13,385     49     501     12,933  

  Class C Preferred Stock             213     2,738     213         2,951  

UniTek Global Services, Inc.

  LIBOR Plus 8.50% (Floor 1.00%)         (4 )   507     5,021     3,518     4     8,535  

  LIBOR Plus 8.50% (Floor 1.00%)             33     824     3     690     137  

  15% PIK Unsecured Debt             94     745     88         833  

  Preferred Stock         (632 )   1,302     6,410     1,302     632     7,080  

  Preferred Stock         (5 )   207         2,725     5     2,720  

  Common Stock         (690 )       3,010         690     2,320  

Universal Wellhead Services

  Preferred Member Units         80         720     80         800  

Holdings, LLC

  Member Units         620         610     620         1,230  

Valley Healthcare Group, LLC

  LIBOR Plus 12.50% (Floor 0.50%)             1,306     12,844     25     1,110     11,759  

  Preferred Member Units                 1,600             1,600  

Volusion, LLC

  11.5% Secured Debt             2,015     15,298     517     766     15,049  

  Preferred Member Units                 14,000             14,000  

  Warrants         (337 )       2,576         336     2,240  

Other

                                               

Amounts related to investments transferred to or from other 1940 Act classification during the period

        122         220     9,919              

      $ 12,920   $ (18,012 ) $ 29,601   $ 375,948   $ 83,670   $ 111,468   $ 338,231  

Total Non-Control/Non-Affiliate investments

      $ 14,663   $ (17,562 ) $ 77,623                          

Total Portfolio Investments

      $ 27,842   $ (4,358 ) $ 149,944                          

(1)
The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule of investments.

(2)
Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in "Amounts from investments transferred from other 1940 Act classifications during the period."

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in

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(4)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.

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Schedule 12-14

MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments In and Advances to Affiliates
September 30, 2016
(dollars in thousands)
(Unaudited)

Company
 
Investment(1)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

Control Investments

                                               

Majority-owned investments

 

 

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

Café Brazil, LLC

 

Member Units

 
$

 
$

(760

)

$

416
   
7,330
 
$

 
$

760
 
$

6,570
 

CMS Minerals LLC

 

Member Units

   
   
(62

)
 
101
   
   
4,083
   
190
   
3,893
 

  Preferred Member Units         (2,783 )   1,172     6,914         3,543     3,371  

Gamber-Johnson

  LIBOR Plus 11.00% (Floor 1.00%)             884         19,798         19,798  

Holdings, LLC

  Member Units             354         12,124         12,124  

GRT Rubber

  LIBOR Plus 9.00% (Floor 1.00%)         94     1,118     15,988     134     2,638     13,484  

Technologies LLC

  Member Units         2,450     335     15,580     2,450         18,030  

Hydratec, Inc.

  Common Stock         810     1,270     14,950     810         15,760  

IDX Broker, LLC

  12.5% Secured Debt         (16 )   1,099     11,350     16     116     11,250  

  Member Units         250     68     6,440     250         6,690  

Jensen Jewelers of

  Prime Plus 6.75% (Floor 2.00%)         (22 )   359     4,055     522     372     4,205  

Idaho, LLC

  Member Units         (100 )   159     4,750         100     4,650  

Lamb's Venture, LLC

  LIBOR Plus 5.75%         1     7         352     213     139  

  11% Secured Debt             653     7,962         227     7,735  

  Preferred Equity                 328     72         400  

  Member Units         1,190     50     4,690     1,190         5,880  

  9.5% Secured Debt             65     919         37     882  

  Member Units         380     45     1,240     380         1,620  

Lighting Unlimited, LLC

  8% Secured Debt             92     1,514             1,514  

  Preferred Equity                 430             430  

  Warrants         (30 )       40         30     10  

  Member Units         (270 )   (81 )   350         270     80  

Mid-Columbia Lumber

  10% Secured Debt             133     1,750             1,750  

Products, LLC

  12% Secured Debt             356     3,900             3,900  

  Member Units         (280 )   4     2,580         280     2,300  

  9.5% Secured Debt             62     881         34     847  

  Member Units         50     16     550     50         600  

MSC Adviser I, LLC

  Member Units         2,861     2,110     27,272     2,861         30,133  

Mystic Logistics

  12% Secured Debt         (33 )   892     9,448     32     304     9,176  

Holdings, LLC

  Common Stock         (820 )       5,970         820     5,150  

NRP Jones, LLC

  6% Current / 6% PIK Secured Debt             1,426     12,948     683         13,631  

  Warrants         (320 )       450         320     130  

  Member Units         (1,070 )       1,480         1,070     410  

PPL RVs, Inc.

  11.1% Secured Debt             820     9,710             9,710  

  Common Stock         2,010     261     9,770     2,010         11,780  

Principle

  12% Secured Debt         (21 )   392     4,060     21     21     4,060  

Environmental, LLC

  12% Current / 2% PIK Secured Debt         (1 )   354     3,310     52     1     3,361  

  Preferred Member Units         (1,460 )       6,060         1,460     4,600  

  Warrants         (290 )       310         290     20  

Quality Lease Service, LLC

  8% PIK Secured Debt             392     6,538     391         6,929  

  Member Units                 2,638     250         2,888  

Southern RV, LLC

  13% Secured Debt         (104 )   157     11,400     104     11,504      

  Member Units     13,918     (13,420 )   957     15,100         15,100      

  13% Secured Debt     440     (30 )   45     3,250     30     3,280      

  Member Units         (720 )       1,200         1,200      

The MPI Group, LLC

  9% Secured Debt             202     2,921     1         2,922  

  Series A Preferred Units         (330 )       690         330     360  

  Warrants                              

  Member Units         70     95     2,230     70         2,300  

Travis Acquisition LLC

  12% Secured Debt         (43 )   340     3,513     43     3,556      

  Member Units     17,862     (7,380 )   2,812     14,480         14,480      

Uvalco Supply, LLC

  9% Secured Debt             77     1,314         328     986  

  Member Units         (600 )   140     5,460         600     4,860  

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Table of Contents

Company
 
Investment(1)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fees or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

Vision Interests, Inc.

  13% Secured Debt             312     3,052     15     182     2,885  

  Series A Preferred Stock         (180 )       3,550         180     3,370  

  Common Stock         (70 )       210         70     140  

Ziegler's NYPD, LLC

  6.5% Secured Debt             51     992     1         993  

  12% Secured Debt             37     500         200     300  

  14% Secured Debt             293     2,750             2,750  

  Warrants         170         50     170         220  

  Preferred Member Units         300         3,400     300         3,700  

Other controlled investments

                                               

Access Media Holdings, LLC

 

5.00% Current / 5.00% PIK Secured

   
 
   
 
   
 
   
 
   
 
   
 
   
 
 

  Debt         (1,486 )   1,689     20,380     826     1,486     19,720  

  Preferred Member Units         (3,482 )       2,000     1,732     3,482     250  

  Member Units                              

AmeriTech College, LLC

  10% Secured Debt             76     1,003     1         1,004  

  10% Secured Debt             230     3,025             3,025  

  Preferred Member Units             86     2,291             2,291  

ASC Interests, LLC

  11% Secured Debt         (10 )   205     2,500     10     260     2,250  

  Member Units         450     65     2,230     450         2,680  

Bond-Coat, Inc.

  12% Secured Debt         (26 )   1,085     11,596     17     17     11,596  

  Common Stock         (4,050 )       9,140         4,050     5,090  

CBT Nuggets, LLC

  Member Units         10,680     6,225     42,120     10,680         52,800  

Datacom, LLC

  8% Secured Debt             33         900         900  

  5.25% Current / 5.25% PIK Secured                                            

  Debt         (450 )   878     10,970     369     451     10,888  

  Class A Preferred Member Units         138         1,181     137         1,318  

  Class B Preferred Member Units         (3,310 )       5,079         3,310     1,769  

Garreco, LLC

  14% Secured Debt             636     5,739     22     250     5,511  

  Member Units         (120 )   5     1,270         120     1,150  

Gulf Manufacturing, LLC

  9% PIK Secured Debt             53     777             777  

  Member Units         (5,000 )       13,770         5,000     8,770  

Gulf Publishing

  12.5% Secured Debt             645         9,907         9,907  

Holdings, LLC

  Member Units             62         3,124         3,124  

Harrison Hydra-Gen, Ltd.

  9% Secured Debt             9     5,010         5,010      

  Preferred Stock             2     1,361     2     1,363      

  Common Stock         740     137     2,600     740         3,340  

Hawthorne Customs and

  Member Units         (180 )       460         180     280  

Dispatch Services, LLC

  Member Units         (180 )   141     2,220         180     2,040  

HW Temps LLC

  LIBOR Plus 9.50% (Floor 1.00%)             814     9,884     412         10,296  

  Preferred Member Units         418     354     3,942     418         4,360  

Indianapolis Aviation

  15% Secured Debt         (5 )   417     3,100     5     5     3,100  

Partners, LLC

  Warrants         109         2,540     109         2,649  

Marine Shelters

                                               

Holdings, LLC (LoneStar

  12% PIK Secured Debt         (430 )   886     8,870     939     430     9,379  

Marine Shelters)

  Preferred Member Units         (3,975 )       4,881         3,975     906  

MH Corbin Holding LLC

  10% Secured Debt             1,062     13,869     21     525     13,365  

  Preferred Member Units             105     6,000             6,000  

NAPCO Precast, LLC

  Prime Plus 2.00% (Floor 7.00%)         22     219     4,005         1,292     2,713  

  18% Secured Debt         31     609     4,924         972     3,952  

  Member Units         2,080     645     8,590     2,080         10,670  

NRI Clinical Research, LLC

  14% Secured Debt         46     519     4,539     79     108     4,510  

  Warrants         310         340     310         650  

  Member Units         979         1,342     979         2,321  

OMi Holdings, Inc.

  Common Stock         750         13,640     750         14,390  

Pegasus Research Group, LLC (Televerde)

  Member Units         1,780     339     6,840     1,780         8,620  

River Aggregates, LLC

  Zero Coupon Secured Debt             52     556     53         609  

  Member Units         770     345     3,830     770         4,600  

  Member Units         150         2,360     150         2,510  

SoftTouch Medical

  LIBOR Plus 9.00% (Floor 1.00%)         48     606     8,010     65     850     7,225  

Holdings LLC

  Member Units         2,959     262     5,710     2,960         8,670  

Other

                                               

Amounts related to investments transferred to or from other 1940 Act classification during the period

                                 

      $ 32,220   $ (20,823 ) $ 40,398     555,011   $ 90,062   $ 97,422   $ 547,651  

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Company
 
Investment(1)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fee or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

Affiliate Investments

                                               

AFG Capital Group, LLC

 

11% Secured Debt

 
$

 
$

(179

)

$

1,313
 
$

12,790
 
$

349
 
$

13,139
 
$

 

  Warrants         130         490     130         620  

  Member Units         510         2,020     510         2,530  

Barfly Ventures, LLC

  12% Secured Debt         (94 )   862     4,042     1,813     94     5,761  

  Options         23             420         420  

  Warrants         (233 )       473         233     240  

BBB Tank Services, LLC

  LIBOR Plus 7.50% (Floor 1.00%)             6         332         332  

  12% Current / 1% PIK Secured Debt             298         3,982         3,982  

  Member Units                     800         800  

Boss Industries, LLC

  Preferred Member Units         (113 )   199     2,586     133     113     2,606  

Bridge Capital Solutions

  13% Secured Debt             984     6,890     5,660     7,000     5,550  

Corporation

  Warrants         80         1,300     2,012         3,312  

  13% Secured Debt             40         990         990  

  Preferred Member Units             19         1,000         1,000  

Buca C, LLC

  LIBOR Plus 7.25% (Floor 1.00%)         174     1,595     25,299     231     3,159     22,371  

  Preferred Member Units         1,720     168     3,711     1,888         5,599  

CAI Software LLC

  12% Secured Debt         (12 )   391     4,661     12     893     3,780  

  Member Units         1,150     69     1,000     1,150         2,150  

CapFusion, LLC

  13% Secured Debt             1,003         11,566         11,566  

  Warrants                     1,200         1,200  

Chandler Signs

  12% Secured Debt         41     456         4,500         4,500  

Holdings, LLC

  Class A Units         1,450     82         2,950         2,950  

Condit Exhibits, LLC

  Member Units         770     130     1,010     770         1,780  

Congruent Credit

  LP Interests (Fund II)         (561 )   400     2,834         1,395     1,439  

Opportunities Funds

  LP Interests (Fund III)         218     730     12,024     3,952         15,976  

Daseke, Inc.

  12% Current / 2.5% PIK Secured                                            

  Debt         (61 )   2,427     21,253     468     61     21,660  

  Common Stock         (1,020 )       22,660         1,020     21,640  

Dos Rios Partners

  LP Interests (Fund)         (43 )       2,031     2,133     43     4,121  

  LP Interests (Fund A)         (134 )       648     677     134     1,191  

Dos Rios Stone Products LLC

  Class A Units             51         2,000         2,000  

East Teak Fine Hardwoods, Inc.

  Common Stock             37     860             860  

East West Copolymer &

  12% Secured Debt             949     9,463     71         9,534  

Rubber, LLC

  Warrants                 50             50  

EIG Fund Investments

  LP Interests                                        

                225     718     2,070         2,788  

EIG Traverse

                                               

Co-Investment, L.P.

  LP Interests         222     895     4,755     5,272         10,027  

Freeport Financial Funds

  LP Interests (Fund)         (425 )   296     6,045         425     5,620  

  LP Interests (Fund III)             357     2,077     1,487         3,564  

Gault Financial, LLC (RMB

  10% Secured Debt             1,156     10,930     123         11,053  

Capital, LLC)

  Warrants                              

Glowpoint, Inc.

  8% Secured Debt             17     397     1     398      

  12% Secured Debt         (2,305 )   843     8,929     17     2,307     6,639  

  Common Stock         (1,680 )       3,840         1,680     2,160  

Guerdon Modular

  LIBOR Plus 8.50% (Floor 1.00%)             20     (15 )   975     960      

Holdings, Inc.

  9% Current / 4% PIK Secured Debt             1,080     10,295     181         10,476  

  Preferred Stock                     1,140         1,140  

  Common Stock         (1,910 )       1,990         1,910     80  

Houston Plating and Coatings, LLC

  Member Units         (4,493 )   (23 )   8,440     433     4,493     4,380  

I-45 SLF LLC

  Member units         386     1,196     7,200     5,386         12,586  

Indianhead Pipeline

  12% Secured Debt             609     5,853     95     675     5,273  

Services, LLC

  Preferred Member Units         338     31     2,302     368         2,670  

  Warrants                              

  Member Units     (1,254 )                        

KBK Industries, LLC

  10% Secured Debt             23         1,000     300     700  

  12.5% Secured Debt         (25 )   572     5,900     11     25     5,886  

  Member Units         (590 )   (8 )   3,680         590     3,090  

L.F. Manufacturing Holdings, LLC

  Member Units         (105 )       1,485         105     1,380  

MPS Denver, LLC

  Member Units                 1,130     124     1,254      

OnAsset Intelligence, Inc.

  12% PIK Secured Debt             378     4,006     378         4,384  

  Preferred Stock         (1,380 )       1,380         1,380      

  Warrants                              

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Company
 
Investment(1)
  Amount of
Realized
Gain/(Loss)
  Amount of
Unrealized
Gain/(Loss)
  Amount of
Interest, Fee or
Dividends
Credited to
Income(2)
  December 31,
2015
Fair Value
  Gross
Additions(3)
  Gross
Reductions(4)
  September 30,
2016
Fair Value
 

OPI International Ltd.

  10% Unsecured Debt             36     473             473  

  Common Stock                 3,200             3,200  

PCI Holding Company, Inc.

  12% Secured Debt         112     946         13,000         13,000  

  Preferred Stock         (297 )   450     4,887     450     297     5,040  

Radial Drilling Services Inc.

  12% Secured Debt     (1,433 )   2,441     20     1,500     2,461     3,961      

  Warrants     (760 )   758             758     758      

Rocaceia, LLC (Quality

                                               

Lease and Rental

  12% Secured Debt                 250             250  

Holdings, LLC)

  Preferred Member Units     (2 )                        

Samba Holdings, Inc.

  12.5% Secured Debt         (110 )   1,100     24,662     110     24,772      

  Common Stock     28,709     (28,133 )       30,220         30,220      

Tin Roof Acquisition Company

  12% Secured Debt             1,304     13,807     45     313     13,539  

  Class C Preferred Stock             193     2,477     193         2,670  

UniTek Global Services, Inc.

  LIBOR Plus 7.50% (Floor 1.00%)             192     2,812     1         2,813  

  LIBOR Plus 8.50% (Floor 1.00%)             86     1,255     7     447     815  

  15% PIK Unsecured Debt             82     638     76         714  

  Preferred Stock         165     495     5,540     660         6,200  

  Common Stock         2,580             2,580         2,580  

Universal Wellhead Services Holdings, LLC

  Class A Preferred Units         (1,840 )       3,000         1,840     1,160  

Valley Healthcare

  LIBOR Plus 12.50% (Floor 0.50%)             1,069     10,297     425     100     10,622  

Group, LLC

  Preferred Member Units                     1,600         1,600  

Volusion, LLC

  10.5% Secured Debt             1,591     16,199     192         16,391  

  Preferred Member Units                 14,000             14,000  

  Warrants                 1,400             1,400  

Other

                                               

Amounts related to investments transferred to or from other 1940 Act classification during the period

                (345 )   (15,530 )            

      $ 25,260   $ (32,475 ) $ 27,095   $ 350,519   $ 93,318   $ 106,494   $ 352,873  

Total Non-Control/Non-Affiliate investments

      $ (22,452 ) $ 23,560   $ 63,841                          

Total Portfolio Investments

      $ 35,028   $ (29,738 ) $ 131,334                          

(1)
The principal amount, the ownership detail for equity investments and if the investment is income producing is included in the consolidated schedule of investments.

(2)
Represents the total amount of interest, fees and dividends credited to income for the portion of the period for which an investment was included in Control or Affiliate categories, respectively. For investments transferred between Control and Affiliate categories during the period, any income or investment balances related to the time period it was in the category other than the one shown at period end is included in "Amounts from investments transferred from other 1940 Act classifications during the period."

(3)
Gross additions include increases in the cost basis of investments resulting from new portfolio investments, follow-on investments and accrued PIK interest, and the exchange of one or more existing securities for one or more new securities. Gross additions also include net increases in unrealized appreciation or net decreases in net unrealized depreciation as well as the movement of an existing portfolio company into this category and out of a different category.

(4)
Gross reductions include decreases in the cost basis of investments resulting from principal repayments or sales and the exchange of one or more existing securities for one or more new securities. Gross reductions also include net increases in net unrealized depreciation or net decreases in unrealized appreciation as well as the movement of an existing portfolio company out of this category and into a different category.

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Item 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The information in this section contains forward-looking statements that involve risks and uncertainties. Please see "Risk Factors" and "Cautionary Statement Concerning Forward-Looking Statements" in our Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission (the "SEC") on February 24, 2017, for a discussion of the uncertainties, risks and assumptions associated with these statements. You should read the following discussion in conjunction with the consolidated financial statements and related notes and other financial information included elsewhere in this Quarterly Report and in the Annual Report on Form 10-K for the year ended December 31, 2016.

ORGANIZATION

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

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

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

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

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

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

OVERVIEW

        Our principal investment objective is to maximize our portfolio's total return by generating current income from our debt investments and capital appreciation from our equity and equity-related investments, including warrants, convertible securities and other rights to acquire equity securities in a portfolio company. Our LMM companies generally have annual revenues between $10 million and $150 million, and our LMM portfolio investments generally range in size from $5 million to $50 million. Our Middle Market investments are made in businesses that are generally larger in size than our LMM portfolio companies, with annual revenues typically between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $15 million. Our private loan ("Private Loan") portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis. Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio.

        We seek to fill the financing gap for LMM businesses, which, historically, have had more limited access to financing from commercial banks and other traditional sources. The underserved nature of the LMM creates the opportunity for us to meet the financing needs of LMM companies while also negotiating favorable transaction terms and equity participations. Our ability to invest across a company's capital structure, from secured loans to equity securities, allows us to offer portfolio companies a comprehensive suite of financing options, or a "one stop" financing solution. Providing customized, "one stop" financing solutions is important to LMM portfolio companies. We generally seek to partner directly with entrepreneurs, management teams and business owners in making our investments. Our LMM portfolio debt investments are generally secured by a first lien on the assets of the portfolio company and typically have a term of between five and seven years from the original investment date.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have an expected duration of between three and seven years from the original investment date.

        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our other portfolio ("Other Portfolio") investments primarily consist of investments which are not consistent with the typical profiles for our LMM, Middle Market or Private Loan portfolio investments, including investments which may be managed by third parties. In our Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds

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managed. We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income Fund, Inc. ("HMS Income"). Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities.

        The following tables provide a summary of our investments in the LMM, Middle Market and Private Loan portfolios as of September 30, 2017 and December 31, 2016 (this information excludes the Other Portfolio investments and the External Investment Manager which are discussed further below):

 
  As of September 30, 2017  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    71     68     56  

Fair value

  $ 938.0   $ 607.5   $ 485.9  

Cost

  $ 804.6   $ 633.8   $ 505.6  

% of portfolio at cost—debt

    68.1%     96.9%     94.5%  

% of portfolio at cost—equity

    31.9%     3.1%     5.5%  

% of debt investments at cost secured by first priority lien

    96.3%     90.2%     91.5%  

Weighted-average annual effective yield(b)

    11.9%     8.7%     9.3%  

Average EBITDA(c)

  $ 4.3   $ 84.8   $ 38.0  

(a)
At September 30, 2017, we had equity ownership in approximately 99% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 38%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of September 30, 2017, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including seven LMM portfolio companies, two Middle Market portfolio companies and three Private Loan portfolio companies, as

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  As of December 31, 2016  
 
  LMM(a)   Middle
Market
  Private Loan  
 
  (dollars in millions)
 

Number of portfolio companies

    73     78     46  

Fair value

  $ 892.6   $ 630.6   $ 342.9  

Cost

  $ 760.3   $ 646.8   $ 357.7  

% of portfolio at cost—debt

    69.1%     97.2%     93.5%  

% of portfolio at cost—equity

    30.9%     2.8%     6.5%  

% of debt investments at cost secured by first priority lien

    92.1%     89.1%     89.0%  

Weighted-average annual effective yield(b)

    12.5%     8.5%     9.6%  

Average EBITDA(c)

  $ 5.9   $ 98.6   $ 22.7  

(a)
At December 31, 2016, we had equity ownership in approximately 99% of our LMM portfolio companies, and the average fully diluted equity ownership in those portfolio companies was approximately 36%.

(b)
The weighted-average annual effective yields were computed using the effective interest rates for all debt investments at cost as of December 31, 2016, including amortization of deferred debt origination fees and accretion of original issue discount but excluding fees payable upon repayment of the debt instruments and any debt investments on non-accrual status. Weighted-average annual effective yield is higher than what an investor in shares of our common stock will realize on its investment because it does not reflect our expenses or any sales load paid by an investor.

(c)
The average EBITDA is calculated using a simple average for the LMM portfolio and a weighted-average for the Middle Market and Private Loan portfolios. These calculations exclude certain portfolio companies, including five LMM portfolio companies, one Middle Market portfolio company and three Private Loan portfolio companies, as EBITDA is not a meaningful valuation metric for our investments in these portfolio companies.

        As of September 30, 2017, we had Other Portfolio investments in eleven companies, collectively totaling approximately $99.2 million in fair value and approximately $105.6 million in cost basis and which comprised approximately 4.6% of our Investment Portfolio (as defined in "—Critical Accounting Policies—Basis of Presentation" below) at fair value. As of December 31, 2016, we had Other Portfolio investments in ten companies, collectively totaling approximately $100.3 million in fair value and approximately $107.1 million in cost basis and which comprised approximately 5.0% of our Investment Portfolio at fair value.

        As previously discussed, the External Investment Manager is a wholly owned subsidiary that is treated as a portfolio investment. As of September 30, 2017, there was no cost basis in this investment and the investment had a fair value of approximately $39.3 million, which comprised approximately 1.8% of our Investment Portfolio at fair value. As of December 31, 2016, there was no cost basis in this investment and the investment had a fair value of approximately $30.6 million, which comprised approximately 1.5% of our Investment Portfolio at fair value.

        Our portfolio investments are generally made through MSCC and the Funds. MSCC and the Funds share the same investment strategies and criteria, although they are subject to different regulatory regimes. An investor's return in MSCC will depend, in part, on the Funds' investment returns as they are wholly owned subsidiaries of MSCC.

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        The level of new portfolio investment activity will fluctuate from period to period based upon our view of the current economic fundamentals, our ability to identify new investment opportunities that meet our investment criteria, and our ability to consummate the identified opportunities. The level of new investment activity, and associated interest and fee income, will directly impact future investment income. In addition, the level of dividends paid by portfolio companies and the portion of our portfolio debt investments on non-accrual status will directly impact future investment income. While we intend to grow our portfolio and our investment income over the long term, our growth and our operating results may be more limited during depressed economic periods. However, we intend to appropriately manage our cost structure and liquidity position based on applicable economic conditions and our investment outlook. The level of realized gains or losses and unrealized appreciation or depreciation on our investments will also fluctuate depending upon portfolio activity, economic conditions and the performance of our individual portfolio companies. The changes in realized gains and losses and unrealized appreciation or depreciation could have a material impact on our operating results.

        Because we are internally managed, we do not pay any external investment advisory fees, but instead directly incur the operating costs associated with employing investment and portfolio management professionals. We believe that our internally managed structure provides us with a beneficial operating expense structure when compared to other publicly traded and privately held investment firms which are externally managed, and our internally managed structure allows us the opportunity to leverage our non-interest operating expenses as we grow our Investment Portfolio. For the three months ended September 30, 2017 and 2016, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.5% on an annualized basis. For the nine months ended September 30, 2017, the ratio of our total operating expenses, excluding interest expense and the effect of certain non-recurring professional fees and other expenses as discussed further below in "Discussion and analysis of results of operations—Comparison of the nine months ended September 30, 2017 and September 30, 2016", as a percentage of our quarterly average total assets was 1.5% on an annualized basis, compared to 1.4% on an annualized basis for the nine months ended September 30, 2016 and 1.5% for the year ended December 31, 2016. Including the effect of these non-recurring expenses, the ratio for the nine months ended September 30, 2017 would have been 1.6% on an annualized basis.

        During May 2012, we entered into an investment sub-advisory agreement with HMS Adviser, LP ("HMS Adviser"), which is the investment advisor to HMS Income, a non-listed BDC, to provide certain investment advisory services to HMS Adviser. In December 2013, after obtaining required no-action relief from the SEC to allow us to own a registered investment adviser, we assigned the sub-advisory agreement to the External Investment Manager since the fees received from such arrangement could otherwise have negative consequences on our ability to meet the source-of-income requirement necessary for us to maintain our RIC tax treatment. Under the investment sub-advisory agreement, the External Investment Manager is entitled to 50% of the base management fee and the incentive fees earned by HMS Adviser under its advisory agreement with HMS Income. Based upon several fee waiver agreements with HMS Income and HMS Adviser, the External Investment Manager did not begin accruing the base management fee and incentive fees, if any, until January 1, 2014. The External Investment Manager has conditionally agreed to waive a limited amount of the incentive fees otherwise earned. During the three months ended September 30, 2017 and 2016, the External Investment Manager earned $2.8 million and $2.5 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser. During the nine months ended September 30, 2017 and 2016, the External Investment Manager earned $8.1 million and $7.1 million, respectively, of management fees (net of fees waived, if any) under the sub-advisory agreement with HMS Adviser.

        During April 2014, we received an exemptive order from the SEC permitting co-investments by us and HMS Income in certain negotiated transactions where co-investing would otherwise be prohibited

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under the 1940 Act. We have made, and in the future intend to continue to make, such co-investments with HMS Income in accordance with the conditions of the order. The order requires, among other things, that we and the External Investment Manager consider whether each such investment opportunity is appropriate for HMS Income and, if it is appropriate, to propose an allocation of the investment opportunity between us and HMS Income. Because the External Investment Manager may receive performance-based fee compensation from HMS Income, this may provide it an incentive to allocate opportunities to HMS Income instead of us. However, both we and the External Investment Manager have policies and procedures in place to manage this conflict.

CRITICAL ACCOUNTING POLICIES

        Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP"). For each of the periods presented herein, our consolidated financial statements include the accounts of MSCC and its consolidated subsidiaries. The Investment Portfolio, as used herein, refers to all of our investments in LMM portfolio companies, investments in Middle Market portfolio companies, Private Loan portfolio investments, Other Portfolio investments, and the investment in the External Investment Manager. Our results of operations for the three and nine months ended September 30, 2017 and 2016, cash flows for the nine months ended September 30, 2017 and 2016, and financial position as of September 30, 2017 and December 31, 2016, are presented on a consolidated basis. The effects of all intercompany transactions between us and our consolidated subsidiaries have been eliminated in consolidation.

        Our accompanying unaudited consolidated financial statements are presented in conformity with U.S. GAAP for interim financial information and pursuant to the requirements for reporting on Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain disclosures accompanying annual financial statements prepared in accordance with U.S. GAAP are omitted. In the opinion of management, the unaudited consolidated financial results included herein contain all adjustments, consisting solely of normal recurring accruals, considered necessary for the fair presentation of financial statements for the interim periods included herein. The results of operations for the three and nine months ended September 30, 2017 and 2016 are not necessarily indicative of the operating results to be expected for the full year. Also, the unaudited financial statements and notes should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2016. Financial statements prepared on a U.S. GAAP basis require management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Such estimates and assumptions could change in the future as more information becomes known, which could impact the amounts reported and disclosed herein.

        We are an investment company following the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 946, Financial Services—Investment Company ("ASC 946"). Under regulations pursuant to Article 6 of Regulation S-X applicable to BDCs and ASC 946, we are precluded from consolidating other entities in which we have equity investments, including those in which we have a controlling interest, unless the other entity is another investment company. An exception to this general principle in ASC 946 occurs if we hold a controlling interest in an operating company that provides all or substantially all of its services directly to us or to any of our portfolio companies. Accordingly, as noted above, our consolidated financial statements include the financial position and operating results for the Funds and the Taxable Subsidiaries. We have determined that all of our portfolio investments do not qualify for this exception, including the investment in the External Investment Manager. Therefore, our Investment Portfolio is carried on the consolidated balance sheet at fair value with any adjustments to fair value recognized as "Net Change in Unrealized Appreciation (Depreciation)" on the consolidated statements of operations

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until the investment is realized, usually upon exit, resulting in any gain or loss being recognized as a "Net Realized Gain (Loss)."

        The most significant determination inherent in the preparation of our consolidated financial statements is the valuation of our Investment Portfolio and the related amounts of unrealized appreciation and depreciation. As of both September 30, 2017 and December 31, 2016, our Investment Portfolio valued at fair value represented approximately 96% of our total assets. We are required to report our investments at fair value. We follow the provisions of Financial Accounting Standards Board ("FASB") ASC 820, Fair Value Measurements and Disclosures ("ASC 820"). ASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. ASC 820 requires us to assume that the portfolio investment is to be sold in the principal market to independent market participants, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal market that are independent, knowledgeable and willing and able to transact. See "Note B.1.—Valuation of the Investment Portfolio" in the notes to consolidated financial statements for a detailed discussion of our investment portfolio valuation process and procedures.

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

        Our Board of Directors has the final responsibility for overseeing, reviewing and approving, in good faith, our determination of the fair value for our Investment Portfolio and our valuation procedures, consistent with 1940 Act requirements. We believe our Investment Portfolio as of September 30, 2017 and December 31, 2016 approximates fair value as of those dates based on the markets in which we operate and other conditions in existence on those reporting dates.

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

        We may periodically provide services, including structuring and advisory services, to our portfolio companies or other third parties. For services that are separately identifiable and evidence exists to substantiate fair value, fee income is recognized as earned, which is generally when the investment or

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other applicable transaction closes. Fees received in connection with debt financing transactions for services that do not meet these criteria are treated as debt origination fees and are deferred and accreted into income over the life of the financing.

        We hold certain debt and preferred equity instruments in our Investment Portfolio that contain PIK interest and cumulative dividend provisions. The PIK interest, computed at the contractual rate specified in each debt agreement, is periodically added to the principal balance of the debt and is recorded as interest income. Thus, the actual collection of this interest may be deferred until the time of debt principal repayment. Cumulative dividends are recorded as dividend income, and any dividends in arrears are added to the balance of the preferred equity investment. The actual collection of these dividends in arrears may be deferred until such time as the preferred equity is redeemed or sold. To maintain RIC tax treatment (as discussed below), these non-cash sources of income may need to be paid out to stockholders in the form of distributions, even though we may not have collected the PIK interest and cumulative dividends in cash. We stop accruing PIK interest and cumulative dividends and write off any accrued and uncollected interest and dividends in arrears when we determine that such PIK interest and dividends in arrears are no longer collectible. For the three months ended September 30, 2017 and 2016, (i) approximately 1.9% and 4.0%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.8% and 1.8%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash. For the nine months ended September 30, 2017 and 2016, (i) approximately 2.7% and 3.7%, respectively, of our total investment income was attributable to PIK interest income not paid currently in cash and (ii) approximately 1.8% and 1.1%, respectively, of our total investment income was attributable to cumulative dividend income not paid currently in cash.

        We account for our share-based compensation plans using the fair value method, as prescribed by ASC 718, Compensation—Stock Compensation. Accordingly, for restricted stock awards, we measure the grant date fair value based upon the market price of our common stock on the date of the grant and amortize the fair value of the awards as share-based compensation expense over the requisite service period, which is generally the vesting term.

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

        The Taxable Subsidiaries primarily hold certain portfolio investments for us. The Taxable Subsidiaries permit us to hold equity investments in portfolio companies which are "pass-through" entities for tax purposes and to continue to comply with the "source-income" requirements contained

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

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

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

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

INVESTMENT PORTFOLIO COMPOSITION

        Our LMM portfolio investments primarily consist of secured debt, equity warrants and direct equity investments in privately held, LMM companies based in the United States. Our LMM portfolio companies generally have annual revenues between $10 million and $150 million, and our LMM investments generally range in size from $5 million to $50 million. The LMM debt investments are typically secured by either a first or second priority lien on the assets of the portfolio company, generally bear interest at fixed rates, and generally have a term of between five and seven years from the original investment date. In most LMM portfolio companies, we receive nominally priced equity warrants and/or make direct equity investments in connection with a debt investment.

        Our Middle Market portfolio investments primarily consist of direct investments in or secondary purchases of interest-bearing debt securities in privately held companies based in the United States that are generally larger in size than the companies included in our LMM portfolio. Our Middle Market portfolio companies generally have annual revenues between $150 million and $1.5 billion, and our Middle Market investments generally range in size from $3 million to $15 million. Our Middle Market portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

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        Our Private Loan portfolio investments are primarily debt securities in privately held companies which have been originated through strategic relationships with other investment funds on a collaborative basis, and are often referred to in the debt markets as "club deals." Private Loan investments are typically similar in size, structure, terms and conditions to investments we hold in our LMM portfolio and Middle Market portfolio. Our Private Loan portfolio debt investments are generally secured by either a first or second priority lien on the assets of the portfolio company and typically have a term of between three and seven years from the original investment date.

        Our Other Portfolio investments primarily consist of investments which are not consistent with the typical profiles for LMM, Middle Market and Private Loan portfolio investments, including investments which may be managed by third parties. In the Other Portfolio, we may incur indirect fees and expenses in connection with investments managed by third parties, such as investments in other investment companies or private funds.

        Our external asset management business is conducted through the External Investment Manager. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. We have entered into an agreement with the External Investment Manager to share employees in connection with its asset management business generally, and specifically for its relationship with HMS Income. Through this agreement, we share employees with the External Investment Manager, including their related infrastructure, business relationships, management expertise and capital raising capabilities, and we allocate the related expenses to the External Investment Manager pursuant to the sharing agreement. Our total expenses for the three months ended September 30, 2017 and 2016 are net of expenses allocated to the External Investment Manager of $1.7 million and $1.2 million, respectively. Our total expenses for the nine months ended September 30, 2017 and 2016 are net of expenses allocated to the External Investment Manager of $4.8 million and $3.7 million, respectively. The External Investment Manager earns management fees based on the assets of the funds under management and may earn incentive fees, or a carried interest, based on the performance of the funds managed. The total contribution of the External Investment Manager to our net investment income consists of the combination of the expenses allocated to the External Investment Manager and dividend income received from the External Investment Manager. For the three months ended September 30, 2017 and 2016, the total contribution to our net investment income was $2.4 million and $2.0 million, respectively. For the nine months ended September 30, 2017 and 2016, the total contribution to our net investment income was $6.9 million and $5.8 million, respectively.

        The following tables summarize the composition of our total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments at cost and fair value by type of investment as a percentage of the total combined LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments as of September 30, 2017 and December 31, 2016 (this information excludes the Other Portfolio investments and the External Investment Manager).

Cost:
  September 30,
2017
  December 31,
2016
 

First lien debt

    78.2%     76.1%  

Equity

    14.8%     14.5%  

Second lien debt

    5.8%     7.7%  

Equity warrants

    0.8%     1.1%  

Other

    0.4%     0.6%  

    100.0%     100.0%  

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Fair Value:
  September 30,
2017
  December 31,
2016
 

First lien debt

    71.1%     68.7%  

Equity

    22.5%     22.6%  

Second lien debt

    5.4%     7.2%  

Equity warrants

    0.6%     0.9%  

Other

    0.4%     0.6%  

    100.0%     100.0%  

        Our LMM portfolio investments, Middle Market portfolio investments and Private Loan portfolio investments carry a number of risks including: (1) investing in companies which may have limited operating histories and financial resources; (2) holding investments that generally are not publicly traded and which may be subject to legal and other restrictions on resale; and (3) other risks common to investing in below investment grade debt and equity investments in our Investment Portfolio. Please see "Risk Factors—Risks Related to Our Investments" contained in our Form 10-K for the fiscal year ended December 31, 2016 and "Risk Factors" below for a more complete discussion of the risks involved with investing in our Investment Portfolio.

PORTFOLIO ASSET QUALITY

        We utilize an internally developed investment rating system to rate the performance of each LMM portfolio company and to monitor our expected level of returns on each of our LMM investments in relation to our expectations for the portfolio company. The investment rating system takes into consideration various factors, including each investment's expected level of returns, the collectability of our debt investments and the ability to receive a return of the invested capital in our equity investments, comparisons to competitors and other industry participants, the portfolio company's future outlook and other factors that are deemed to be significant to the portfolio company.

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        The following table shows the distribution of our LMM portfolio investments on the 1 to 5 investment rating scale at fair value as of September 30, 2017 and December 31, 2016:

 
  As of September 30, 2017   As of December 31, 2016  
Investment Rating
  Investments at
Fair Value
  Percentage of
Total Portfolio
  Investments at
Fair Value
  Percentage of
Total Portfolio
 
 
   
  (dollars in thousands)
   
 

1

  $ 246,935     26.3%   $ 253,420     28.4%  

2

  $ 222,964     23.8%     258,085     28.9%  

3

  $ 383,529     40.9%     294,807     33.0%  

4

  $ 67,686     7.2%     75,433     8.5%  

5

  $ 16,928     1.8%     10,847     1.2%  

Total

  $ 938,042     100.0%   $ 892,592     100.0%  

        Based upon our investment rating system, the weighted-average rating of our LMM portfolio was approximately 2.3 as of both September 30, 2017 and December 31, 2016.

        As of September 30, 2017, our total Investment Portfolio had six investments on non-accrual status, which comprised approximately 0.4% of its fair value and 2.7% of its cost. As of December 31, 2016, our total Investment Portfolio had four investments on non-accrual status, which comprised approximately 0.6% of its fair value and 3.0% of its cost.

        The operating results of our portfolio companies are impacted by changes in the broader fundamentals of the United States economy. In the event that the United States economy contracts, it is likely that the financial results of small to mid-sized companies, like those in which we invest, could experience deterioration or limited growth from current levels, which could ultimately lead to difficulty in meeting their debt service requirements, to an increase in defaults on our debt investments or in realized losses on our investments and to difficulty in maintaining historical dividend payment rates and unrealized appreciation on our equity investments. Consequently, we can provide no assurance that the performance of certain portfolio companies will not be negatively impacted by economic cycles or other conditions, which could also have a negative impact on our future results.

DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

 
  Three Months Ended
September 30,
  Net Change  
 
  2017   2016   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 51,786   $ 46,599   $ 5,187     11%  

Total expenses

    (17,757 )   (16,042 )   (1,715 )   11%  

Net investment income

    34,029     30,557     3,472     11%  

Net realized gain (loss) from investments

    (10,706 )   4,286     (14,992 )      

Net change in net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    16,368     8,376     7,992        

SBIC debentures and marketable securities and idle funds

    (221 )   (566 )   345        

Total net change in net unrealized appreciation

    16,147     7,810     8,337        

Income tax benefit (provision)

    (4,571 )   528     (5,099 )      

Net increase in net assets resulting from operations

  $ 34,899   $ 43,181   $ (8,282 )   –19%  

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  Three Months Ended
September 30,
  Net Change  
 
  2017   2016   Amount   %  
 
  (dollars in thousands, except
per share amounts)

 

Net investment income

  $ 34,029   $ 30,557   $ 3,472     11%  

Share-based compensation expense

    2,476     2,137     339     16%  

Distributable net investment income(a)

  $ 36,505   $ 32,694   $ 3,811     12%  

Net investment income per share—

                         

Basic and diluted

  $ 0.60   $ 0.58   $ 0.02     3%  

Distributable net investment income per share—

                         

Basic and diluted(a)

  $ 0.64   $ 0.62   $ 0.02     3%  

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

        For the three months ended September 30, 2017, total investment income was $51.8 million, an 11% increase over the $46.6 million of total investment income for the corresponding period of 2016. This comparable period increase was principally attributable to (i) a $4.2 million increase in interest income primarily related to higher average levels of portfolio debt investments, (ii) a $0.6 million increase in fee income, and (iii) a $0.4 million increase in dividend income from Investment Portfolio equity investments. The total investment income in the three months ended September 30, 2017 includes $1.7 million related to dividend income activity from portfolio companies that is considered to be less consistent on a recurring basis or non-recurring which is consistent with the amount from such dividend activity in the same period in 2016 and an increase of $0.4 million primarily related to higher accelerated prepayment, repricing and other activity for certain Middle Market portfolio debt investments when compared to the same period in 2016.

        For the three months ended September 30, 2017, total expenses increased to $17.8 million from $16.0 million for the corresponding period of 2016. This comparable period increase in operating expenses was principally attributable to (i) a $0.8 million increase in interest expense primarily due to the higher average interest rate on our Credit Facility in the three months ended September 30, 2017, (ii) a $0.5 million increase in general and administrative expenses, (iii) a $0.5 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals and (iv) a $0.3 million increase in share-based compensation expense, with these increases partially offset by a $0.4 million increase in the expenses allocated to the External Investment Manager, in each case when compared to the same period in the prior year. For the three months ended September 30, 2017, the ratio of our total operating expenses, excluding interest expense, as a percentage of our quarterly average total assets was 1.5% on an annualized basis, which is

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consistent with the ratio on an annualized basis for the three months ended September 30, 2016 and for the year ended December 31, 2016.

        Net investment income for the three months ended September 30, 2017 was $34.0 million, or an 11% increase, compared to net investment income of $30.6 million for the corresponding period of 2016. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses as discussed above.

        For the three months ended September 30, 2017, distributable net investment income increased 12% to $36.5 million, or $0.64 per share, compared with $32.7 million, or $0.62 per share, in the corresponding period of 2016. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses both as discussed above. Distributable net investment income on a per share basis for the three months ended September 30, 2017 reflects (i) an increase of approximately $0.01 per share from the comparable period in 2016 attributable to the net increase in the comparable levels of accelerated prepayment, repricing and other activity for certain Investment Portfolio debt investments and (ii) a greater number of average shares outstanding compared to the corresponding period in 2016 primarily due to shares issued through the ATM Program (as defined in "—Liquidity and Capital Resources—Capital Resources" below), shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan.

        The net increase in net assets resulting from operations during the three months ended September 30, 2017 was $34.9 million, or $0.61 per share, compared with $43.2 million, or $0.82 per share, during the three months ended September 30, 2016. This $8.3 million decrease from the same period in the prior year was primarily the result of (i) a $15.0 million decrease in the net realized gain (loss) from investments, from a net realized gain from investments of $4.3 million for the three months ended September 30, 2016 to a net realized loss from investments of $10.7 million for the three months ended September 30, 2017, and (ii) a $5.1 million change in the income tax benefit (provision) to a $4.6 million income tax provision for the three months ended September 30, 2017, with these changes partially offset by (i) an $8.0 million increase in net change in unrealized appreciation (depreciation) from portfolio investments, including the impact of accounting reversals relating to realized gains/income (losses) and (ii) a $3.5 million increase in net investment income as discussed above. The net realized loss from investments of $10.7 million for the three months ended September 30, 2017 was primarily the result of (i) the net realized loss of $9.2 million resulting from losses on the exit of two LMM investments, partially offset by the gains on the exit of three LMM investments and (ii) the net realized loss of $1.8 million in our Middle Market portfolio, which is primarily the result of the loss of $2.3 million on the exit of a Middle Market investment, partially offset by $0.5 million of net gains on other activity in our Middle Market portfolio.

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        The following table provides a summary of the total net unrealized appreciation of $16.1 million for the three months ended September 30, 2017:

 
  Three Months Ended September 30, 2017  
 
  LMM(a)   Middle Market   Private Loan   Other(b)   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized appreciation recognized in prior periods due to net realized gains/income (losses) recognized during the current period

  $ 7.3   $ 1.0   $   $ (0.6 ) $ 7.7  

Net unrealized appreciation (depreciation) relating to portfolio investments

    9.1     (5.1 )   0.8     3.8     8.6  

Total net change in unrealized appreciation (depreciation) relating to portfolio investments

  $ 16.4   $ (4.1 ) $ 0.8   $ 3.2   $ 16.3  

Unrealized depreciation relating to SBIC debentures(c)

                            (0.2 )

Total net change in unrealized appreciation

                          $ 16.1  

(a)
LMM includes unrealized appreciation on 19 LMM portfolio investments and unrealized depreciation on 13 LMM portfolio investments.

(b)
Other includes $2.2 million of unrealized appreciation relating to the External Investment Manager and $1.6 million of net unrealized appreciation relating to the Other Portfolio.

(c)
Relates to unrealized depreciation on the SBIC debentures held by MSC II which are accounted for on a fair value basis.

        The income tax provision for the three months ended September 30, 2017 of $4.6 million principally consisted of a deferred tax provision of $3.8 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in net operating loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences, and other current tax expense of $0.8 million related to (i) a $0.5 million accrual for excise tax on our estimated undistributed taxable income and (ii) other current tax expense of $0.3 million related to accruals for U.S. federal and state income taxes.

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  Nine Months Ended
September 30,
  Net Change  
 
  2017   2016   Amount   %  
 
  (dollars in thousands)
 

Total investment income

  $ 149,944   $ 131,508   $ 18,436     14%  

Total expenses

    (52,056 )   (46,137 )   (5,919 )   13%  

Net investment income

    97,888     85,371     12,517     15%  

Net realized gain from investments

    27,842     33,347     (5,505 )      

Net realized loss from SBIC debentures

    (5,217 )       (5,217 )      

Net change in net unrealized appreciation (depreciation) from:

                         

Portfolio investments

    (4,358 )   (29,738 )   25,380        

SBIC debentures and marketable securities and idle funds

    5,408     909     4,499        

Total net change in net unrealized appreciation (depreciation)

    1,050     (28,829 )   29,879        

Income tax benefit (provision)

    (12,383 )   1,018     (13,401 )      

Net increase in net assets resulting from operations

  $ 109,180   $ 90,907   $ 18,273     20%  

 

 
  Nine Months
Ended September 30,
  Net Change  
 
  2017   2016   Amount   %  
 
  (dollars in thousands, except
per share amounts)

 

Net investment income

  $ 97,888   $ 85,371   $ 12,517     15%  

Share-based compensation expense

    7,542     5,977     1,565     26%  

Distributable net investment income(a)

  $ 105,430   $ 91,348   $ 14,082     15%  

Net investment income per share—

                         

Basic and diluted

  $ 1.74   $ 1.66   $ 0.08     5%  

Distributable net investment income per share—

                         

Basic and diluted(a)

  $ 1.88   $ 1.77   $ 0.11     6%  

(a)
Distributable net investment income is net investment income as determined in accordance with U.S. GAAP, excluding the impact of share-based compensation expense which is non-cash in nature. We believe presenting distributable net investment income and related per share amounts is useful and appropriate supplemental disclosure of information for analyzing our financial performance since share-based compensation does not require settlement in cash. However, distributable net investment income is a non-U.S. GAAP measure and should not be considered as a replacement to net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, distributable net investment income should be reviewed only in connection with such U.S. GAAP measures in analyzing our financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to distributable net investment income is presented in the table above.

        For the nine months ended September 30, 2017, total investment income was $149.9 million, a 14% increase over the $131.5 million of total investment income for the corresponding period of 2016. This comparable period increase was principally attributable to (i) a $16.1 million increase in interest

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income primarily related to higher average levels of portfolio debt investments and increased activities involving existing Investment Portfolio debt investments and (ii) a $2.3 million increase in fee income. The total investment income in the nine months ended September 30, 2017 includes an increase of $5.6 million related to higher accelerated prepayment, repricing and other activity for certain Middle Market and Private Loan portfolio debt investments when compared to the same period in 2016 and includes $1.7 million related to dividend income activity from portfolio companies that is considered to be less consistent on a recurring basis or non-recurring which is consistent with the amount from such dividend income activity in the same period in 2016.

        For the nine months ended September 30, 2017, total expenses increased to $52.1 million from $46.1 million for the corresponding period of 2016. This comparable period increase in operating expenses was principally attributable to (i) a $1.9 million increase in general and administrative expenses, including approximately $0.6 million related to non-recurring professional fees and other expenses incurred on certain potential new portfolio investment opportunities which were terminated during the due diligence and legal documentation processes, (ii) a $1.8 million increase in interest expense, primarily due to the higher average interest rate and balance outstanding on our Credit Facility in the nine months ended September 30, 2017, (iii) a $1.7 million increase in compensation expense related to increases in the number of personnel, base compensation levels and incentive compensation accruals and (iv) a $1.6 million increase in share-based compensation expense, with these increases partially offset by a $1.1 million increase in the expenses allocated to the External Investment Manager, in each case when compared to the same period in the prior year. For the nine months ended September 30, 2017, the ratio of our total operating expenses, excluding interest expense and the non-recurring professional fees and other expenses discussed above, as a percentage of our quarterly average total assets was 1.5% on an annualized basis, compared to 1.4% on an annualized basis for the nine months ended September 30, 2016, and 1.5% for the year ended December 31, 2016. Including the effect of the non-recurring expenses, the ratio for the nine months ended September 30, 2017 was 1.6% on an annualized basis.

        Net investment income for the nine months ended September 30, 2017 was $97.9 million, or a 15% increase, compared to net investment income of $85.4 million for the corresponding period of 2016. The increase in net investment income was principally attributable to the increase in total investment income, partially offset by higher operating expenses as discussed above.

        For the nine months ended September 30, 2017, distributable net investment income increased 15% to $105.4 million, or $1.88 per share, compared with $91.3 million, or $1.77 per share, in the corresponding period of 2016. The increase in distributable net investment income was primarily due to the higher level of total investment income, partially offset by higher operating expenses both as discussed above. Distributable net investment income on a per share basis for the nine months ended September 30, 2017 reflects (i) an increase of approximately $0.10 per share from the comparable period in 2016 attributable to the net increase in the comparable levels of accelerated prepayment, repricing and other activity for certain Investment Portfolio debt investments and (ii) a greater number of average shares outstanding compared to the corresponding period in 2016 primarily due to shares issued through the ATM Program, shares issued pursuant to our equity incentive plans and shares issued pursuant to our dividend reinvestment plan.

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        The net increase in net assets resulting from operations during the nine months ended September 30, 2017 was $109.2 million, or $1.94 per share, compared with $90.9 million, or $1.76 per share, during the nine months ended September 30, 2016. This $18.3 million increase from the same period in the prior year was primarily the result of (i) a $29.9 million improvement in net change in unrealized appreciation (depreciation) from portfolio investments and SBIC debentures, including the impact of accounting reversals relating to realized gains/income (losses), from net unrealized depreciation of $28.8 million for the nine months ended September 30, 2016 to net unrealized appreciation of $1.1 million for the nine months ended September 30, 2017 and (ii) a $12.5 million increase in net investment income as discussed above, with these increases partially offset by (i) a $13.4 million change in the income tax provision from an income tax benefit of $1.0 million for the nine months ended September 30, 2016 to an income tax provision of $12.4 million for the nine months ended September 30, 2017, (ii) a $5.5 million decrease in the net realized gain from investments to a total net realized gain from investments of $27.8 million for the nine months ended September 30, 2017 and (iii) a $5.2 million realized loss on the repayment of SBIC debentures outstanding at MSC II which had previously been accounted for on the fair value method of accounting. The net realized gain from investments of $27.8 million for the nine months ended September 30, 2017 was primarily the result of (i) the net realized gain of $15.5 million resulting from gains on the exit of five LMM investments and losses on the exit of three LMM investments, (ii) realized gains of $9.3 million due to activity in our Other Portfolio, (iii) the realized gain of $2.6 million on the exit of one Private Loan investment, (iv) the realized gain of $1.4 million on the partial exit of one LMM investment and (v) the net realized loss of $0.9 million in our Middle Market portfolio, which is primarily the result of the loss of $2.3 million on the exit of a Middle Market investment, partially offset by $1.4 million of net gains on other activity in our Middle Market portfolio. The realized loss of $5.2 million on the repayment of SBIC debentures is related to the previously recognized bargain purchase gain resulting from recording the MSC II debentures at fair value on the date of the acquisition of MSC II in 2010. The effect of the realized loss is offset by the reversal of all previously recognized unrealized depreciation on these SBIC debentures due to fair value adjustments since the date of the acquisition.

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        The following table provides a summary of the total net unrealized appreciation of $1.1 million for the nine months ended September 30, 2017:

 
  Nine Months Ended September 30, 2017  
 
  LMM(a)   Middle Market   Private Loan   Other(b)   Total  
 
  (dollars in millions)
 

Accounting reversals of net unrealized appreciation recognized in prior periods due to net realized gains/income (losses) recognized during the current period

  $ (15.7 ) $ (1.3 ) $ (2.1 ) $ (8.1 ) $ (27.2 )

Net change in unrealized appreciation (depreciation) relating to portfolio investments

    16.4     (8.7 )   (2.2 )   17.3     22.8  

Total net change in unrealized appreciation (depreciation) relating to portfolio investments

  $ 0.7   $ (10.0 ) $ (4.3 ) $ 9.2   $ (4.4 )

Unrealized appreciation relating to SBIC debentures(c)

                            5.5  

Total net change in unrealized appreciation

                          $ 1.1  

(a)
LMM includes unrealized appreciation on 27 LMM portfolio investments and unrealized depreciation on 29 LMM portfolio investments.

(b)
Other includes $8.7 million of unrealized appreciation relating to the External Investment Manager and $8.6 million of net unrealized appreciation relating to the Other Portfolio.

(c)
Relates to unrealized appreciation on the SBIC debentures held by MSC II which are accounted for on a fair value basis and includes $6.0 million of accounting reversals resulting from the reversal of previously recognized unrealized depreciation recorded since the date of acquisition of MSC II on the debentures repaid due to fair value adjustments since such date, partially offset by $0.5 million of current period unrealized depreciation on the remaining SBIC debentures.

        The income tax provision for the nine months ended September 30, 2017 of $12.4 million principally consisted of a deferred tax provision of $9.9 million, which is primarily the result of the net activity relating to our portfolio investments held in our Taxable Subsidiaries, including changes in net operating loss carryforwards, changes in net unrealized appreciation/depreciation and other temporary book-tax differences, and other current tax expense of $2.5 million related to (i) a $1.6 million accrual for excise tax on our estimated undistributed taxable income and (ii) other current tax expense of $0.9 million related to accruals for U.S. federal and state income taxes.

        For the nine months ended September 30, 2017, we experienced a net increase in cash and cash equivalents in the amount of approximately $5.7 million, which is the net result of approximately $51.0 million of cash used in our operating activities and approximately $56.6 million of cash provided by financing activities.

        During the period, we used $51.0 million of cash from our operating activities, which resulted primarily from (i) cash flows we generated from the operating profits earned through our operating activities totaling $88.2 million, which is our $105.4 million of distributable net investment income, excluding the non-cash effects of the accretion of unearned income of $12.4 million, payment-in-kind

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interest income of $4.1 million, cumulative dividends of $2.7 million and the amortization expense for deferred financing costs of $2.0 million, (ii) cash uses totaling $746.9 million consisting of (a) $743.7 million for the funding of new portfolio company investments and settlement of accruals for portfolio investments existing as of December 31, 2016, (b) $2.4 million related to decreases in payables and accruals and (c) $0.8 million related to increases in other assets and (iii) cash proceeds totaling $607.6 million from the sales and repayments of debt investments and sales of and return on capital of equity investments.

        During the nine months ended September 30, 2017, $56.6 million in cash was provided by financing activities, which principally consisted of (i) $118.1 million in net cash proceeds from the ATM Program (described below), (ii) $60.0 million in cash proceeds from issuance of SBIC debentures and (iii) $12.0 million in net borrowings on the Credit Facility, partially offset by (i) $102.3 million in cash dividends paid to stockholders, (ii) $25.2 million in repayment of SBIC debentures, (iii) $4.4 million for purchases of vested restricted stock from employees to satisfy their tax withholding requirements upon the vesting of such restricted stock and (iv) $1.6 million for payment of deferred debt issuance costs, SBIC debenture fees and other costs.

        As of September 30, 2017, we had $30.1 million in cash and cash equivalents and $230.0 million of unused capacity under the Credit Facility, which we maintain to support our investment and operating activities. As of September 30, 2017, our net asset value totaled $1,329.7 million, or $23.02 per share.

        The Credit Facility, which provides additional liquidity to support our investment and operational activities, was amended in September 2017 to increase the total commitments to $585.0 million from a diversified group of fifteen lenders. The Credit Facility matures in September 2021 and contains an accordion feature which allows us to increase the total commitments under the facility to up to $750.0 million from new and existing lenders on the same terms and conditions as the existing commitments.

        Borrowings under the Credit Facility bear interest, subject to our election, on a per annum basis at a rate equal to the applicable LIBOR rate (1.23% as of September 30, 2017) plus (i) 1.875% (or the applicable base rate (Prime Rate of 4.25% as of September 30, 2017) plus 0.875%) as long as we maintain an investment grade rating and meet certain agreed upon excess collateral and maximum leverage requirements, (ii) 2.0% (or the applicable base rate plus 1.0%) if we maintain an investment grade rating but do not meet certain excess collateral and maximum leverage requirements or (iii) 2.25% (or the applicable base rate plus 1.25%) if we do not maintain an investment grade rating. We pay unused commitment fees of 0.25% per annum on the unused lender commitments under the Credit Facility. The Credit Facility is secured by a first lien on the assets of MSCC and its subsidiaries, excluding the equity ownership or assets of the Funds and the External Investment Manager. The Credit Facility contains certain affirmative and negative covenants, including but not limited to: (i) maintaining a minimum availability of at least 10% of the borrowing base, (ii) maintaining an interest coverage ratio of at least 2.0 to 1.0, (iii) maintaining an asset coverage ratio of at least 1.5 to 1.0 and (iv) maintaining a minimum tangible net worth. The Credit Facility is provided on a revolving basis through its final maturity date in September 2021, and contains two, one-year extension options which could extend the final maturity by up to two years, subject to certain conditions, including lender approval. As of September 30, 2017, we had $355.0 million in borrowings outstanding under the Credit Facility, the interest rate on the Credit Facility was 3.1% and we were in compliance with all financial covenants of the Credit Facility.

        Through the Funds, we have the ability to issue SBIC debentures guaranteed by the SBA at favorable interest rates and favorable terms and conditions up to a maximum amount of $350.0 million. During the nine months ended September 30, 2017, we issued $60.0 million of SBIC debentures and

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opportunistically prepaid $25.2 million of our existing SBIC debentures as part of an effort to manage the maturity dates of our oldest SBIC debentures, leaving $75.2 million of remaining capacity under our SBIC licenses. Debentures guaranteed by the SBA have fixed interest rates that equal prevailing 10-year Treasury Note rates plus a market spread and have a maturity of ten years with interest payable semiannually. The principal amount of the debentures is not required to be paid before maturity, but may be pre-paid at any time with no prepayment penalty. Main Street expects to issue new SBIC debentures under the SBIC program in the future in an amount up to the regulatory maximum amount of $350.0 million for affiliated SBIC funds. On September 30, 2017, through our three wholly owned SBICs, we had $274.8 million of outstanding SBIC debentures guaranteed by the SBA, which bear a weighted-average annual fixed interest rate of approximately 3.8%, paid semiannually, and mature ten years from issuance. The first maturity related to our SBIC debentures occurs in 2019, and the weighted-average remaining duration is approximately 5.8 years as of September 30, 2017.

        In April 2013, we issued $92.0 million, including the underwriters' full exercise of their over-allotment option, in aggregate principal amount of the 6.125% Notes (the "6.125% Notes"). The 6.125% Notes are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 6.125% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 6.125% Notes mature on April 1, 2023, and may be redeemed in whole or in part at any time or from time to time at our option on or after April 1, 2018. We may from time to time repurchase 6.125% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2017, the outstanding balance of the 6.125% Notes was $90.7 million.

        The indenture governing the 6.125% Notes (the "6.125% Notes Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 6.125% Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 6.125% Notes Indenture.

        In November 2014, we issued $175.0 million in aggregate principal amount of the 4.50% Notes (the "4.50% Notes") at an issue price of 99.53%. The 4.50% Notes are unsecured obligations and rank pari passu with our current and future unsecured indebtedness; senior to any of our future indebtedness that expressly provides it is subordinated to the 4.50% Notes; effectively subordinated to all of our existing and future secured indebtedness, to the extent of the value of the assets securing such indebtedness, including borrowings under our Credit Facility; and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of the Funds. The 4.50% Notes mature on December 1, 2019, and may be redeemed in whole or in part at any time at our option subject to certain make-whole provisions. The 4.50% Notes bear interest at a rate of 4.50% per year payable semiannually on June 1 and December 1 of each year, beginning June 1, 2015. We may from time to time repurchase 4.50% Notes in accordance with the 1940 Act and the rules promulgated thereunder. As of September 30, 2017, the outstanding balance of the 4.50% Notes was $175.0 million.

        The indenture governing the 4.50% Notes (the "4.50% Notes Indenture") contains certain covenants, including covenants requiring our compliance with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) as modified by Section 61(a)(1) of the 1940 Act, as well as covenants requiring us to provide financial information to the holders of the 4.50% Notes and the Trustee if we cease to be subject to the reporting requirements of the Securities

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Exchange Act of 1934. These covenants are subject to limitations and exceptions that are described in the 4.50% Notes Indenture.

        During November 2015, we commenced a program with certain selling agents through which we can sell shares of our common stock by means of at-the-market offerings from time to time (the "ATM Program"). During the nine months ended September 30, 2017, we sold 3,119,247 shares of our common stock at a weighted-average price of $38.33 per share and raised $119.5 million of gross proceeds under the ATM Program. Net proceeds were $118.1 million after commissions to the selling agents on shares sold and offering costs. As of September 30, 2017, sales transactions representing 75,404 shares had not settled and are not included in shares issued and outstanding on the face of the consolidated balance sheet, but are included in the weighted-average shares outstanding in the consolidated statement of operations and in the shares used to calculate net asset value per share. As of September 30, 2017, there were 2,737,081 shares available for sale under the ATM Program.

        During the year ended December 31, 2016, we sold 3,324,646 shares of our common stock at a weighted-average price of $34.17 per share and raised $113.6 million of gross proceeds under the ATM Program. Net proceeds were $112.0 million after commissions to the selling agents on shares sold and offering costs. As of December 31, 2016, sales transactions representing 42,413 shares had not settled and were not included in shares issued and outstanding on the face of the consolidated balance sheet, but were included in the weighted-average shares outstanding in the consolidated statements of operations and in the shares used to calculate net asset value per share.

        We anticipate that we will continue to fund our investment activities through existing cash and cash equivalents, cash flows generated through our ongoing operating activities, utilization of available borrowings under our Credit Facility and a combination of future issuances of debt and equity capital. Our primary uses of funds will be investments in portfolio companies, operating expenses and cash distributions to holders of our common stock.

        We periodically invest excess cash balances into "Marketable securities and idle funds investments". The primary investment objective of Marketable securities and idle funds investments is to generate incremental cash returns on excess cash balances prior to utilizing those funds for investment in our LMM, Middle Market and Private Loan portfolio investments. Marketable securities and idle funds investments generally consist of debt investments, independently rated debt investments, certificates of deposit with financial institutions, diversified bond funds and publicly traded debt and equity investments. The composition of Marketable securities and idle funds investments will vary in a given period based upon, among other things, changes in market conditions, the underlying fundamentals in our Marketable securities and idle funds investments, our outlook regarding future LMM, Middle Market and Private Loan portfolio investment needs, and any regulatory requirements applicable to us.

        If our common stock trades below our net asset value per share, we will generally not be able to issue additional common stock at the market price unless our stockholders approve such a sale and our Board of Directors makes certain determinations. We did not seek stockholder authorization to sell shares of our common stock below the then current net asset value per share of our common stock at our 2017 annual meeting of stockholders because our common stock price per share had been trading significantly above the then current net asset value per share of our common stock since 2011. We would therefore need future approval from our stockholders to issue shares below the then current net asset value per share.

        In order to satisfy the Code requirements applicable to a RIC, we intend to distribute to our stockholders, after consideration and application of our ability under the Code to carry forward certain excess undistributed taxable income from one tax year into the next tax year, substantially all of our taxable income. In addition, as a BDC, we generally are required to meet a coverage ratio of total assets to total senior securities, which include borrowings and any preferred stock we may issue in the

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future, of at least 200%. This requirement limits the amount that we may borrow. In January 2008, we received an exemptive order from the SEC to exclude SBA-guaranteed debt securities issued by MSMF and any other wholly owned subsidiaries of ours which operate as SBICs from the asset coverage requirements of the 1940 Act as applicable to us, which, in turn, enables us to fund more investments with debt capital.

        Although we have been able to secure access to additional liquidity, including through the Credit Facility, public debt issuances, leverage available through the SBIC program and equity offerings, there is no assurance that debt or equity capital will be available to us in the future on favorable terms, or at all.

        In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 supersedes the revenue recognition requirements under ASC 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarified the implementation guidance on principal versus agent considerations. In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which clarified the implementation guidance regarding performance obligations and licensing arrangements. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606)—Narrow-Scope Improvements and Practical Expedients, which clarified guidance on assessing collectability, presenting sales tax, measuring noncash consideration, and certain transition matters. In December 2016, the FASB issued ASU No. 2016-20, Revenue from Contracts with Customers (Topic 606)—Technical Corrections and Improvements, which provided disclosure relief, and clarified the scope and application of the new revenue standard and related cost guidance. The new guidance will be effective for the annual reporting period beginning after December 15, 2017, including interim periods within that reporting period. Early adoption would be permitted for annual reporting periods beginning after December 15, 2016. We expect to identify similar performance obligations under ASC 606 as compared with deliverables and separate units of account previously identified. As a result, we expect timing of our revenue recognition to remain the same.

        In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires debt financing costs related to a recognized debt liability to be presented on the balance sheet as a direct deduction from the related debt liability, similar to the presentation of debt discounts. Additionally in August 2015, the FASB issued ASU 2015-15, Interest—Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, which provides further clarification on the same topic and states that the SEC would not object to the deferral and presentation of debt issuance costs as an asset and subsequent amortization of the deferred costs over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit

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arrangement. The Company adopted the guidance for debt arrangements that are not line-of-credit arrangements for the three months ended June 30, 2017. Comparative financial statements of prior interim and annual periods have been adjusted to apply the new method retrospectively. As a result of the adoption, the Company reclassified $7.9 million of deferred financing costs assets to a direct deduction from the related debt liability on the consolidated balance sheet as of December 31, 2016. The adoption of this guidance had no impact on net assets, the consolidated statements of operations or the consolidated statements of cash flows.

        In May 2015, the FASB issued ASU 2015-07, Fair Value Measurements—Disclosures for Certain Entities that Calculate Net Asset Value per Share. This amendment updates guidance intended to eliminate the diversity in practice surrounding how investments measured at net asset value under the practical expedient with future redemption dates have been categorized in the fair value hierarchy. Under the updated guidance, investments for which fair value is measured at net asset value per share using the practical expedient should no longer be categorized in the fair value hierarchy, while investments for which fair value is measured at net asset value per share but the practical expedient is not applied should continue to be categorized in the fair value hierarchy. The updated guidance requires retrospective adoption for all periods presented and is effective for interim and annual reporting periods beginning after December 15, 2015, with early adoption permitted. The Company adopted this standard during the three months ended March 31, 2016. There was no impact of the adoption of this new accounting standard on our consolidated financial statements as none of our investments are measured through the use of the practical expedient.

        In February 2016, the FASB issued ASU 2016-02, Leases, which requires lessees to recognize on the balance sheet a right-of-use asset, representing its right to use the underlying asset for the lease term, and a lease liability for all leases with terms greater than 12 months. The guidance also requires qualitative and quantitative disclosures designed to assess the amount, timing, and uncertainty of cash flows arising from leases. The standard requires the use of a modified retrospective transition approach, which includes a number of optional practical expedients that entities may elect to apply. The new guidance is effective for annual periods beginning after December 15, 2018, and interim periods therein. Early application is permitted. While we continue to assess the effect of adoption, we currently believe the most significant change relates to the recognition of a new right-of-use asset and lease liability on our consolidated balance sheet for our office space operating lease. We currently have one operating lease for office space and do not expect a significant change in our leasing activity between now and adoption. See further discussion of our operating lease obligation in "Note M—Commitments and Contingences" in the notes to the consolidated financial statements.

        In March 2016, the FASB issued ASU 2016-09, Compensation—Stock Compensation: Improvements to Employee Share-Based Payment Accounting, which is intended to simplify several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2016, and interim periods therein. Early application is permitted. The Company elected to early adopt this standard during the three months ended March 31, 2016. See further discussion of the impact of the adoption of this standard in "Note B.8.—Summary of Significant Accounting Policies—Share-based Compensation" in the notes to consolidated financial statements.

        In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), which is intended to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual periods beginning after December 15, 2017, and interim periods therein. Early application is permitted. The impact of the adoption of this new accounting standard on our consolidated financial statements is not expected to be material.

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        From time to time, new accounting pronouncements are issued by the FASB or other standards setting bodies that are adopted by us as of the specified effective date. We believe that the impact of recently issued standards and any that are not yet effective will not have a material impact on our consolidated financial statements upon adoption.

        Inflation has not had a significant effect on our results of operations in any of the reporting periods presented herein. However, our portfolio companies have experienced, and may in the future experience, the impacts of inflation on their operating results, including periodic escalations in their costs for labor, raw materials and third-party services and required energy consumption.

        We may be a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of our portfolio companies. These instruments include commitments to extend credit and fund equity capital and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. At September 30, 2017, we had a total of $146.9 million in outstanding commitments comprised of (i) 39 investments with commitments to fund revolving loans that had not been fully drawn or term loans with additional commitments not yet funded and (ii) 11 investments with equity capital commitments that had not been fully called.

        As of September 30, 2017, the future fixed commitments for cash payments in connection with our SBIC debentures, the 4.50% Notes, the 6.125% Notes and rent obligations under our office lease for each of the next five years and thereafter are as follows:

 
  2017   2018   2019   2020   2021   Thereafter   Total  

SBIC debentures

  $   $   $ 20,000   $ 55,000   $ 40,000   $ 159,800   $ 274,800  

Interest due on SBIC debentures

    784     10,330     10,332     9,140     6,588     20,523     57,697  

Notes 6.125%

                        90,655     90,655  

Interest due on 6.125% Notes

    1,388     5,553     5,553     5,553     5,553     6,939     30,539  

4.50% Notes

            175,000                 175,000  

Interest due on 4.50% Notes

    3,938     7,875     7,875                 19,688  

Operating Lease Obligation(1)

        373     749     763     777     5,031     7,693  

Total

  $ 6,110   $ 24,131   $ 219,509   $ 70,456   $ 52,918   $ 282,948   $ 656,072  

(1)
Operating Lease Obligation means a rent payment obligation under a lease classified as an operating lease and disclosed pursuant to FASB ASC 840, as may be modified or supplemented.

        As of September 30, 2017, we had $355.0 million in borrowings outstanding under our Credit Facility, and the Credit Facility is currently scheduled to mature in September 2021. The Credit Facility contains two, one-year extension options which could extend the maturity to September 2023, subject to lender approval. See further discussion of the Credit Facility terms in "—Liquidity and Capital Resources—Capital Resources."

        As discussed further above, the External Investment Manager is treated as a wholly owned portfolio company of MSCC and is included as part of our Investment Portfolio. At September 30,

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2017, we had a receivable of approximately $2.7 million due from the External Investment Manager which included (i) approximately $2.0 million primarily related to operating expenses incurred by us required to support the External Investment Manager's business and due from the External Investment Manager to Main Street under a tax sharing agreement (see further discussion above in "—Critical Accounting Policies—Income Taxes") and (ii) approximately $0.7 million of dividends declared but not paid by the External Investment Manager.

        In November 2015, our Board of Directors approved and adopted the Main Street Capital Corporation Deferred Compensation Plan (the "2015 Deferred Compensation Plan"). The 2015 Deferred Compensation Plan became effective on January 1, 2016 and replaced the Deferred Compensation Plan for Non-Employee Directors previously adopted by the Board of Directors in June 2013 (the "2013 Deferred Compensation Plan"). Under the 2015 Deferred Compensation Plan, non-employee directors and certain key employees may defer receipt of some or all of their cash compensation and directors' fees, subject to certain limitations. Individuals participating in the 2015 Deferred Compensation Plan receive distributions of their respective balances based on predetermined payout schedules or other events as defined by the plan and are also able to direct investments made on their behalf among investment alternatives permitted from time to time under the plan, including phantom Main Street stock units. As of September 30, 2017, $3.8 million of compensation and directors' fees had been deferred under the 2015 Deferred Compensation Plan (including amounts previously deferred under the 2013 Deferred Compensation Plan). Of this amount, $2.4 million was deferred into phantom Main Street stock units, representing 72,228 shares of our common stock. Including phantom stock units issued through dividend reinvestment, the phantom stock units outstanding as of September 30, 2017 represented 84,963 shares of our common stock. Any amounts deferred under the plan represented by phantom Main Street stock units will not be issued or included as outstanding on the consolidated statements of changes in net assets until such shares are actually distributed to the participant in accordance with the plan, but are included in operating expenses and weighted-average shares outstanding in our consolidated statements of operations as earned.

        In October 2017, we declared a semi-annual supplemental cash dividend of $0.275 per share payable in December 2017. This supplemental cash dividend is in addition to the previously announced regular monthly cash dividends that we declared for the fourth quarter of 2017 of $0.190 per share for each of October, November and December 2017.

        In October 2017, we declared regular monthly dividends of $0.190 per share for each month of January, February and March of 2018. These regular monthly dividends equal a total of $0.570 per share for the first quarter of 2018 and represent a 2.7% increase from the regular monthly dividends declared for the first quarter of 2017. Including the semi-annual supplemental dividend declared for December 2017 and the regular monthly dividends declared for the fourth quarter of 2017 and first quarter of 2018, we will have paid $21.960 per share in cumulative dividends since our October 2007 initial public offering.

Item 3.    Quantitative and Qualitative Disclosures about Market Risk

        We are subject to financial market risks, including changes in interest rates. Changes in interest rates may affect both our cost of funding and our interest income from portfolio investments. Our risk management systems and procedures are designed to identify and analyze our risk, to set appropriate policies and limits and to continually monitor these risks. Our investment income will be affected by changes in various interest rates, including LIBOR and prime rates, to the extent that any debt investments include floating interest rates. The majority of our debt investments are made with either fixed interest rates or floating rates that are subject to contractual minimum interest rates for the term of the investment. As of September 30, 2017, approximately 70% of our debt investment portfolio (at

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cost) bore interest at floating rates, 96% of which were subject to contractual minimum interest rates. Our interest expense will be affected by changes in the published LIBOR rate in connection with our Credit Facility; however, the interest rates on our outstanding SBIC debentures, 4.50% Notes and 6.125% Notes, which comprise the majority of our outstanding debt, are fixed for the life of such debt. As of September 30, 2017, we had not entered into any interest rate hedging arrangements. The following table shows the approximate annualized increase or decrease in the components of net investment income due to hypothetical base rate changes in interest rates, assuming no changes in our investments and borrowings as of September 30, 2017.

Basis Point Change
  Increase
(Decrease)
in Interest
Income
  (Increase)
Decrease
in Interest
Expense
  Increase
(Decrease) in Net
Investment
Income
  Increase
(Decrease) in Net
Investment
Income per
Share
 
 
  (dollars in thousands)
   
 

(25)

  $ (2,778 ) $ 888   $ (1,890 ) $ (0.03 )

25

    2,874     (887 )   1,987     0.03  

50

    5,769     (1,775 )   3,994     0.07  

100

    11,571     (3,550 )   8,021     0.14  

150

    17,428     (5,325 )   12,103     0.21  

200

    23,285     (7,100 )   16,185     0.28  

300

    34,998     (10,650 )   24,348     0.42  

400

    46,712     (14,200 )   32,512     0.56  

        The hypothetical results would also be impacted by the changes in the amount of debt outstanding under our Credit Facility (with an increase (decrease) in the debt outstanding under the Credit Facility resulting in an (increase) decrease in the hypothetical interest expense).

Item 4.    Controls and Procedures

        As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chairman and Chief Executive Officer, our President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15 of the Securities Exchange Act of 1934). Based on that evaluation, our Chairman and Chief Executive Officer, our President, our Chief Financial Officer, our Chief Compliance Officer and our Chief Accounting Officer have concluded that our current disclosure controls and procedures are effective in timely alerting them of material information relating to us that is required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934. There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.    Legal Proceedings

        We may, from time to time, be involved in litigation arising out of our operations in the normal course of business or otherwise. Furthermore, third parties may seek to impose liability on us in connection with the activities of our portfolio companies. While the outcome of any current legal proceedings cannot at this time be predicted with certainty, we do not expect any current matters will materially affect our financial condition or results of operations; however, there can be no assurance whether any pending legal proceedings will have a material adverse effect on our financial condition or results of operations in any future reporting period.

Item 1A.    Risk Factors

        There have been no material changes to the risk factors as previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016 that we filed with the SEC on February 24, 2017, and as updated in our registration statement on Form N-2 filed on April 26, 2017.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds

        During the three months ended September 30, 2017, we issued 42,494 shares of our common stock under our dividend reinvestment plan. These issuances were not subject to the registration requirements of the Securities Act of 1933, as amended. The aggregate value of the shares of common stock issued during the three months ended September 30, 2017 under the dividend reinvestment plan was approximately $1.7 million.

Item 5.    Other Information

Expansion of Board of Directors and Appointment of Director

        On October 31, 2017, our Board of Directors increased the size of the Board from eight to nine directors and appointed Valerie L. Banner as director to fill the vacancy created by the increase to serve until our 2018 Annual Meeting of Stockholders. Ms. Banner was also appointed to serve on the Nominating and Corporate Governance Committee of the Board.

        Ms. Banner, age 62, has served as Vice President, General Counsel and Corporate Secretary of Exterran Corporation (NYSE: EXTN) since November 2015. Prior to the spin-off of Exterran Corporation from Archrock, Inc., formerly known as Exterran Holdings, Inc. (NYSE: AROC, formerly EXH), in November 2015, Ms. Banner served as Associate General Counsel of Exterran Holdings from 2008 to 2015 and as special counsel from 2007 to 2008. Prior to the merger of Hanover Compressor Company and Universal Compression Holdings, Inc. in August 2007 to form Exterran Holdings, she served Universal as special counsel from 2000 to 2007, and served as Senior Vice President, General Counsel and Secretary from 1998 through 2000. Prior to joining Universal, Ms. Banner served as counsel for several publicly traded companies and was in private practice, having begun her career as an associate with Andrews & Kurth LLP. Ms. Banner also serves as an officer and director of certain Exterran Corporation subsidiaries.

        Ms. Banner will be entitled to receive compensation for her service on the Board consistent with our director compensation program for non-employee directors. In connection with her appointment to the Board, we entered into our standard form of indemnification agreement with Ms. Banner, the form of which was previously filed as Exhibit (k)(13) to our Pre-Effective Amendment No. 3 to Registration Statement on Form N-2 (Reg. No. 333-142879) filed on September 21, 2007.

        The Board has determined that Ms. Banner qualifies as an independent director under the listing standards of the New York Stock Exchange and under section 2(a)(19) of the 1940 Act as not an

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"interested person". There are no arrangements or understandings between Ms. Banner and any other persons pursuant to which she was selected as director. There are no current or proposed transactions between us and Ms. Banner or her immediate family members that would require disclosure under Item 404(a) of Regulation S-K promulgated by the SEC.

Item 6.    Exhibits

        Listed below are the exhibits which are filed as part of this report (according to the number assigned to them in Item 601 of Regulation S-K):

Exhibit
Number
  Description of Exhibit
  10.1   Supplement Agreement dated September 26, 2017 (previously filed as Exhibit 10.1 to Main Street Capital Corporation's Current report on Form 8-K filed on September 27, 2017 (File No. 1-33723)).

 

14.1

 

Code of Business Conduct and Ethics.

 

31.1

 

Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

31.2

 

Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.

 

32.1

 

Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

 

32.2

 

Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350).

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SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

    Main Street Capital Corporation

Date: November 3, 2017

 

/s/ VINCENT D. FOSTER

Vincent D. Foster
Chairman and Chief Executive Officer
(principal executive officer)

Date: November 3, 2017

 

/s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
(principal financial officer)

Date: November 3, 2017

 

/s/ SHANNON D. MARTIN

Shannon D. Martin
Vice President and Chief Accounting Officer
(principal accounting officer)

155



Exhibit 14.1

MAIN STREET CAPITAL CORPORATION

CODE OF BUSINESS
CONDUCT AND ETHICS

October 2017



CODE OF BUSINESS CONDUCT
AND ETHICS

TABLE OF CONTENTS

 
  Page  

Introduction

    1  

Purpose of the Code

    1  

Conflicts of Interest

    1  

Corporate Opportunities

    2  

Confidentiality

    2  

Fair Dealing

    2  

Protection and Proper Use of Company Assets

    2  

Compliance with Applicable Laws, Rules and Regulations

    2  

Equal Opportunity, Harassment

    3  

Political Activities

    3  

Loans

    3  

Accuracy of Company Records

    4  

Retaining Business Communications

    4  

Media Relations

    4  

Intellectual Property Information

    4  

Internet and E-mail Policy

    5  

Reporting Violations and Complaint Handling

    5  

Administration of the Code

    6  

Sanctions for Code Violations

    6  

Application/Waivers

    6  

Revisions and Amendments

    6  

Appendices

   
 
 

Code Acknowledgment

   
A-1
 

ii



CODE OF BUSINESS CONDUCT AND ETHICS

Introduction

        Ethics are important to Main Street Capital Corporation ("Main Street" or the "Company") and to its management. Main Street is committed to the highest ethical standards and to conducting its business with the highest level of integrity. This code of business conduct and ethics (the "Code") has been adopted by Main Street in order to establish applicable policies, guidelines, and procedures that promote ethical practices and conduct by Main Street and all its employees, officers, and directors.

        All officers, directors and employees of Main Street are responsible for maintaining this level of integrity and for complying with the policies contained in this Code. If you have a question or concern about what is proper conduct for you or anyone else, please raise these concerns with any member of management, or follow the procedures outlined in applicable sections of this Code.


Purpose of the Code

        This Code is intended to:

        All employees, as a condition of employment or continued employment, will acknowledge in writing that they have received a copy of this Code, read it, and understand that the Code contains our expectations regarding their conduct. All employees will receive any updates and updated versions of this Code and will be required to read and acknowledge such updates.


Conflicts of Interest

        You must avoid any conflict, or the appearance of a conflict, between your personal interests and our interests. A conflict exists when your personal interest in any way interferes with our interests, or when you take any action or have any interest that may make it difficult for you to perform your job objectively and effectively. For example, a conflict of interest probably exists if:

1



Corporate Opportunities

        Each of us has a duty to advance the legitimate interests of Main Street when the opportunity to do so presents itself. Therefore, you may not:


Confidentiality

        You must not disclose confidential information regarding us, our affiliates, our lenders, our clients, or our other business partners, unless disclosure is authorized or required by law. Confidential information includes all non-public information that might be harmful to, or useful to the competitors of, Main Street, our affiliates, our lenders, our clients, or our other business partners. Even after you leave Main Street, this obligation continues until the information becomes publicly available.


Fair Dealing

        You must endeavor to deal fairly with our customers, suppliers and business partners, or any other companies or individuals with whom we do business or come into contact with, including fellow employees and our competitors. You must not take unfair advantage of these or other parties by means of:


Protection and Proper Use of Company Assets

        Our assets are to be used only for legitimate business purposes. You should protect our assets and ensure that they are used efficiently.

        Incidental personal use of telephones, fax machines, copy machines, personal computers and similar equipment is generally allowed if there is no significant added cost to us, it does not interfere with your work duties, and is not related to an illegal activity or to any outside business.


Compliance with Applicable Laws, Rules and Regulations

        Each of us has a duty to comply with all laws, rules and regulations that apply to our business. Highlighted below are some of the key compliance guidelines that must be followed.

2


        Please talk to our Chief Compliance Officer if you have any questions about how to comply with the above regulations and other laws, rules and regulations.

        In addition, we expect you to comply with all of our policies and procedures that apply to you. We may modify or update our policies and procedures in the future, and may adopt new policies and procedures from time to time. You are also expected to observe the terms of any confidentiality agreement, employment agreement or other similar agreement that applies to you.


Equal Opportunity, Harassment

        We are committed to providing equal opportunity in all of our employment practices including selection, hiring, promotion, transfer, and compensation of all qualified applicants and employees without regard to race, color, sex or gender, sexual orientation, religion, age, national origin, handicap, disability, citizenship status, or any other status protected by law. With this in mind, there are certain behaviors that will not be tolerated. These include harassment, violence, intimidation, and discrimination of any kind involving race, color, religion, gender, sexual orientation, age, national origin, citizenship status, handicap, disability, marital status, or any other status protected by law.


Political Activities

        Main Street encourages its employees to be actively involved in the civic affairs of the communities in which they live. When speaking on public issues, however, employees should do so only as individual citizens of the community and must be careful not to create the impression that they are acting for, or representing the views of, Main Street. Additionally, Main Street and its employees are prohibited from making any contribution or giving a gift to a state or local political candidate, official, party or organization that would be prohibited by applicable law. In order for the Company to determine whether a gift or political contribution may be prohibited, employees are required to provide advance notice to the Chief Compliance Officer in advance of a proposed contribution.

        The Chief Compliance Officer retains discretion to monitor all business activities between the Company and the provider or recipient of any gift or political contribution in connection with this policy. Any questions regarding this policy or the application of this policy should be directed to the Chief Compliance Officer or Chief Executive Officer.


Loans

        No employee may borrow funds from or become indebted to any person, business or company having business dealings or a relationship with Main Street, except with respect to customary personal loans (e.g., home mortgage loans, automobile loans, lines of credit, etc.), unless the arrangement is disclosed in writing and receives prior written approval from the Chief Compliance Officer of the

3


Company. No employee may use the Company's name, position in a particular market or goodwill to receive any benefit on loan transactions without the prior express written consent of the Chief Compliance Officer of the Company.


Accuracy of Company Records

        We require honest and accurate recording and reporting of information in order to make responsible business decisions. This includes such data as quality, safety, and personnel records, as well as financial records.

        All financial books, records and accounts must accurately reflect transactions and events, and conform both to required accounting principles and to our system of internal controls. No false or artificial entries may be made.


Retaining Business Communications

        The law requires us to maintain certain types of corporate records, usually for specified periods of time. Failure to retain those records for those minimum periods could subject us to penalties and fines, cause the loss of rights, obstruct justice, place us in contempt of court, or seriously disadvantage us in litigation.

        From time to time we establish retention or destruction policies in order to ensure legal compliance. We expect you to fully comply with any published records retention or destruction policies, provided that you should note the following exception: If you believe, or we inform you, that our records are relevant to any litigation or governmental action, or any potential litigation or action, then you must preserve those records until we determine the records are no longer needed. This exception supersedes any previously or subsequently established destruction policies for those records. If you believe that this exception may apply, or have any questions regarding the possible applicability of that exception, please contact our Chief Compliance Officer.


Media Relations

        We must speak with a unified voice in all dealings with the press and other media. As a result, our Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer or other designated persons will serve as our contact persons for media seeking information about Main Street. Any requests from the media must be referred to our Chief Executive Officer, President, Chief Operating Officer, Chief Financial Officer or other designated persons.


Intellectual Property Information

        Information generated in our business is a valuable asset. Protecting this information plays an important role in our growth and ability to compete. Such information includes business and research plans; objectives and strategies; trade secrets; unpublished financial information; salary and benefits data; lender and other business partner lists. Employees who have access to our intellectual property information are obligated to safeguard it from unauthorized access and:

4



Internet and E-Mail Policy

        We provide an e-mail system and Internet access to certain of our employees to help them do their work. You may use the e-mail system and the Internet only for legitimate business purposes in the course of your duties. Incidental and occasional personal use is permitted, but never for personal gain or any improper use. Further, you are prohibited from discussing or posting information regarding Main Street in any external electronic forum, including Internet chat rooms or electronic bulletin boards or social media sites.


Reporting Violations and Complaint Handling

        You are responsible for compliance with the rules, standards and principles described in this Code. In addition, you should be alert to possible violations of the Code by Main Street's employees, officers and directors, and you are expected to report a violation promptly. Normally, reports should be made to one's immediate supervisor. Under some circumstances, it may be impractical or you may feel uncomfortable raising a matter with your supervisor. In those instances, you are encouraged to contact our Chief Compliance Officer who will investigate and report the matter to our Chief Executive Officer and/or Board of Directors, as the circumstance dictates. You will also be expected to cooperate in an investigation of a violation.

        Anyone who has a concern about our conduct, the conduct of an officer of Main Street or our accounting, internal accounting controls or auditing matters, may communicate that concern to the Audit Committee of the Board of Directors by direct communication with our Chief Compliance Officer or by email or in writing. All reported concerns shall be forwarded to the Audit Committee and will be simultaneously addressed by our Chief Compliance Officer in the same way that other concerns are addressed by us. The status of all outstanding concerns forwarded to the Audit Committee will be reported on a quarterly basis by our Chief Compliance Officer. The Audit Committee may direct that certain matters be presented to the full board and may also direct special treatment, including the retention of outside advisors or counsel, for any concern reported to it.

        All reports will be investigated and whenever possible, requests for confidentiality shall be honored. And, while anonymous reports will be accepted, please understand that anonymity may hinder or impede the investigation of a report. All cases of questionable activity or improper actions will be reviewed for appropriate action, discipline or corrective actions. Whenever possible, we will keep confidential the identity of employees, officers or directors who are accused of violations, unless or until it has been determined that a violation has occurred.

        There will be no reprisal, retaliation or adverse action taken against any employee who, in good faith, reports or assists in the investigation of, a violation or suspected violation, or who makes an inquiry about the appropriateness of an anticipated or actual course of action. For the avoidance of doubt, nothing in this Code shall be interpreted as impeding an employee from communicating directly with the staff of the Securities and Exchange Commission about suspected securities law violations.

        For reporting concerns about Main Street's conduct, the conduct of an officer of Main Street, or about Main Street's accounting, internal accounting controls or auditing matters, you may use the following means of communication:

        In the case of a confidential, anonymous submission, employees should set forth their concerns in writing and forward them in a sealed envelope to the Chairperson of the Audit Committee, in care of our Chief Compliance Officer, such envelope to be labeled with a legend such as: "To be opened by the Audit Committee only."

5



Administration of the Code

        The Chief Compliance Officer has overall responsibility for administering the Code and reporting on the administration of and compliance with the Code and related matters to our Board of Directors.


Sanctions for Code Violations

        All violations of the Code will result in appropriate corrective action, up to and including dismissal. If the violation involves potentially criminal activity, the individual or individuals in question will be reported, as warranted, to the appropriate authorities.


Application/Waivers

        All of our directors, officers and employees are subject to this Code.

        Any amendment or waiver of the Code for an executive officer or member of our Board of Directors must be made by our Board of Directors and will be publicly disclosed in the manner required pursuant to Item 5.05 of Form 8-K.


Revisions and Amendments

        This Code may be revised, changed or amended at any time by our Board of Directors. Following any material revisions or updates, an updated version of this Code will be distributed to you, and will supersede the prior version of this Code effective upon distribution. We may ask you to sign an acknowledgement confirming that you have read and understood the revised version of the Code, and that you agree to comply with the provisions.

6



APPENDIX A

Main Street Capital Corporation

Acknowledgment Regarding
Code of Business Conduct and Ethics

This acknowledgment is to be signed and returned to our Chief Compliance Officer and will be retained as part of your permanent personnel file.

        I have received a copy of Main Street Capital Corporation's Code of Business Conduct and Ethics, read it, and understand that the Code contains the expectations of Main Street Capital Corporation regarding conduct. I agree to observe the policies and procedures contained in the Code of Business Conduct and Ethics and have been advised that, if I have any questions or concerns relating to such policies or procedures, I understand that I have an obligation to report to the Audit Committee, Chairman or President or other such designated officer, any suspected violations of the Code of which I am aware. I also understand that the Code is issued for informational purposes and that it is not intended to create, nor does it represent, a contract of employment.

       
Name (Printed)

 

 

 

 


Signature

 

 

 

 


Date

Date Received:

 


 

 

 

Reviewed By:

 


 

 

 
    Date    

The failure to read and/or sign this acknowledgment in no way relieves you of your responsibility to comply with Main Street Capital Corporation's Code of Business Conduct and Ethics.

A-1



Exhibit 31.1

I, Vincent D. Foster, certify that:

1.
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2017 of Main Street Capital Corporation (the "registrant");

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated this November 3, 2017.

By:   /s/ VINCENT D. FOSTER

Vincent D. Foster
Chairman and Chief Executive Officer
   


Exhibit 31.2

I, Brent D. Smith, certify that:

1.
I have reviewed this quarterly report on Form 10-Q for the quarterly period ended September 30, 2017 of Main Street Capital Corporation (the "registrant");

2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Dated this November 3, 2017.

By:   /s/ BRENT D. SMITH

Brent D. Smith
Chief Financial Officer and Treasurer
   


Exhibit 32.1

Certification of Chief Executive Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

        In connection with the Quarterly Report of Main Street Capital Corporation (the "Registrant") on Form 10-Q for the quarter ended September 30, 2017 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Vincent D. Foster, the Chairman and Chief Executive Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

  /s/ VINCENT D. FOSTER

  Name:   Vincent D. Foster

  Date:   November 3, 2017


Exhibit 32.2

Certification of Chief Financial Officer
Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)

        In connection with the Quarterly Report of Main Street Capital Corporation (the "Registrant") on Form 10-Q for the quarter ended September 30, 2017 (the "Report"), as filed with the Securities and Exchange Commission on the date hereof, I, Brent D. Smith, the Chief Financial Officer of the Registrant, hereby certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

  /s/ BRENT D. SMITH

  Name:   Brent D. Smith

  Date:   November 3, 2017