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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 June 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 August 3, 2017 was 56,810,793.

   


Table of Contents


TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1.

 

Consolidated Financial Statements

   

 

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

  1

 

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

  2

 

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

  3

 

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

  4

 

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

  5

 

Consolidated Schedule of Investments—December 31, 2016

  36

 

Notes to Consolidated Financial Statements (unaudited)

  67

 

Consolidated Financial Statement Schedule

  112

 

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

  112

Item 2.

 

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

  122

Item 3.

 

Quantitative and Qualitative Disclosures about Market Risk

  146

Item 4.

 

Controls and Procedures

  147


PART II
OTHER INFORMATION

Item 1.

 

Legal Proceedings

  148

Item 1A.

 

Risk Factors

  148

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

  148

Item 6.

 

Exhibits

  148

 

Signatures

  149

Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Balance Sheets

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

 
  June 30,
2017
  December 31,
2016
 
 
  (Unaudited)
   
 

ASSETS

             

  

             

Portfolio investments at fair value:

             

Control investments (cost: $497,623 and $439,674 as of June 30, 2017 and December 31, 2016, respectively)

  $ 671,713   $ 594,282  

Affiliate investments (cost: $415,997 and $394,699 as of June 30, 2017 and December 31, 2016, respectively)

    368,488     375,948  

Non-Control/Non-Affiliate investments (cost: $1,058,628 and $1,037,510 as of June 30, 2017 and December 31, 2016, respectively)

    1,036,745     1,026,676  

Total investments (cost: $1,972,248 and $1,871,883 as of June 30, 2017 and December 31, 2016, respectively)

    2,076,946     1,996,906  

  

             

Cash and cash equivalents

    21,799     24,480  

Interest receivable and other assets

    34,897     35,133  

Receivable for securities sold

    23,851     1,990  

Deferred financing costs (net of accumulated amortization of $5,094 and $4,598 as of June 30, 2017 and December 31, 2016, respectively)

    4,222     4,718  

Deferred tax asset, net

    3,003     9,125  

Total assets

  $ 2,164,718   $ 2,072,352  

LIABILITIES

             

Credit facility

 
$

303,000
 
$

343,000
 

SBIC debentures (par: $261,200 and $240,000 as of June 30, 2017 and December 31, 2016, respectively)

    255,663     235,686  

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

    173,254     172,893  

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

    88,905     88,752  

Accounts payable and other liabilities

    10,821     14,205  

Payable for securities purchased

    36,032     2,184  

Interest payable

    3,814     4,103  

Dividend payable

    10,484     10,048  

Total liabilities

    881,973     870,871  

  

             

Commitments and contingencies (Note M)

             

NET ASSETS

   
 
   
 
 

  

             

Common stock, $0.01 par value per share (150,000,000 shares authorized; 56,672,496 and 54,312,444 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively)

    567     543  

Additional paid-in capital

    1,228,185     1,143,883  

Accumulated net investment income, net of cumulative dividends of $576,222 and $521,297 as of June 30, 2017 and December 31, 2016, respectively           

    22,751     19,033  

Accumulated net realized gain from investments (accumulated net realized gain from investments of $86,943 before cumulative dividends of $129,701 as of June 30, 2017 and accumulated net realized gain from investments of $48,394 before cumulative dividends of $107,281 as of December 31, 2016)

    (42,758 )   (58,887 )

Net unrealized appreciation, net of income taxes

    74,000     96,909  

Total net assets

    1,282,745     1,201,481  

Total liabilities and net assets

  $ 2,164,718   $ 2,072,352  

NET ASSET VALUE PER SHARE

  $ 22.62   $ 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
June 30,
  Six Months Ended
June 30,
 
 
  2017   2016   2017   2016  

INVESTMENT INCOME:

                         

Interest, fee and dividend income:

                         

Control investments

  $ 14,590   $ 12,957   $ 27,576   $ 25,572  

Affiliate investments

    9,568     8,952     19,468     17,476  

Non-Control/Non-Affiliate investments

    26,113     20,956     51,116     41,693  

Interest, fee and dividend income

    50,271     42,865     98,160     84,741  

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

        37         168  

Total investment income

    50,271     42,902     98,160     84,909  

EXPENSES:

                         

Interest

    (8,793 )   (8,255 )   (17,400 )   (16,437 )

Compensation

    (4,555 )   (3,952 )   (8,985 )   (7,772 )

General and administrative

    (3,060 )   (2,157 )   (6,000 )   (4,562 )

Share-based compensation

    (2,798 )   (2,251 )   (5,067 )   (3,840 )

Expenses allocated to the External Investment Manager

    1,628     1,361     3,152     2,515  

Total expenses

    (17,578 )   (15,254 )   (34,300 )   (30,096 )

NET INVESTMENT INCOME

    32,693     27,648     63,860     54,813  

NET REALIZED GAIN (LOSS):

   
 
   
 
   
 
   
 
 

Control investments

    3,789         3,108     14,358  

Affiliate investments

    (115 )   28,707     22,816     28,707  

Non-Control/Non-Affiliate investments

    7,307     (13,237 )   12,625     (12,419 )

Marketable securities and idle funds investments

        (13 )       (1,586 )

SBIC debentures

            (5,217 )    

Total net realized gain

    10,981     15,457     33,332     29,060  

NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION):

   
 
   
 
   
 
   
 
 

Portfolio investments

    1,365     (10,585 )   (20,726 )   (38,114 )

Marketable securities and idle funds investments

        37         1,494  

SBIC debentures

    (36 )   127     5,629     (19 )

Total net change in unrealized appreciation (depreciation)             

    1,329     (10,421 )   (15,097 )   (36,639 )

INCOME TAXES:

                         

Federal and state income, excise and other taxes

    (438 )   (1,098 )   (1,690 )   (1,468 )

Deferred taxes

    (1,736 )   (675 )   (6,122 )   1,958  

Income tax benefit (provision)

    (2,174 )   (1,773 )   (7,812 )   490  

NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS

  $ 42,829   $ 30,911   $ 74,283   $ 47,724  

NET INVESTMENT INCOME PER SHARE—BASIC AND DILUTED

  $ 0.58   $ 0.54   $ 1.15   $ 1.07  

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

  $ 0.76   $ 0.60   $ 1.33   $ 0.94  

DIVIDENDS PAID PER SHARE:

                         

Regular monthly dividends

  $ 0.555   $ 0.540   $ 1.110   $ 1.080  

Supplemental dividends

    0.275     0.275     0.275     0.275  

Total dividends

  $ 0.830   $ 0.815   $ 1.385   $ 1.355  

WEIGHTED AVERAGE SHARES OUTSTANDING—BASIC AND DILUTED

    56,166,782     51,441,371     55,648,854     50,995,575  

   

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

   
1,225,757
   
12
   
38,642
   
   
   
   
38,654
 

Share-based compensation

            3,840                 3,840  

Purchase of vested stock for employee payroll tax withholding

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

Dividend reinvestment

    255,391     3     7,811                 7,814  

Amortization of directors' deferred compensation

            301                 301  

Issuance of restricted stock, net of forfeited shares

    260,668     3     (3 )                

Dividends to stockholders

                (39,883 )   (29,445 )       (69,328 )

Cumulative-effect to retained earnings for excess tax benefit

                        1,806     1,806  

Net increase (decrease) resulting from operations

                54,813     29,060     (36,149 )   47,724  

Balances at June 30, 2016

    52,074,810   $ 521   $ 1,059,466   $ 22,111   $ (50,038 ) $ 67,052   $ 1,099,112  

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

   
2,104,424
   
22
   
78,412
   
   
   
   
78,434
 

Share-based compensation

            5,067                 5,067  

Purchase of vested stock for employee payroll tax withholding

    (113,371 )   (1 )   (4,346 )               (4,347 )

Investment through issuance of unregistered shares

    11,464         442                 442  

Dividend reinvestment

    115,807     1     4,403                 4,404  

Amortization of directors' deferred compensation

            326                 326  

Issuance of restricted stock, net of forfeited shares

    225,152     2     (2 )                

Dividends to stockholders

                (54,925 )   (22,420 )       (77,345 )

Net increase (decrease) resulting from operations

                58,643     38,549     (22,909 )   74,283  

Balances at June 30, 2017

    56,698,333   $ 567   $ 1,228,185   $ 22,751   $ (42,758 ) $ 74,000   $ 1,282,745  

   

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)

 
  Six Months Ended
June 30,
 
 
  2017   2016  

CASH FLOWS FROM OPERATING ACTIVITIES

             

Net increase in net assets resulting from operations

  $ 74,283   $ 47,724  

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

             

Investments in portfolio companies

    (471,548 )   (303,049 )

Proceeds from sales and repayments of debt investments in portfolio companies

    380,005     167,809  

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

    54,352     48,952  

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

        2,129  

Net change in net unrealized depreciation

    15,097     36,639  

Net realized gain

    (33,332 )   (29,060 )

Accretion of unearned income

    (9,091 )   (4,189 )

Payment-in-kind interest

    (3,125 )   (3,042 )

Cumulative dividends

    (1,789 )   (638 )

Share-based compensation expense

    5,067     3,840  

Amortization of deferred financing costs

    1,324     1,288  

Deferred tax (benefit) provision

    6,122     (1,958 )

Changes in other assets and liabilities:

             

Interest receivable and other assets

    420     (1,825 )

Interest payable

    (289 )   1,432  

Accounts payable and other liabilities

    (3,058 )   (2,774 )

Deferred fees and other

    1,224     1,362  

Net cash provided by (used in) operating activities

    15,662     (35,360 )

CASH FLOWS FROM FINANCING ACTIVITIES

   
 
   
 
 

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

    78,434     38,654  

Dividends paid

    (72,505 )   (61,225 )

Proceeds from issuance of SBIC debentures

    46,400      

Repayments of SBIC debentures

    (25,200 )    

Proceeds from credit facility

    251,000     203,000  

Repayments on credit facility

    (291,000 )   (144,000 )

Payment of deferred loan costs and SBIC debenture fees

    (1,125 )   (30 )

Purchases of vested stock for employee payroll tax withholding

    (4,347 )   (2,593 )

Other

        (83 )

Net cash provided by (used in) financing activities

    (18,343 )   33,723  

Net decrease in cash and cash equivalents

    (2,681 )   (1,637 )

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

    24,480     20,331  

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $ 21,799   $ 18,694  

Supplemental cash flow disclosures:

             

Interest paid

  $ 16,304   $ 13,646  

Taxes paid

  $ 2,785   $ 1,575  

Non-cash financing activities:

             

Shares issued pursuant to the DRIP

  $ 4,404   $ 7,814  

   

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

4


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Control Investments(5)

 

 

 

 

                   

                           

Access Media Holdings, LLC(10)

 

Private Cable Operator

                       

     

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

  $ 23,234   $ 23,234   $ 19,450  

     

Preferred Member Units (7,339,500 units; 12% cumulative)

          7,233     270  

     

Member Units (45 units)

          1      

                  30,468     19,720  

                           

Ameritech College Operations, LLC

 

For-Profit Nursing and Healthcare College

                       

     

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

    1,004     1,004     1,004  

     

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

    3,025     3,025     3,025  

     

Preferred Member Units (2,936 units)

          6,191     2,910  

                  10,220     6,939  

                           

ASC Interests, LLC

 

Recreational and Educational Shooting Facility

                       

     

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

    2,000     1,989     2,000  

     

Member Units (1,500 units)(8)

          1,500     2,320  

                  3,489     4,320  

                           

Bond-Coat, Inc.

 

Casing and Tubing Coating Services

                       

     

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

    11,596     11,576     11,596  

     

Common Stock (57,508 shares)

          6,350     7,830  

                  17,926     19,426  

                           

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     65,910  

                           

Charps, LLC

 

Pipeline Maintenance and Construction

                       

     

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

    18,400     18,209     18,209  

     

Preferred Member Units (1,600 units)

          400     400  

                  18,609     18,609  

                           

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Clad-Rex Steel, LLC

 

Specialty Manufacturer of Vinyl-Clad Metal

                       

     

LIBOR Plus 9.50% (Floor 1.00%), Current Coupon 10.55%, Secured Debt (Maturity—December 20, 2021)(9)

    14,080     13,949     13,949  

     

Member Units (717 units)(8)

          7,280     7,830  

     

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

    1,193     1,181     1,181  

     

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

          210     210  

                  22,620     23,170  

                           

CMS Minerals Investments

 

Oil & Gas Exploration & Production

                       

     

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

          3,641     2,628  

                           

Datacom, LLC

 

Technology and Telecommunications Provider

                       

     

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

    1,080     1,080     1,080  

     

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

    12,024     11,974     11,653  

     

Class A Preferred Member Units (15% cumulative)

          1,181     1,472  

     

Class B Preferred Member Units (6,453 units)

          6,030     211  

                  20,265     14,416  

                           

Gamber-Johnson Holdings, LLC

 

Manufacturer of Ruggedized Computer Mounting Systems

                       

     

LIBOR Plus 11.00% (Floor 1.00%), Current Coupon 12.05%, Secured Debt (Maturity—June 24, 2021)(9)

    23,880     23,668     23,880  

     

Member Units (8,619 units)(8)

          14,844     22,080  

                  38,512     45,960  

                           

Garreco, LLC

 

Manufacturer and Supplier of Dental Products

                       

     

LIBOR Plus 10.00% (Floor 1.00%), Current Coupon 11.15%, Secured Debt (Maturity—March 31, 2020)(9)

    5,844     5,794     5,794  

     

Member Units (1,200 units)

          1,200     1,830  

                  6,994     7,624  

                           

GRT Rubber Technologies LLC

 

Manufacturer of Engineered Rubber Products

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.05%, Secured Debt (Maturity—December 19, 2019)(9)

    12,409     12,340     12,409  

     

Member Units (5,879 units)(8)

          13,065     20,680  

                  25,405     33,089  

                           

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Gulf Manufacturing, LLC

 

Manufacturer of Specialty Fabricated Industrial Piping Products

                       

     

9% PIK Secured Debt (Ashland Capital IX, LLC) (Maturity—June 30, 2017)(17)

    777     777     777  

     

Member Units (438 units)(8)

          2,980     10,470  

                  3,757     11,247  

                           

Gulf Publishing Holdings, LLC

 

Energy Industry Focused Media and Publishing

                       

     

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

    12,800     12,692     12,692  

     

Member Units (3,681 units)

          3,681     4,330  

                  16,373     17,022  

                           

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  

                           

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 14.05%, Secured Debt (Maturity July 2, 2020)(9)

    9,976     9,909     9,909  

     

Preferred Member Units (3,200 units)

          3,942     3,940  

                  13,851     13,849  

                           

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

                       

     

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

    10,350     10,317     10,350  

     

Member Units (5,400 units)(8)

          5,606     8,630  

                  15,923     18,980  

                           

7


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Jensen Jewelers of Idaho, LLC

 

Retail Jewelry Store

                       

     

Prime Plus 6.75% (Floor 2.00%), Current Coupon 10.75%, Secured Debt (Maturity—November 14, 2019)(9)

    3,755     3,707     3,755  

     

Member Units (627 units)(8)

          811     4,460  

                  4,518     8,215  

                           

KBK Industries, LLC

 

Manufacturer of Specialty Oilfield and Industrial Products

                       

     

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

    940     940     940  

     

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

    5,900     5,896     5,900  

     

Member Units (325 units)

          783     3,990  

                  7,619     10,830  

                           

Lamb Ventures, LLC

 

Aftermarket Automotive Services Chain

                       

     

LIBOR Plus 5.75%, Current Coupon 6.83%, Secured Debt (Maturity May 30, 2018)

    190     190     190  

     

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

    7,579     7,579     7,579  

     

Preferred Equity (non-voting)

          400     400  

     

Member Units (742 units)(8)

          5,273     6,330  

     

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     590  

                  14,495     15,521  

                           

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      

                           

MH Corbin Holding LLC

 

Manufacturer and Distributor of Traffic Safety Products

                       

     

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

    12,950     12,862     12,862  

     

Preferred Member Units (4,000 shares)

          6,000     6,000  

                  18,862     18,862  

                           

8


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

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)

    814     814     814  

     

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

          790     1,290  

                  9,064     8,734  

                           

MSC Adviser I, LLC(16)

 

Third Party Investment Advisory Services

                       

     

Member Units (Fully diluted 100.0%)(8)

              37,104  

                           

Mystic Logistics Holdings, LLC

 

Logistics and Distribution Services Provider for Large Volume Mailers

                       

     

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

    8,032     7,938     8,032  

     

Common Stock (5,873 shares)

          2,720     6,590  

                  10,658     14,622  

                           

NAPCO Precast, LLC

 

Precast Concrete Manufacturing

                       

     

LIBOR Plus 8.50%, Current Coupon 9.70%, Secured Debt (Maturity—May 31, 2019)

    10,475     10,438     10,438  

     

Member Units (2,955 units)(8)

          2,975     11,100  

                  13,413     21,538  

                           

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)

    400     400     400  

     

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

    4,205     4,194     4,205  

     

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

          252     680  

     

Member Units (500,000 units)

          765     2,461  

                  5,611     7,746  

                           

NRP Jones, LLC

 

Manufacturer of Hoses, Fittings and Assemblies

                       

     

8% Current / 4% PIK Secured Debt (Maturity—December 22, 2016)(17)

    14,197     14,197     14,197  

     

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  

                  17,914     14,737  

                           

9


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

NuStep, LLC

 

Designer, Manufacturer and Distributor of Fitness Equipment

                       

     

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

    20,600     20,402     20,402  

     

Preferred Member Units (406 units)

          10,200     10,200  

                  30,602     30,602  

                           

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)

          1,290     8,230  

                           

PPL RVs, Inc.

 

Recreational Vehicle Dealer

                       

     

LIBOR Plus 7.00% (Floor 0.50%), Current Coupon 8.15%, Secured Debt (Maturity—November 15, 2021)(9)

    18,000     17,841     18,000  

     

Common Stock (1,962 shares)(8)

          2,150     11,780  

                  19,991     29,780  

                           

Principle Environmental, LLC

 

Noise Abatement Service Provider

                       

     

12% Secured Debt (Maturity—April 30, 2017)(17)

    4,060     4,060     4,060  

     

12% Current / 2% PIK Secured Debt (Maturity—April 30, 2017)(17)

    3,412     3,412     3,412  

     

Preferred Member Units (19,631 units)

          4,600     6,610  

     

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

          1,200     340  

                  13,272     14,422  

                           

Quality Lease Service, LLC

 

Provider of Rigsite Accommodation Unit Rentals and Related Services

                       

     

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

    7,341     7,341     7,341  

     

Member Units (1,000 units)

          2,318     4,387  

                  9,659     11,728  

                           

River Aggregates, LLC

 

Processor of Construction Aggregates

                       

     

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

    750     666     666  

     

Member Units (1,150 units)(8)

          1,150     4,410  

     

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

          369     2,510  

                  2,185     7,586  

                           

10


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

SoftTouch Medical Holdings LLC

 

Provider of In-Home Pediatric Durable Medical Equipment

                       

     

LIBOR Plus 9.00% (Floor 1.00%), Current Coupon 10.05%, Secured Debt (Maturity—October 31, 2019)(9)

    7,140     7,103     7,140  

     

Member Units (4,450 units)(8)

          4,930     9,540  

                  12,033     16,680  

                           

The MPI Group, LLC

 

Manufacturer of Custom Hollow Metal Doors, Frames and Accessories

                       

     

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

    2,924     2,923     2,620  

     

Series A Preferred Units (2,500 units; 10% Cumulative)

          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     5,010  

                           

Uvalco Supply, LLC

 

Farm and Ranch Supply Store

                       

     

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

    636     636     636  

     

Member Units (1,867 units)(8)

          3,579     4,306  

                  4,215     4,942  

                           

Vision Interests, Inc.

 

Manufacturer / Installer of Commercial Signage

                       

     

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

    2,814     2,790     2,790  

     

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

          3,000     3,000  

     

Common Stock (1,126,242 shares)

          3,706      

                  9,496     5,790  

                           

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     210  

     

Preferred Member Units (10,072 units)

          2,834     3,580  

                  7,479     7,835  

Subtotal Control Investments (32.3% of total investments at fair value)

  $ 497,623   $ 671,713  

11


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

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   $ 690  

     

Member Units (186 units)(8)

          1,200     2,850  

                  1,459     3,540  

                           

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 10.55%, Secured Debt (Maturity—April 8, 2021)(9)

    800     797     797  

     

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

    4,027     3,994     3,994  

     

Member Units (800,000 units)

          800     800  

                  5,591     5,591  

                           

Barfly Ventures, LLC(10)

 

Casual Restaurant Group

                       

     

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

    7,796     7,675     7,796  

     

Options (2 equivalent units)

          397     590  

     

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

          473     330  

                  8,545     8,716  

                           

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     16,216     16,216  

     

Member Units (2,160,000 units)

          2,160     2,160  

                  18,376     18,376  

                           

Boss Industries, LLC

 

Manufacturer and Distributor of Air, Power and Other Industrial Equipment

                       

     

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

          2,519     3,320  

                           

12


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Bridge Capital Solutions Corporation

 

Financial Services and Cash Flow Solutions Provider

                       

     

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

    7,500     5,740     5,740  

     

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  

                  9,863     11,110  

                           

Buca C, LLC

 

Casual Restaurant Group

                       

     

LIBOR Plus 7.25% (Floor 1.00%), Current Coupon 8.33%, Secured Debt (Maturity—June 30, 2020)(9)

    21,204     21,068     21,068  

     

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

          4,053     4,048  

                  25,121     25,116  

                           

CAI Software LLC

 

Provider of Specialized Enterprise Resource Planning Software

                       

     

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

    3,483     3,464     3,483  

     

Member Units (65,356 units)(8)

          654     2,820  

                  4,118     6,303  

                           

CapFusion, LLC(13)

 

Non-Bank Lender to Small Businesses

                       

     

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

    14,400     13,304     13,304  

     

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

          1,200     1,200  

                  14,504     14,504  

                           

Chandler Signs Holdings, LLC(10)

 

Sign Manufacturer

                       

     

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

    4,500     4,464     4,500  

     

Class A Units (1,500,000 units)(8)

          1,500     2,910  

                  5,964     7,410  

                           

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)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Congruent Credit Opportunities Funds(12)(13)

 

Investment Partnership

                       

     

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

          5,730     1,377  

     

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

          17,869     18,577  

                  23,599     19,954  

                           

Dos Rios Partners(12)(13)

 

Investment Partnership

                       

     

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

          5,996     5,369  

     

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

          1,904     1,573  

                  7,900     6,942  

                           

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)

    9,699     9,591     3,000  

     

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

          50      

                  9,641     3,000  

                           

EIG Fund Investments(12)(13)

 

Investment Partnership

                       

     

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

          793     694  

     

LP Interests (EIG Traverse Co-Investment, L.P.) (Fully diluted 22.2%)(8)

          9,805     10,409  

                  10,598     11,103  

                           

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)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Gault Financial, LLC (RMB Capital, LLC)

 

Purchases and Manages Collection of Healthcare and other Business Receivables

                       

     

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

    12,720     12,720     11,770  

     

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

          400      

                  13,120     11,770  

                           

Glowpoint, Inc.

 

Provider of Cloud Managed Video Collaboration Services

                       

     

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

    9,000     8,963     2,700  

     

Common Stock (7,711,517 shares)

          3,958     2,170  

                  12,921     4,870  

                           

Guerdon Modular Holdings, Inc.

 

Multi-Family and Commercial Modular Construction Company

                       

     

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

    10,708     10,612     10,612  

     

Preferred Stock (404,998 shares)

          1,140     1,140  

     

Common Stock (212,033 shares)

          2,983     80  

                  14,735     11,832  

                           

Hawk Ridge Systems, LLC(13)

 

Value-Added Reseller of Engineering Design and Manufacturing Solutions

                       

     

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

    10,000     9,909     9,909  

     

Preferred Member Units (226 units)(8)

          2,850     2,850  

     

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

          150     150  

                  12,909     12,909  

                           

Houston Plating and Coatings, LLC

 

Provider of Plating and Industrial Coating Services

                       

     

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

    3,000     3,000     3,000  

     

Member Units (315,756 units)

          2,179     4,980  

                  5,179     7,980  

                           

I-45 SLF LLC(12)(13)

 

Investment Partnership

                       

     

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

          16,200     17,165  

                           

15


Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

Indianhead Pipeline Services, LLC

 

Provider of Pipeline Support Services

                       

     

12% Secured Debt (Maturity—February 6, 2018)

    5,192     5,192     5,192  

     

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

          2,537     2,875  

     

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

          459      

     

Member Units (14,732 units)

          1      

                  8,189     8,067  

                           

L.F. Manufacturing Holdings, LLC(10)

 

Manufacturer of Fiberglass Products

                       

     

Member Units (2,179,001 units)

          2,019     1,380  

                           

Meisler Operating LLC

 

Provider of Short-term Trailer and Container Rental

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.72%, Secured Debt (Maturity—June 7, 2022)(9)

    16,800     16,618     16,618  

     

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

          3,200     3,200  

                  19,818     19,818  

                           

OnAsset Intelligence, Inc.

 

Provider of Transportation Monitoring / Tracking Products and Services

                       

     

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

    4,796     4,796     4,796  

     

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

    45     45     45  

     

Preferred Stock (912 shares; 7% cumulative)

          1,981      

     

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

          1,919      

                  8,741     4,841  

                           

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)

    13,300     13,218     13,300  

     

Preferred Stock (1,740,000 shares)

          1,740     2,610  

     

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

          3,733     4,870  

                  18,691     20,780  

                           

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Table of Contents


MAIN STREET CAPITAL CORPORATION

Consolidated Schedule of Investments (Continued)

June 30, 2017

(dollars in thousands)

(Unaudited)

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

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)

    13,175     13,081     13,081  

     

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

          2,878     2,878  

                  15,959     15,959  

                           

UniTek Global Services, Inc.(11)

 

Provider of Outsourced Infrastructure Services

                       

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.65%, Secured Debt (Maturity—January 13, 2019)(9)

    8,535     8,527     8,535  

     

LIBOR Plus 8.50% (Floor 1.00%), Current Coupon 9.65% / 1.00% PIK, Current Coupon Plus PIK 10.65%, Secured Debt (Maturity—January 13, 2019)(9)

    137     137     137  

     

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

    802     802     802  

     

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