Quarterly report pursuant to Section 13 or 15(d)

DEBT

v3.23.3
DEBT
 9 Months Ended
Sep. 30, 2023
Debt Disclosure [Abstract]  
DEBT DEBT
Summary of debt as of September 30, 2023 is as follows:
Outstanding Balance
Unamortized Debt Issuance
Costs (1)
Recorded Value
Estimated Fair Value (2)
(dollars in thousands)
SPV Facility $ 264,688  $ —  $ 264,688  $ 264,688 
Series A Notes 150,000  (920) 149,080  138,513 
Corporate Facility 92,000  —  92,000  92,000 
Total Debt $ 506,688  $ (920) $ 505,768  $ 495,201 
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(1)The unamortized debt issuance costs for the Credit Facilities are reflected as Deferred financing costs on the Consolidated Balance Sheets, while the deferred debt issuance costs related to the Series A Notes are reflected as contra liabilities to the Series A Notes on the Consolidated Balance Sheets.
(2)Estimated fair value for outstanding debt if MSC Income Fund had adopted the fair value option under ASC 825. See discussion of the methods used to estimate the fair value of MSC Income Fund’s debt in Note B.9. — Summary of Significant Accounting Policies — Fair Value of Financial Instruments.
Summary of debt as of December 31, 2022 is as follows:
Outstanding Balance
Unamortized Debt Issuance Costs (1)
Recorded Value
Estimated Fair Value (2)
(dollars in thousands)
SPV Facility $ 223,688  $ —  $ 223,688  $ 223,688 
Series A Notes 150,000  (1,144) 148,856  132,955 
Corporate Facility 98,000  —  98,000  98,000 
Total Debt $ 471,688  $ (1,144) $ 470,544  $ 454,643 
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(1)The unamortized debt issuance costs for the Credit Facilities are reflected as Deferred financing costs on the Consolidated Balance Sheets, while the deferred debt issuance costs related to the Series A Notes are reflected as contra liabilities to the Series A Notes on the Consolidated Balance Sheets.
(2)Estimated fair value for outstanding debt if MSC Income Fund had adopted the fair value option under ASC 825. See discussion of the methods used to estimate the fair value of MSC Income Fund’s debt in Note B.9. — Summary of Significant Accounting Policies — Fair Value of Financial Instruments.
Summarized interest expense for the three and nine months ended September 30, 2023 and 2022 is as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2023 2022 2023 2022
(dollars in thousands)
SPV Facility $ 5,933  $ 3,944  $ 16,127  $ 9,218 
Series A Notes 1,590  1,573  4,769  4,577 
Corporate Facility 1,880  1,284  5,703  2,833 
Total Interest Expense $ 9,403  $ 6,801  $ 26,599  $ 16,628 
Corporate Facility
MSC Income Fund is a party to a senior secured revolving credit agreement dated March 6, 2017 (as amended, the “Corporate Facility”) with EverBank (formerly known as TIAA Bank), as administrative agent, and with EverBank and other financial institutions as lenders. As of September 30, 2023, the Corporate Facility included (i) total commitments of $165.0 million, (ii) an accordion feature with the right to request an increase in commitments under the facility from new and existing lenders on the same terms and conditions as the existing commitments up to $200.0 million of total commitments and (iii) a revolving period and maturity date to September 1, 2025 and March 1, 2026, respectively, with two, one-year extension options subject to lender approval.
Borrowings under the Corporate Facility bear interest, subject to MSC Income Fund’s election, on a per annum basis at a rate equal to (i) SOFR plus 2.50% or (ii) the base rate plus 1.40%. The base rate is defined as the higher of (a) the Prime rate, (b) the Federal Funds Rate (as defined in the credit agreement) plus 0.5% or (c) SOFR plus 1.1%. Additionally, MSC Income Fund pays an annual unused commitment fee of 0.30% per annum on the unused lender commitments if more than 50% or more of the lender commitments are being used and an annual unused commitment fee of 0.625% per annum on the unused lender commitments if less than 50% of the lender commitments are being used. Borrowings under the Corporate Facility are secured by a first lien on all of the assets of MSIF and its subsidiaries, other than the assets of Structured Subsidiaries or immaterial subsidiaries, as well as all of the assets, and a pledge of equity ownership interests, of any future subsidiaries of MSIF (other than Structured Subsidiaries or immaterial subsidiaries). In connection with the Corporate Facility, MSIF has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities. Effective April 27, 2023, the reference rate changed from LIBOR to SOFR plus an applicable credit spread adjustment of 0.10%.
As of September 30, 2023, the interest rate on the Corporate Facility was 7.83%. The average interest rate for borrowings under the Corporate Facility was 7.75% and 4.61% per annum for the three months ended September 30, 2023 and 2022, respectively, and 7.39% and 3.45% per annum for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, MSC Income Fund was in compliance with all financial covenants of the Corporate Facility.
SPV Facility
On February 3, 2021, MSIF Funding LLC (“MSIF Funding”), a wholly-owned Structured Subsidiary that primarily holds originated loan investments, entered into a senior secured revolving credit facility (as amended, the “SPV Facility” and, together with the Corporate Facility, the “Credit Facilities”) by and among JPMorgan Chase Bank, National Association (“JPM”), as administrative agent, and U.S. Bank, N.A., as collateral agent and collateral administrator, JPM and other financial institutions as lenders and MSIF as portfolio manager. In August 2023, the SPV facility was amended to extend the revolving period expiration date from February 3, 2024 to February 3, 2027 and the maturity date from February 3, 2025 to February 3, 2028. Additionally, total commitments were reduced from $325.0 million to $300.0 million. Advances under the SPV Facility bear interest at a per annum rate equal to the three month SOFR in effect, plus the applicable margin of 3.00% per annum. MSIF Funding also pays a commitment fee of 0.75% per annum on the average daily unused amount of the financing commitments until February 2, 2027. As of September 30, 2023, the SPV Facility included total commitments of $300.0 million and an accordion feature, with the right to request an increase of total
commitments and borrowing availability up to $450.0 million. The SPV Facility is secured by a collateral loan on the assets of MSIF Funding. In connection with the SPV Facility, MSIF Funding has made customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
As of September 30, 2023, the interest rate on the SPV Facility was 8.25%. The average interest rate for borrowings under the SPV Facility was 8.25% and 5.18% per annum for the three months ended September 30, 2023 and 2022, respectively, and 7.99% and 4.07% per annum for the nine months ended September 30, 2023 and 2022, respectively. As of September 30, 2023, MSC Income Fund was in compliance with all financial covenants of the SPV Facility.
Series A Notes
Pursuant to a Master Note Purchase Agreement dated October 21, 2021 (the “Note Purchase Agreement”), MSC Income Fund issued $77.5 million of 4.04% Series A Senior Notes due 2026 (the “Series A Notes”) upon entering into the Note Purchase Agreement and an additional $72.5 million on January 21, 2022. The Series A Notes bear a fixed interest rate of 4.04% per year and will mature on October 30, 2026, unless redeemed, purchased or prepaid prior to such date by the Company in accordance with their terms.
Interest on the Series A Notes is due semiannually on April 30 and October 30 each year, beginning on April 30, 2022. The Series A Notes may be redeemed in whole or in part at any time or from time to time at MSC Income Fund’s option at par plus accrued interest to the prepayment date and, if applicable, a make-whole premium. In addition, MSC Income Fund is obligated to offer to prepay the Series A Notes at par plus accrued and unpaid interest up to, but excluding, the date of prepayment, if certain change in control events occur. In the event that a Below Investment Grade Event (as defined in the Note Purchase Agreement) occurs, the Series A Notes will bear interest at a fixed rate of 5.04% per year from the date of the occurrence of the Below Investment Grade Event to and until the date on which the Below Investment Grade Event ends. The Series A Notes are general unsecured obligations of MSIF that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by MSIF.
The Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, cross-default under other indebtedness of MSIF or subsidiary guarantors subject to a cure pass-through, certain judgments and orders and certain events of bankruptcy. As of September 30, 2023, MSC Income Fund was in compliance with all financial covenants of the Note Purchase Agreement.