SEC Company Response from Main Street Capital (MAIN) — May 24, 2012
Main Street Capital CORP
Date: May 24, 2012 · CIK: 0001396440 · Accession: 0001104659-12-039695
AI Filing Summary & Sentiment
File numbers found in text: 333-173674
Letter
Washington, DC 20549 Attn: James E. O’Connor, Esq. Re: Main Street Capital Corporation Registration Statement on Form N-2 (File No. 333-173674)
Dear Mr. O’Connor:
In accordance with Rule 461 of the General Rules and Regulations under the Securities Act of 1933, as amended, Main Street Capital Corporation (the “Company”) hereby respectfully requests that the above-captioned registration statement, including all amendments thereto, be ordered effective on May 24, 2012 at 4:30 p.m., or as soon thereafter as practicable.
In connection with the submission of the Company’s request for accelerated effectiveness of the above-captioned Registration Statement, the Company hereby acknowledges that:
· the Company is responsible for the adequacy and accuracy of the disclosure in the filing;
· should the Securities and Exchange Commission (the “Commission”) or the staff thereof (the “Staff”), acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing;
· the action of the Commission or the Staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the Company from its full responsibility for the adequacy and accuracy of the disclosure in the filing; and
· the Company may not assert this action as defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.
MAIN STREET CAPITAL CORPORATION
By:
/s/ Jason B. Beauvais
Jason B. Beauvais
Vice President, General Counsel and Secretary
[Sutherland Asbill & Brennan LLP Letterhead]
May 24, 2012
CONFIDENTIAL
VIA EDGAR
Christina DiAngelo
Division of Investment Management
U.S. Securities and Exchange Commission
100 F Street, N.E.
Washington, DC 20549
Re:
Main Street Capital Corporation — Post-Effective Amendment No. 2 to Registration Statement on Form N-2 (File No. 333-173674) (the “Registration Statement”)
Dear Ms. DiAngelo:
On behalf of Main Street Capital Corporation (the “Company”), set forth below is the Company’s response to the comments of the staff of the Division of Investment Management (the “Staff”) of the Securities and Exchange Commission (the “SEC”) that you provided to us regarding the Registration Statement. The Staff’s comments are set forth below and are followed by the Company’s responses.
Fees and Expenses
1. Comment: We refer to the 1.53% figure in the line item entitled “Income tax expense” in the “Fees and Expenses” table. Please explain to the Staff why this figure is less than the difference obtained by subtracting the 9.82% figure (which is the ratio of operating expenses, including tax expense, to average net asset value) in Note H. Financial Highlights in the notes to the financial statements contained in the Registration Statement and the 7.96% figure (which is the ratio of operating expenses to average net asset value) also contained in such note to the financial statements.
Response:
The Financial Highlights expense ratios in Note H. are calculated as a percentage of “average net assets” for the year ended December 31, 2011 (excluding the portion of net
assets belonging to the Main Street Capital II, LP (“MSC II”) noncontrolling interest), which reflects a rolling five quarter average. For the year ended December 31, 2011, this average covers the net assets as of December 31, 2011, September 30, 2011, June 30, 2011, March 31, 2011, and December 31, 2010, and the resulting average amount for these five dates as disclosed in Note H. is $327,385,882. Also, the expenses used in the Financial Highlights table in Note H. come directly from the Company’s December 31, 2011 consolidated statement of operations, but are net of the amount attributable to the MSC II noncontrolling interests (see footnote (1) in the Financial Highlights table).
The Fees and Expenses table ratios are calculated as a percentage of net assets (including the portion of net assets belonging to the MSC II noncontrolling interest) as of the December 31, 2011 consolidated balance sheet, or $411,188,117. Also, the expense amounts used in the Fees and Expenses table agree to the amounts reported in the December 31, 2011 consolidated statement of operations and include the noncontrolling interest share which corresponds with the net asset assumptions used in this table.
Please note that the Company acquired all of the remaining noncontrolling equity interests in MSC II during the first quarter of 2012, and as a result the noncontrolling interest will no longer be a reconciling item in future periods ending after the quarter ended March 31, 2012.
2. Comment: We refer to footnote no. 6 to the Fees and Expenses table. Please expand the discussion in the footnote to explain the assumptions that were used in connection with computing the 3.29% figure in the line item entitled “Interest payments on borrowed funds” in the Fees and Expenses table.
Response:
The Company will comply with this comment by expanding the footnote to explain that estimated annual interest payments on borrowed funds are based on current debt levels and are then adjusted for projected increases (but not decreases) in debt levels over the next twelve months.
3. Comment: We refer to the line item entitled “Acquired fund fees and expenses” in the Fee and Expenses table. Please confirm that investments in any money market mutual funds and other mutual funds were taken into accounting in arriving at the 0.02% figure contained in such line item.
Response:
The Company currently has no investments in any money market mutual funds or any other mutual funds. However, to the extent the Company has any such investments in the future, they will be included when calculating the “Acquired fund fees and expenses” in the Fee and Expenses table.
4. Comment: Please consider deleting footnote no. 9 to the Fees and Expenses table given the common sense nature of the information contained therein.
Response:
The Company will comply with this comment and delete footnote no. 9 to the Fees and Expenses table.
5. Comment: We refer to the Example contained in the Fees and Expenses table. Please provide the Staff with the back-up computations for the figures contained therein.
Response:
The Company has supplementally provided the Staff with back-up computations for the figures reflected in the Example contained in the Fees and Expenses table.
Consolidated Financial Statements
6. Comment: We refer to the line item entitled “cash and cash equivalents” on the consolidated balance sheets. Please advise the Staff on a supplemental basis of the various components thereof, including whether such line item includes investments in money market mutual funds. If such line item includes investments in money market mutual funds, please confirm that such investments are separately identified in the schedule of investments.
Response:
“Cash and cash equivalents” on the consolidated balance sheet includes cash. The Company confirms that such line item does not include investments in any money market mutual funds. However, to the extent the Company has investments in any money market mutual funds in the future, such investments will be included separately in the Company’s schedule of investments to the extent required by Regulation S-X Rule 12-12.
7. Comment: We refer to the line item entitled “SBIC debentures” on the consolidated balance sheets. Please advise the Staff on a supplemental basis why the Company has elected fair value treatment with respect to a portion of its SBIC debentures.
Response:
The small business investment company (“SBIC”) debentures carried at fair value were issued by MSC II, the SBIC fund in which the Company acquired an approximately 88% ownership in January 2010 (the “Exchange Offer”). The Company elected the fair value option under ASC 825, Financial Instruments (“ASC 825”) for the SBIC debentures (the “Acquired Debentures”) acquired by the Company in connection with the Exchange Offer. The fair value option was elected for the Acquired Debentures as part of the
acquisition accounting related to the Exchange Offer. In order to provide for a more consistent basis of presentation, the Company has elected and currently intends to continue to elect the fair value option for individual SBIC debentures issued by MSC II subsequent to the Exchange Offer. As of December 31, 2011, the recorded value of the SBIC debentures was $201.9 million, which consisted of (i) $76.9 million recorded at fair value, or $18.1 million less than the $95.0 million face value of these MSC II SBIC debentures, and (ii) $125.0 million reported at face value and issued by Main Street Mezzanine Fund, LP, which SBIC was owned by the Company prior to the Exchange Offer. See Note B.13 to the audited consolidated financial statements as of December 31, 2011.
8. Comment: We refer to the line item entitled “Net unrealized appreciation, net of income taxes” on the consolidated balance sheets. Please advise the Staff on a supplemental basis of the computations involved in determining the change in the amount of net unrealized appreciation included in the “Total investments” balance from December 31, 2010 to December 31, 2011. Also, please provide the Staff with a reconciliation of the change in the “Total investments” balance from December 31, 2010 to December 31, 2011.
Response:
The following information is being provided to assist the Staff in understanding the change in the amount of net unrealized appreciation reflected in the “Total investments” balance from December 31, 2010 to December 31, 2011 (the total amount of which is $266.8 million on December 31, 2011). For the year ended December 31, 2011, the following unrealized losses reflected in the “Net unrealized appreciation, net of income taxes” line item on the consolidated balance sheet were not part of the change in the “Total investments” balance:
· Change in the value of SBIC debentures at fair value — ($6.3) million unrealized loss
· Change in Other Assets — ($0.5) million unrealized loss on a note receivable
Excluding the two unrealized loss items above, the change in the amount of net unrealized appreciation attributable to investments and included in the change in the “Total investments” balance from December 31, 2010 to December 31, 2011 was $35.3 million.
The change in the “Total investments” balance from December 31, 2010 to December 31, 2011 is reconciled below (in millions):
Beginning balance at December 31, 2010
$
417.6 million
Per the cash flow statement:
Investments in portfolio companies
$
249.4
Repayments from portfolio companies
$
(80.8
)
Proceeds from sale of equity securities
$
(2.1
)
Net marketable securities investments
$
54.0
Net unrealized appreciation from investments
$
35.3
Net realized gain
$
2.6
Accretion of unearned income
$
6.8
Net PIK (PIK interest $2.0 and cumulative dividends $1.6)
$
3.6
Deferred loan origination fees
$
(2.1
)
Ending balance at 12/31/11
$
684.3 million
9. Comment: Please delete the double-underscore under the line item entitled “Total liabilities and net assets” in the consolidated balance sheets.
Response:
Based on current industry reporting practice, the Company believes the double-underscore under the “Total liabilities and net assets” line item highlights the symmetry of the financial statement with the “Total assets” line. Therefore, the Company respectfully declines to delete such double-underscore.
10. Comment: We refer to the consolidated statements of operations. If payment-in-kind income in any period shown exceeded 5% of total investment income for such period, such income should be separately stated on the consolidated statements of operations for such period. See Rule 6-07(1) of Regulation S-X.
Response:
The Company confirms that its payment-in-kind (“PIK”) interest income has not exceeded 5% of total investment income for any period shown in the Company’s consolidated statements of operations in the Registration Statement.
Please also refer to the Company’s risk factor entitled “We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income” in the Registration Statement where the Company highlights the percentage of payment-in-kind (“PIK”) interest income to total investment income (3.7% for 2011). In addition, the Company began separately disclosing the percentage of PIK interest income to total investment income in the notes to its consolidated financial statements beginning with the quarter ended March 31, 2012.
11. Comment: We refer to the consolidated statements of operations. Similarly, please separately state any expense item contained within the “General and Administrative” expense line item that exceeds 5% of total expenses. See Rule 6-07(2)(b) of Regulation S-X.
Response:
The Company currently has no expense items greater than 5% of total expenses. However, to the extent the Company has any such expense items greater than 5% of total expenses in the future, they will be separately reported within the Company’s consolidated statement of operations in compliance with Rule 6-07(2)(b) of Regulation S-X.
12. Comment: In an appropriate location in the notes to the consolidated financial statements, please separately disclose the following information with respect to the Company’s equity offerings: gross proceeds, sales load (underwriting discounts or commissions) and offerings expenses.
Response:
The Company began separately disclosing the gross proceeds, sales load (underwriting discounts or commissions) and offerings expenses associated with its equity offerings in its notes to the consolidated financial statements for the quarter ended March 31, 2012 and will continue to provide such disclosure in the Company’s future filings.
13. Comment: Please confirm that the Company will periodically determine that the total amount of payment-in-kind interest, plus the initial cost of the underlying debt security does not exceed the current fair value of the debt security.
Response:
The Company confirms that it periodically determines that the total amount of payment-in-kind interest, plus the initial cost of the underlying debt security does not exceed the current fair value of the debt security.
14. Comment: Please comply with Instruction 1.b to Item 8.6.c of Form N-2. In addition, please consider disclosing the percentage of the Company’s non-qualifying assets as of the date of the most recent financial statements included in the Registration Statement.
Response:
The Company began complying with Instruction 1.b to Item 8.6.c of Form N-2 in its financial statements for the quarter ended March 31, 2012. The footnote included in the Company’s Schedule of Investments as of March 31, 2012 indicates those investments
that are not qualifying assets as defined under Section 55(a) of the 1940 Act and the significance of such non-qualification. Based on the current industry repo
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CORRESP 1 filename1.htm Main Street Capital Corporation 1300 Post Oak Boulevard, Suite 800 Houston, TX 77056 (713) 350-6000 May 24, 2012 U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Attn: James E. O’Connor, Esq. Re: Main Street Capital Corporation Registration Statement on Form N-2 (File No. 333-173674) Dear Mr. O’Connor: In accordance with Rule 461 of the General Rules and Regulations under the Securities Act of 1933, as amended, Main Street Capital Corporation (the “Company”) hereby respectfully requests that the above-captioned registration statement, including all amendments thereto, be ordered effective on May 24, 2012 at 4:30 p.m., or as soon thereafter as practicable. In connection with the submission of the Company’s request for accelerated effectiveness of the above-captioned Registration Statement, the Company hereby acknowledges that: · the Company is responsible for the adequacy and accuracy of the disclosure in the filing; · should the Securities and Exchange Commission (the “Commission”) or the staff thereof (the “Staff”), acting pursuant to delegated authority, declare the filing effective, it does not foreclose the Commission from taking any action with respect to the filing; · the action of the Commission or the Staff, acting pursuant to delegated authority, in declaring the filing effective, does not relieve the Company from its full responsibility for the adequacy and accuracy of the disclosure in the filing; and · the Company may not assert this action as defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States. MAIN STREET CAPITAL CORPORATION By: /s/ Jason B. Beauvais Jason B. Beauvais Vice President, General Counsel and Secretary [Sutherland Asbill & Brennan LLP Letterhead] May 24, 2012 CONFIDENTIAL VIA EDGAR Christina DiAngelo Division of Investment Management U.S. Securities and Exchange Commission 100 F Street, N.E. Washington, DC 20549 Re: Main Street Capital Corporation — Post-Effective Amendment No. 2 to Registration Statement on Form N-2 (File No. 333-173674) (the “Registration Statement”) Dear Ms. DiAngelo: On behalf of Main Street Capital Corporation (the “Company”), set forth below is the Company’s response to the comments of the staff of the Division of Investment Management (the “Staff”) of the Securities and Exchange Commission (the “SEC”) that you provided to us regarding the Registration Statement. The Staff’s comments are set forth below and are followed by the Company’s responses. Fees and Expenses 1. Comment: We refer to the 1.53% figure in the line item entitled “Income tax expense” in the “Fees and Expenses” table. Please explain to the Staff why this figure is less than the difference obtained by subtracting the 9.82% figure (which is the ratio of operating expenses, including tax expense, to average net asset value) in Note H. Financial Highlights in the notes to the financial statements contained in the Registration Statement and the 7.96% figure (which is the ratio of operating expenses to average net asset value) also contained in such note to the financial statements. Response: The Financial Highlights expense ratios in Note H. are calculated as a percentage of “average net assets” for the year ended December 31, 2011 (excluding the portion of net assets belonging to the Main Street Capital II, LP (“MSC II”) noncontrolling interest), which reflects a rolling five quarter average. For the year ended December 31, 2011, this average covers the net assets as of December 31, 2011, September 30, 2011, June 30, 2011, March 31, 2011, and December 31, 2010, and the resulting average amount for these five dates as disclosed in Note H. is $327,385,882. Also, the expenses used in the Financial Highlights table in Note H. come directly from the Company’s December 31, 2011 consolidated statement of operations, but are net of the amount attributable to the MSC II noncontrolling interests (see footnote (1) in the Financial Highlights table). The Fees and Expenses table ratios are calculated as a percentage of net assets (including the portion of net assets belonging to the MSC II noncontrolling interest) as of the December 31, 2011 consolidated balance sheet, or $411,188,117. Also, the expense amounts used in the Fees and Expenses table agree to the amounts reported in the December 31, 2011 consolidated statement of operations and include the noncontrolling interest share which corresponds with the net asset assumptions used in this table. Please note that the Company acquired all of the remaining noncontrolling equity interests in MSC II during the first quarter of 2012, and as a result the noncontrolling interest will no longer be a reconciling item in future periods ending after the quarter ended March 31, 2012. 2. Comment: We refer to footnote no. 6 to the Fees and Expenses table. Please expand the discussion in the footnote to explain the assumptions that were used in connection with computing the 3.29% figure in the line item entitled “Interest payments on borrowed funds” in the Fees and Expenses table. Response: The Company will comply with this comment by expanding the footnote to explain that estimated annual interest payments on borrowed funds are based on current debt levels and are then adjusted for projected increases (but not decreases) in debt levels over the next twelve months. 3. Comment: We refer to the line item entitled “Acquired fund fees and expenses” in the Fee and Expenses table. Please confirm that investments in any money market mutual funds and other mutual funds were taken into accounting in arriving at the 0.02% figure contained in such line item. Response: The Company currently has no investments in any money market mutual funds or any other mutual funds. However, to the extent the Company has any such investments in the future, they will be included when calculating the “Acquired fund fees and expenses” in the Fee and Expenses table. 2 4. Comment: Please consider deleting footnote no. 9 to the Fees and Expenses table given the common sense nature of the information contained therein. Response: The Company will comply with this comment and delete footnote no. 9 to the Fees and Expenses table. 5. Comment: We refer to the Example contained in the Fees and Expenses table. Please provide the Staff with the back-up computations for the figures contained therein. Response: The Company has supplementally provided the Staff with back-up computations for the figures reflected in the Example contained in the Fees and Expenses table. Consolidated Financial Statements 6. Comment: We refer to the line item entitled “cash and cash equivalents” on the consolidated balance sheets. Please advise the Staff on a supplemental basis of the various components thereof, including whether such line item includes investments in money market mutual funds. If such line item includes investments in money market mutual funds, please confirm that such investments are separately identified in the schedule of investments. Response: “Cash and cash equivalents” on the consolidated balance sheet includes cash. The Company confirms that such line item does not include investments in any money market mutual funds. However, to the extent the Company has investments in any money market mutual funds in the future, such investments will be included separately in the Company’s schedule of investments to the extent required by Regulation S-X Rule 12-12. 7. Comment: We refer to the line item entitled “SBIC debentures” on the consolidated balance sheets. Please advise the Staff on a supplemental basis why the Company has elected fair value treatment with respect to a portion of its SBIC debentures. Response: The small business investment company (“SBIC”) debentures carried at fair value were issued by MSC II, the SBIC fund in which the Company acquired an approximately 88% ownership in January 2010 (the “Exchange Offer”). The Company elected the fair value option under ASC 825, Financial Instruments (“ASC 825”) for the SBIC debentures (the “Acquired Debentures”) acquired by the Company in connection with the Exchange Offer. The fair value option was elected for the Acquired Debentures as part of the 3 acquisition accounting related to the Exchange Offer. In order to provide for a more consistent basis of presentation, the Company has elected and currently intends to continue to elect the fair value option for individual SBIC debentures issued by MSC II subsequent to the Exchange Offer. As of December 31, 2011, the recorded value of the SBIC debentures was $201.9 million, which consisted of (i) $76.9 million recorded at fair value, or $18.1 million less than the $95.0 million face value of these MSC II SBIC debentures, and (ii) $125.0 million reported at face value and issued by Main Street Mezzanine Fund, LP, which SBIC was owned by the Company prior to the Exchange Offer. See Note B.13 to the audited consolidated financial statements as of December 31, 2011. 8. Comment: We refer to the line item entitled “Net unrealized appreciation, net of income taxes” on the consolidated balance sheets. Please advise the Staff on a supplemental basis of the computations involved in determining the change in the amount of net unrealized appreciation included in the “Total investments” balance from December 31, 2010 to December 31, 2011. Also, please provide the Staff with a reconciliation of the change in the “Total investments” balance from December 31, 2010 to December 31, 2011. Response: The following information is being provided to assist the Staff in understanding the change in the amount of net unrealized appreciation reflected in the “Total investments” balance from December 31, 2010 to December 31, 2011 (the total amount of which is $266.8 million on December 31, 2011). For the year ended December 31, 2011, the following unrealized losses reflected in the “Net unrealized appreciation, net of income taxes” line item on the consolidated balance sheet were not part of the change in the “Total investments” balance: · Change in the value of SBIC debentures at fair value — ($6.3) million unrealized loss · Change in Other Assets — ($0.5) million unrealized loss on a note receivable Excluding the two unrealized loss items above, the change in the amount of net unrealized appreciation attributable to investments and included in the change in the “Total investments” balance from December 31, 2010 to December 31, 2011 was $35.3 million. The change in the “Total investments” balance from December 31, 2010 to December 31, 2011 is reconciled below (in millions): 4 Beginning balance at December 31, 2010 $ 417.6 million Per the cash flow statement: Investments in portfolio companies $ 249.4 Repayments from portfolio companies $ (80.8 ) Proceeds from sale of equity securities $ (2.1 ) Net marketable securities investments $ 54.0 Net unrealized appreciation from investments $ 35.3 Net realized gain $ 2.6 Accretion of unearned income $ 6.8 Net PIK (PIK interest $2.0 and cumulative dividends $1.6) $ 3.6 Deferred loan origination fees $ (2.1 ) Ending balance at 12/31/11 $ 684.3 million 9. Comment: Please delete the double-underscore under the line item entitled “Total liabilities and net assets” in the consolidated balance sheets. Response: Based on current industry reporting practice, the Company believes the double-underscore under the “Total liabilities and net assets” line item highlights the symmetry of the financial statement with the “Total assets” line. Therefore, the Company respectfully declines to delete such double-underscore. 10. Comment: We refer to the consolidated statements of operations. If payment-in-kind income in any period shown exceeded 5% of total investment income for such period, such income should be separately stated on the consolidated statements of operations for such period. See Rule 6-07(1) of Regulation S-X. Response: The Company confirms that its payment-in-kind (“PIK”) interest income has not exceeded 5% of total investment income for any period shown in the Company’s consolidated statements of operations in the Registration Statement. Please also refer to the Company’s risk factor entitled “We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income” in the Registration Statement where the Company highlights the percentage of payment-in-kind (“PIK”) interest income to total investment income (3.7% for 2011). In addition, the Company began separately disclosing the percentage of PIK interest income to total investment income in the notes to its consolidated financial statements beginning with the quarter ended March 31, 2012. 5 11. Comment: We refer to the consolidated statements of operations. Similarly, please separately state any expense item contained within the “General and Administrative” expense line item that exceeds 5% of total expenses. See Rule 6-07(2)(b) of Regulation S-X. Response: The Company currently has no expense items greater than 5% of total expenses. However, to the extent the Company has any such expense items greater than 5% of total expenses in the future, they will be separately reported within the Company’s consolidated statement of operations in compliance with Rule 6-07(2)(b) of Regulation S-X. 12. Comment: In an appropriate location in the notes to the consolidated financial statements, please separately disclose the following information with respect to the Company’s equity offerings: gross proceeds, sales load (underwriting discounts or commissions) and offerings expenses. Response: The Company began separately disclosing the gross proceeds, sales load (underwriting discounts or commissions) and offerings expenses associated with its equity offerings in its notes to the consolidated financial statements for the quarter ended March 31, 2012 and will continue to provide such disclosure in the Company’s future filings. 13. Comment: Please confirm that the Company will periodically determine that the total amount of payment-in-kind interest, plus the initial cost of the underlying debt security does not exceed the current fair value of the debt security. Response: The Company confirms that it periodically determines that the total amount of payment-in-kind interest, plus the initial cost of the underlying debt security does not exceed the current fair value of the debt security. 14. Comment: Please comply with Instruction 1.b to Item 8.6.c of Form N-2. In addition, please consider disclosing the percentage of the Company’s non-qualifying assets as of the date of the most recent financial statements included in the Registration Statement. Response: The Company began complying with Instruction 1.b to Item 8.6.c of Form N-2 in its financial statements for the quarter ended March 31, 2012. The footnote included in the Company’s Schedule of Investments as of March 31, 2012 indicates those investments 6 that are not qualifying assets as defined under Section 55(a) of the 1940 Act and the significance of such non-qualification. Based on the current industry repo