SecProbe.io

Steven B. Boehm
Suther land Asbill &  Brennan LLP
700 S ixth Street, N W, Suite 700
Washing ton, DC  20001- 3980

Re: Stellus C apital Investment Corp. (the “Fund”)
File Numb ers 814-00971 &  333-189938

Dear Mr. Boehm:

On J uly 12, 2013, the  Fund filed a registration st atement on F orm N-2 unde r the
Securities Act of 1933 ( “Securities Act.  The  filing was made to upda te the disclosur e in the
Fund’s registration st atement on F orm N-2.  The Fund is a  busine ss development compa ny that
originates and inve sts primarily in private middl e-market compa nies through first lie n, second
lien, unit ranche and m ezzanine debt financing, often with a  correspondi ng equity investment.
The registration st atement contains m any blank spaces r elated to f ees, c osts and per centages; we
will re view the  Fund’s expense table and ot her information submitt ed in s ubsequent amendments
and m ay have comm ents regarding that information.  W e have referenced t he captions a nd pa ge
number s from the  registration st atement to indi cate the sections of  the registration st atement to
which each comm ent relates.  How ever, you shou ld regard any comm ent made with re spect to
one section of  the registration st atement to apply to simila r disclosur e elsewhere in the
registration st atement.

A letter of even date accompa nied the  filing a nd sought selective review.  With cer tain
exceptions, we  have limit ed our  review of the filing. Our comm ents regarding the filing are set
forth be low.

General

1. Please state in your response  letter whether FINRA will or  has reviewed the  propos ed
distribution t erms and ar rangements of  the transaction involve d in the  registration st atement.  In
this c onnection indi cate whether FINRA has reviewed the  payment of selling commissions, s ales
loads and any dealer manager or other fees.  Indicate also wh ether FINRA aggregated such
payments for purposes of determining c ompli ance with F INRA guidelines on under writer
compe nsation.

2. The type face of the printed doc ument is h ard to r ead and appears to be  set forth in a n
inappropriately small font.  Confirm the  printed document will c ompl y with the type size
requirement in R ule 420.

3.         E xplain to the  staff the status of  the Fund’s offering of shares and the  relationship of  the
current of fering of shares to the  offeri ng of 8,000, 000 shares registered l ast year.  For example,
shares outst anding as of March 31st stood at a little over 12,000,000 according to the  unaudited
Statement of  Operations.  E xplain this d ifference to the  staff.  Does the  Fund contemplate more
offeri ngs in the  near future?

Prospectus Cov er

4. Revise the promin ent statement appearing below the  pricing table, the subst ance of which is
required by Rule 481( b)(1) unde r the Investment Compa ny Act of 1940 ( “1940 A ct”) to reflect
the changes brought about by the National Securities Mar kets Improvement Act of
1996.  C onfirm that the disclosur e will a ppear on the  outside  front c over page of the prospectus.

5. Do the  amounts re ferenced in f ootnote  1 to the  pricing table include all expenses of
issuance and dist ribution?  If not, pl ease include in the  footnot es to the  pricing table all
information re quired by Instruction 6 to Item 1.g. of Form N-2.  The  footnot es should ref lect the
dilution e xpected to result from the  offering.

Prospectus

PROSPECTUS SUMMARY
Stellus Capital Investment Corporation (Page 1)

6. Disclosur e hereunde r indicates that the Fund m ay originate or inve st in, a mong other s,
unitranche and m ezzanine debt.  D efine these terms.

SBIC L icense (Page 4)

7. Disclosur e hereunde r indicates that the Fund h as receiv ed a “green l ight” letter from the
SBA allowin g it to c ontinue  its a pplication to obt ain a license  to form and operate  an SB IC
subsidi ary.  Explain mo re fully the relationship be tween the  Fund a nd this pr opos ed entity,
including  whether the subsidi ary would b e whol ly owned by the Fund, t he percent o f Fund assets
to be  represented at the subsidi ary level and w hether the financial statements would be
consolida ted.

THE OFFERING
Leverage  (Page 9)

8.         E xplain the  under lined term in the  following  sentence: “The Credit Facility provide s for
borrowi ngs in a n aggregate amount up to $115,000,000 on a  committe d basis and an accordion
for an additiona l $35,000,000 f or a total facility size of $150,000,000.”
Further, if accurate, disclose that the following  disclosur e appearing in the  same paragraph
means tha t the Fund’s entire portfolio, a s indi cated, serves as security for any obligation unde r
the revolving c redit facilit y: “The Compa ny’s obli gations to the  lenders are secure d by a first
priority security interest i n its por tfolio of  securities and cash, but e xcluding shor t term

investments.” Disclose whether the agreement places c onstraints on the  Fund’s management of
its po rtfolio.

FEES  AND E XPENSES (Page 13)

9. Footnote  4 states that: “Our base management fee, payable quarterly in arrears, is 1.75%
of our gross a ssets, in cluding assets pur chased with borrow ed amounts or  other forms of  leverage
. . .” With re spect to the  under lined clause, disclose whether the Fund m ay issue  preferred und er
this poli cy.  Disclosur e on pages 26 a nd 63 s uggests that preferred issu ances m ay be
contemplated.  Dis close the othe r forms o f leverage included in the  advisor y agreem ent.  F or
example, might effective  leverage or the notiona l value of swaps be covered?

SELEC TED FINANC IAL DAT A (Page 16)

10. Disclosur e in the  first sentence states: “The following selected financial data for the
period from  Inception ( May 18, 2012 ) through Decem ber 31, 2012 a nd at December 31, 2012, is
derived from ou r financial statements whi ch have been a udited.” The Fund filed its re gistration
statement in S eptember 2012 a nd it w ent effective  in Nove mber 2012.  E xplain the  basis for the
inclusion of  information unde r this caption re lated to per iods pr ior to Nove mber 2012.

RISK FACT ORS
Becau se we use debt to f inance our investments, if market interest rat es were to increase, our
cost of  capital c ould increase, which could reduce our net investment income.
(Page 27)

11. Disclosur e hereunde r indicates that the Fund m ay “utiliz e instruments su ch as forward
contracts, c urrency options a nd int erest ra te swaps, caps, c ollars and floors” and also indi cates
that there is no limit a s to the  Fund’s ability to enter into suc h der ivative transactions.  To the
extent these instruments involve  leverage disclose the manner in whi ch the  Fund c overs or
segregates assets consist ent with §18 of  the 1940 A ct or the provisions of  IC-10666.  See
Investment Compa ny Act Release No. 10666 ( April 18, 1979) .

MANAGEME NT’S DISCUSSIO N AND  ANAL YSIS OF FI NAN CIAL CONDITIO N AND
RESULTS  OF OPERATI ONS
Overview (Page 48)

12. This f ollowing  sentence should be  clarified, e.g., by making the underlined por tion a
separat e sentence: “The total consideration pa id was $194.4 million, c onsisting of $165.2 million
in cash and $29.2 million in shares of  our common sto ck based on the  price of $15.00 pe r share,
or $194.4 million in tot al for 11 c ompa nies (excluding  accrued interest of  approximately $2.3
million)  from a  private investment fund to whi ch the  D. E. S haw group s erves as inve stment
adviser and Stellus C apital serves as a non-discretionary sub-adviser.”

13. Clarify that the borrowi ngs und er the credit facility that occurred on Nov ember 13, 2013
included a group of  lenders again led by Sun Trust Bank.

(Page 59)

14. Disclosur e unde r this su b-caption st ates that: “As of March 31, 2013 and D ecemb er 31,
2012, the  Compa ny was not due  any amount from  Stellus C apital for reimbu rsement of expenses
paid for by the Compa ny that were the responsibili ty of Stellus C apital.  Any  such amounts due
to the  Compa ny would b e included in the  Statement of Assets and Liabilitie s.” Were any such
obligations outst anding  prior to D ecember 31, 201 2?

SENIOR SE CURI TIES (Page 63)

15. Identify Grant Th ornton, L LP as the Fund’s inde pendent registered public  account ants.

MANA GEMENT AGREEM ENTS
Quarterly I ncentive Fee Based on Net Investment Income (Page 92 & 93)

16. Clarify the indemnification dis cussions on the se pages by indicatin g that the policy is
subject to the  requirements of  the 1940 A ct, including the requirements of  IC-11330.  See
Investment Compa ny Act Release No. 11330 ( September 2, 1980) .

DETER MINAT ION OF  NET ASSET VAL UE (Page 98)

17.       Dis closur e in the  second paragraph st ates that: “In addition, our  board of directo rs retains
one or more independent valuation firms to re view the valuation of  each por tfolio inve stment for
which a market quot ation is not a vailable at least quar terly.”  In this c onnect ion, pl ease inform
the staff whether the board will re view and approve in advance the valuation m ethodolog y of any
third-party pricing service it us es and confirm that the boar d will r egularly review the  histo rical
accur acy of its fa ir value methodolog ies.  Se e Investment Compa ny Act Release No. 26299;
“Compli ance Programs o f Investment Compa nies and Investment Advis ers” (Decemb er 17,
2003) .  The  release states that Rule 38a-1 requires funds to pr ovide  a methodolog y or
methodolog ies by which the fund de termines the current fair value of the portfolio s ecurity, and
to “regularly review the  appropriateness and accuracy of the method us ed in va luing  securities,
and m ake any necessary adjustm ents”.

Part C - Signatures

18. The pow er of attorney states in per tinent par t that the named individua ls have pow er to
execute  on b ehalf of the Fund’s directors and of ficers: “…this Re gistration Statement on F orm
N-2 and any and all amendments th ereto, inc luding  post-effective amendments to this
Registration S tatement…”  In this c onnection, pl ease consult the  requirements of  Rule 483( b)
unde r the Securities Act, which requires a pow er of attorney to relate to a specific filing.

ACCOUNT ING COMMENTS

Form N-2 filed July 12, 2013

19. Please revise the “Price Range of Common S tock and Dist ributions”  section of  the
Prospectus to dis close the premium/dis count of  the high and low int raday sales prices to ne t asset
value of the Compa ny’s common stoc k inst ead of  disclosing  the high and low int raday sales
prices a s a percentage of net asset value of the Company’s common stoc k.  Se e Item 8.5 of  Form
N-2.

20. Disclosur e on Pa ge 8 states that:

“Pre-incentive  fee net investment income includes, in the  case  of inve stments with a
defer red interest feature (such as original issue  discount, or  OID, debt inst ruments with
PIK int erest and zero coupon s ecurities), accrued income that we have not yet received in
cash. How ever, the portion of  such incentive  fee that is a ttributable to def erred interest
(such as PIK int erest or OID) will be  paid to S tellus C apital Management, together with
interest th ereon from the  date of deferral to the  date of payment, onl y if and to the  extent
we actually receive such interest in cash, a nd any accr ual thereof will be  reversed if and
to the  extent suc h interest is re versed in connection  with a ny write-off or similar
treatme nt of the investment giving r ise to any deferred interest accrual.  Stellus C apital
Management ha s agreed to per manently waive any interest accrued on the  portion of  the
incentive  fee attributable to defer red interest (such as PIK int erest or OID).”

Please explain the  accounting  for these deferred fees.  E xplain the  situations in whi ch
the Fund would r eceive  PIK interest in cash.  W hy is the  Fund be ing charged interest on def erred
fees?  What are the rates of interest c harged?  Is the Fund a ccruing interest with a  corresponding
waiver from the  advisor ?

Form 10-Q filed May 9, 2013
Consolidated Balance Sheet s:

21. Are there any payables to Trustees a t period-end?  As re quired by Item 12 – Other
liabilitie s:

“State separately (a) amounts pa yable for inve stment advisor y, management and service
fees; a nd (b) the total amount pa yable to: ( 1) Officers and di rectors; (2) controlled
compa nies; and (3) other affiliates, excluding a ny amounts owing  to nonc ontrolled
affiliates whi ch arose in the ordinary course of busine ss and whi ch are subj ect to usua l
trade terms.”

Consolidated Stateme nt of Changes in Net Assets
22.  Include the disclosur e requirements of  Regulation S-X. Ar ticle 6-09.7, to w it:
“Disclose parenthetically the balance of undist ributed net investment income included in
net assets at the end of the period.”

Consolidated Schedule of Investments

23. At 3/31/13 the  fund ha d $25,000,000 of  U.S. Treasury Bills liste d in cash a nd cash
equiva lents. W hy were these inve stments not reflected on the  schedule of investments as
required by Article 12 of  Regulation S -X?

24. In reviewing the 3/31/13 financial statements, w e noticed tha t ove r 58%  of the holding s
on the  schedule of investments w ere valued at cost.  Please explain how va luing  securities at cost
constitut es fair value as defined by ASC 820.

25. Pledged securities unde r borrowi ng arrangements need to be  identified on t he schedule of
investments.  Se e Article 4-08 of  Regulation S -X and Audits of  Investment Compa nies,
American Institute  of Certified Public  Account ants, Paragraph 7.31 (May 1, 2012) .

Notes to Co nsolidated Financial Statements

26. Page F-22 dis closes the valuation t echnique s and significant unobs ervable inputs us ed
in Level 3 va luations.  R efer to the  December 12, 2012 A ICPA Investment Compa nies Expert
Panel Meeting  minut es.

http://www. aicpa.org/InterestA reas/FRC/Indust ryInsights/Downloa dableDocuments/INV
/INV_EP_Minut es/2012/ INV_EP_December12_2 012_M eetin g.pdf

27.          For each unobs ervable input pr ovide  the range of discount rates and a weighted average
rate.  Currently there is only one range for all of the unobs ervable inputs.  Please explain why the
discount ra tes and w eighted average rates are negative.

28. Note  2 (Related Party Arrangements) states the followin g: “For the years ending
Decem ber 31, 2012 a nd D ecem ber 31, 2013, the  Advisor  has agreed to w aive its in centive  fee to
the extent required to suppor t an annua lized divide nd yield of 9.0% (to be  paid on a  quar terly
basis) based on the  price per share of our common sto ck in c onnection with the  Offering.” Does
the advisor  have the ability to recoup a ny amounts  of the waived inc entive  fees?

* * * * * * * * * * *

We note  that portions of  the filing are incomplete.  We may have addition al comm ents on
such por tions whe n you compl ete them in a  pre-effective  amendment, on di sclosure s made in
response  to this le tter, on information suppli ed in your response  letter, or on exhibits a dded in
any pre-effective  amendments.

Whenever a comm ent is ma de in one  location, it is c onsidered a pplicable  to all simila r
disclosur e appearing elsewhere in the  registration statement.

Response  to this l etter should be  in the  form of a pre-effective  amendment filed pur suant
to rule 472 unde r the Securities Act.  W here no c hange will be  made in the  filing in response  to a
comm ent, pl ease indicate this fact in  your respons e letter and briefly state the basis for your
position.  W here changes are made in re sponse  to our comm ents pr ovide  information r egarding
the nature of the change and, if  appropriate, the location of  such new or revised dis closur e in the

amended filing.  As re quired by the rule, please insure that you m ark new or revised dis closur e to
indicate change.

Please advise  us if you have submitte d or expect to submit a n