Business Context and Reporting Period
This Form 8-K filing by Runway Growth Credit Fund Inc. (the "Company") reports events occurring on September 12, 2017, with the report filed on September 13, 2017. The Company is a Maryland corporation regulated as a Business Development Company (BDC). The primary event reported is the approval by stockholders at a Special Meeting of an Amended and Restated Investment Advisory Agreement with Runway Growth Capital LLC (the "Adviser").
Key Financial Metrics
The filing text does not provide specific financial performance metrics such as revenue, profit, cash flow, margins, debt levels, or liquidity ratios for the reporting period. The document focuses exclusively on the terms of the advisory agreement and voting results.
Material Changes Versus Prior Period
The material change reported is the adoption of the Amended Advisory Agreement, which modifies the fee structure compared to the Prior Advisory Agreement:
- Base Management Fee: Clarified to be calculated based on actual Capital Commitments (0.4375% quarterly, or 1.75% annualized) subject to a cap based on the Adviser's actual operating expenses until an IPO or specific asset deployment thresholds are met. Post-IPO or threshold, the fee is based on Gross Assets.
- Income Incentive Fee: Revised to use "Gross Assets" rather than "total assets" in the reduction calculation of pre-incentive fee net investment income. A new total return threshold was added: no incentive fee is payable if cumulative net realized losses exceed 2.0% of non-control/non-affiliate investments AND the annualized return on average daily net assets is less than 10%.
Guidance, Outlook, and Management Commentary
Spin-Off Transaction: The agreement outlines a potential "Spin-Off transaction" where stockholders may exchange shares for a newly formed Public Fund (a BDC) or a Liquidating Fund. The Company intends to complete the final closing of its private placement no later than December 31, 2017, and the Public Fund will use commercially reasonable best efforts to complete an IPO within three years of that closing.
Voting Results: Stockholders approved the Amended Advisory Agreement. As of the record date (August 9, 2017), 3,001,667 shares were outstanding. The vote tally was 2,715,411.87 shares For, 119,015.20 shares Against, and 0 Abstained or Broker Non-Votes.
Risks and Contingencies: The filing notes that the incentive fee is not payable for any prior quarter after the three-year anniversary of the end of such quarter if performance thresholds are not met.
Important Facts for Investor Verification
- Verify the exact date of the final closing of the private placement (targeted for no later than December 31, 2017) to determine the start of the three-year IPO window for the potential Public Fund.
- Review the attached Exhibit 10.1 (Amended and Restated Investment Advisory Agreement) for the complete legal definitions of "Gross Assets," "Capital Commitments," and the specific mechanics of the operating expense cap.
- Monitor the Company's cumulative net realized losses and annualized return on average daily net assets to assess the likelihood of future income incentive fee payments under the new 2.0% loss and 10% return thresholds.
- Confirm the status of the proposed Spin-Off transaction and whether stockholders will be offered the option to exchange shares for the Public Fund or Liquidating Fund.