Harvest Capital Credit Corp. is a closed-end, non-diversified management investment company, which engages in the provision of customized financing solutions to small and mid-sized businesses. Its products include senior secured debt, unitranche term loans, junior secured loans, subordinated debt investments, and minority equity co-investments. The company was founded by Richard Paul Buckanavage on November 14, 2012 and is headquartered in New York, NY.
We are dependent upon our investment adviser’s key personnel for our future success.
Our business model depends to a significant extent upon strong referral relationships of the principals of our investment adviser, and their inability to maintain or develop these relationships, as well as the failure of these relationships to generate investment opportunities, could adversely affect our business.
Our financial condition and results of operations depend on our ability to manage our business and our future growth effectively.
We provide debt and equity capital primarily to small and mid-sized companies, which may present a greater risk of loss than providing debt and equity capital to larger companies.
There may be uncertainty as to the value of our portfolio investments.
We may experience fluctuations in our operating results.
There are significant potential conflicts of interest which could impact our investment returns.
Our incentive fee may induce our investment adviser to pursue speculative investments.
Our base management fee may induce our investment adviser to incur leverage.
PIK interest earned increases our assets under management and, as a result, will increase the amount of base management fees and potential incentive fees payable by us to HCAP Advisors.
Changes in laws or regulations governing our operations may adversely affect our business.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Regulations governing our operations and capital structure affect (and could limit) our ability to raise, and the way in which we may raise, additional capital. Changes to these regulations passed in 2018 will allow us to increase our leverage.
Because we borrow money in connection with our investment activities, the potential for gain or loss on amounts invested in us is magnified and may increase the risk of investing in us.
All of our assets are subject to security interests under the Credit Facility, and if we default on our obligations under the Credit Facility, we may suffer materially adverse consequences, including foreclosure on our assets.
Changes in interest rates may affect our cost of capital and net investment income.
Changes relating to the LIBOR calculation process may adversely affect the value of the LIBOR-indexed, floating-rate debt securities in our portfolio as well as our revolving credit facility.
Provisions of the Delaware General Corporation Law and our certificate of incorporation and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
The investment advisory and management agreement and administration agreement with our investment adviser were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.
Our board of directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval.
The involvement of our investment adviser’s investment professionals in our valuation process may create conflicts of interest.
Our investment adviser has the right to resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to qualify as a BDC or be precluded from investing according to our current business strategy.
A failure on our part to maintain our qualification as a BDC would significantly reduce our operating flexibility.
We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
HCAP Equity Holdings, LLC and HCAP ICC, LLC, our wholly-owned taxable subsidiaries, have elected to be taxed as a C-Corporation and may incur federal income tax expense.
Our operations and infrastructure are dependent on information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations.
We may expose ourselves to risks if we engage in hedging transactions.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Our investments may be risky, and we could lose all or part of our principal.
The lack of liquidity in our investments may adversely affect our business.
Our failure to make follow-on investments in our portfolio companies could impair our investment in a portfolio company.
Because we generally do not hold controlling equity interests in our portfolio companies, we may not be in a position to exercise control over our portfolio companies or to prevent decisions by the management of our portfolio companies that could decrease the value of our investments.
Defaults by our portfolio companies will harm our operating results.
Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and ability to make stockholder distributions and result in a decline in the market price of our shares.
An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
Second priority liens on collateral securing loans that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
Our portfolio is concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
We may be unable to invest a significant portion of the net proceeds from an offering of our securities on acceptable terms within an attractive time frame.
We may allocate the net proceeds from an offering in ways with which you may not agree.
Shares of closed-end investment companies, including BDCs, may trade at a discount to their net asset value.
If our investments do not meet our performance expectations, our stockholders may not receive distributions or a portion of our distributions may be a return of capital.
The market price of our common stock may fluctuate significantly.
Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
Stockholders may experience dilution in their ownership percentage if they do not participate in our dividend reinvestment plan.
Investing in our securities may involve an above average degree of risk.
If we issue preferred stock and/or debt securities, the net asset value and market value of our common stock may become more volatile or otherwise adversely affected.
The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could also adversely affect the market price for our common stock by making an investment in our common stock less attractive. In addition, except in limited circumstances, the 1940 Act imposes certain features onto any preferred stock we issue that may make an investment in our common stock less attractive or otherwise limit our operational flexibility, including:
The trading market or market value of our debt securities or any convertible debt securities, if issued to the public, may be volatile.
Terms relating to redemption may materially adversely affect the return on any debt securities.
The issuance of subscription rights, warrants or convertible debt that are exchangeable for our common stock, will cause your interest in us to be diluted as a result of any such rights, warrants or convertible debt offering.
Future offerings of debt securities, which would be senior to our common stock upon liquidation, or equity securities, which could dilute our existing stockholders and may be senior to our common stock for the purposes of distributions, may harm the value of our common stock.
We have unsecured 2022 Notes that are effectively subordinated to any secured indebtedness we have incurred or may incur in the future.
The 2022 Notes are structurally subordinated to the indebtedness and other liabilities of our existing and future subsidiaries.
The indenture under which the 2022 Notes were issued contains limited protection for holders of the 2022 Notes.
An active trading market for the 2022 Notes may not exist, which could limit the market price of the 2022 Notes or a holder's ability to sell them.
We may choose to redeem the 2022 Notes when prevailing interest rates are relatively low.
If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2022 Notes.