On July 3, 2018, Barings BDC, Inc. (the “Company”) formed Barings BDC Senior Funding I, LLC, an indirectly wholly-owned Delaware limited liability company (“Barings Funding”). The primary purpose of Barings Funding is to function as our special purpose, bankruptcy-remote, financing subsidiary in connection with the Credit Agreement (as defined and discussed below under the section of this Item 1.01 captioned “Credit Facility”).

On August 3, 2018 (the “Effective Date”), the Company caused Barings BDC Finance I, LLC, a directly wholly-owned Delaware limited liability company and the sole member of Barings Funding, to enter into the amended and restated limited liability company agreement (the “LLC Agreement”) that will govern the business and affairs of Barings Funding. Initially, the LLC Agreement provides for two managers, an independent manager (the “Independent Manager”) and a designated manager (the “Designated Manager”). Donald Puglisi was appointed as the initial Independent Manager and, in that capacity, he is a party to the LLC Agreement. Barings LLC, the Company’s investment adviser (the “Advisor”), has been appointed as the Designated Manager and as such has full and exclusive control of Barings Funding’s business and makes all decisions affecting its affairs (except as discussed below with respect to certain material actions).

On the Effective Date, Barings Funding entered into a credit agreement (the “Credit Agreement”) with Bank of America, N.A., as administrative agent (the “Administrative Agent”) and Class A Lender, Société Générale, as Class A‑1 Lender, and Bank of America Merrill Lynch, as sole lead arranger and sole book manager.

Under the terms and conditions of the Credit Agreement, Barings Funding is required to pay certain fees in connection with the credit facility, including a fee on the unused portion of the commitment under the credit facility. Barings Funding may prepay any borrowing at any time without premium or penalty, except that Barings Funding may be liable for certain funding breakage fees if prepayments occur prior to expiration of the relevant interest period. Barings Funding may also permanently reduce all or a portion of the commitment amount under the credit facility upon payment of a commitment reduction fee (such fee applicable only during the first six months of the credit facility).

Barings Funding and the Administrative Agent have entered into a security agreement dated as of the Effective Date (the “Security Agreement”) pursuant to which Barings Funding’s obligations under the Credit Agreement are secured by a first-priority security interest in substantially all of the assets of Barings Funding, including its portfolio of investments (the “Pledged Property”).

In connection with the first-priority security interest established under the Security Agreement, all of the Pledged Property will be held in the custody of State Street Bank and Trust Company, as collateral administrator (the “Collateral Administrator”). The Collateral Administrator will maintain and perform certain collateral administration services with respect to the Pledged Property pursuant to a collateral administration agreement (the “Collateral Administration Agreement”) among Barings Funding, the Administrative Agent and the Collateral Administrator. Generally, the Collateral Administrator will only be authorized to make distributions and payments from Pledged Property based on the written instructions of the Administrative Agent.

Barings Funding has appointed the Advisor to manage its assets pursuant to the terms of an investment management agreement (the “Management Agreement”). The services to be provided by the Advisor, as manager under the Management Agreement, will include, among other things, the following: