What changed in this filing

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Item 1. Business

2022-02-28 compared with 2021-03-04 · 216 added, 222 removed, 605 unchanged (42% of the section changed)

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We are managed by our Adviser.

Blackstone Alternative Credit Advisors LP (the “ Administrator ” and, collectively with its affiliates in the credit-focused business of The Blackstone Group Inc., “ Blackstone Credit ,” which, for the avoidance of doubt, excludes Harvest Fund Advisors LLC and Blackstone Insurance Solutions (“ BIS ”) provides the administrative services necessary for us to operate.

Blackstone Alternative Credit Advisors LP (the “ Administrator ” and, collectively with its affiliates in the credit-focused business of Blackstone Inc., “ Blackstone Credit ,” which, for the avoidance of doubt, excludes Harvest Fund Advisors LLC (“ Harvest ”) and Blackstone Insurance Solutions (“ BIS ”)) provides the administrative services necessary for us to operate.

Our investment objectives are to generate current income and, to a lesser extent, long-term capital appreciation.

Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in secured debt investments (including investments that are secured by equity interests).

Our portfolio is composed primarily of first lien senior secured and unitranche loans (including first out/last out loans), generally with total investment sizes less than $300 million, which criteria may change from time to time.

To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans, generally with total investment sizes less than $100 million, which criteria may change from time to time, and other debt and equity securities.

We believe that Blackstone’s investment platform provides us with a competitive advantage in selecting investments, and to achieve our investment objectives, we will leverage the Adviser’s investment team’s and Blackstone’s extensive network of relationships with other sophisticated institutions to source, evaluate and, as appropriate, partner with on transactions.

There are no assurances that we will achieve our investment objectives.

Under normal market conditions, we generally invest at least 80% of our total assets (net assets plus borrowings for investment purposes) in secured debt investments.

Our portfolio is composed primarily of first lien senior secured and unitranche loans.

To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans and other debt and equity securities.

We do not currently expect to focus on investments in issuers that are distressed or in need of rescue financing.

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As of December 31, 2021, based on fair value, our portfolio consisted of 97.63% first lien senior secured investments and unitranche loans, 0.64% second lien debt investments and 1.73% in equity instruments.

All of our debt investments as of December 31, 2020 were floating rate in nature (88.0% of which had an interest rate floor above zero) and the weighted average yield on our income producing investments was 7.68% at fair value.

As of December 31, 2020 we had investments in 81 portfolio companies, with a weighted average debt investment size in each of our portfolio companies of approximately $69.4 million based on fair value.

99.9% of our debt investments as of December 31, 2021 were floating rate in nature (93.9% of which had an interest rate floor above zero) and the weighted average yield on our income producing investments was 7.21% at fair value.

As of December 31, 2021 we had investments in 148 portfolio companies, with an average debt investment size in each of our portfolio companies of approximately $65.9 million based on fair value.

As a BDC, at least 70% of our assets must be the type of "qualifying" assets listed in Section 55(a) of the 1940 Act, as described herein, which are generally privately-offered securities issued by U.S.

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Effective on December 10, 2020, we changed our name from “Blackstone / GSO Secured Lending Fund” to “Blackstone Secured Lending Fund.”

On October 28, 2021, the Company priced its initial public offering ( “IPO” ), issuing 9,180,000 of its common shares of beneficial interest at a public offering price of $26.15 per share.

Net of underwriting fees, the Company received net cash proceeds, before offering expenses, of $230.6 million.

On November 4, 2021, the underwriters in the IPO exercised their option to purchase an additional 1,377,000 shares of common shares, which resulted in net cash proceeds, before offering expenses, of $33.8 million.

The Company’s common shares began trading on the NYSE under the symbol “BXSL” on October 28, 2021.

COVID-19 Update

Equity, debt, lending and other financial markets have experienced significant volatility recently related to COVID-19 pandemic and its effects.

Equity, debt, lending and other financial markets have experienced significant volatility in the recent past related to COVID-19 pandemic (and related variants) and its effects.

Although many markets have experienced varying degrees of recovery since the initial outbreak of COVID-19, the future impact of the pandemic on financial markets and the Company and its investments is still uncertain.

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Our Adviser is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring our investments and monitoring our investments and portfolio companies on an ongoing basis.

In conducting our investment activities, we believe that we benefit from the significant scale and resources of Blackstone Credit, including our Adviser and its affiliates, subject to the policies and procedures of The Blackstone Group Inc.

(collectively with its affiliates as the context requires, “ Blackstone ”) regarding the management of conflicts of interest.

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The investment professionals employed by Blackstone Credit have spent their careers developing the resources necessary to invest in private companies.

Before undertaking an investment, the Adviser’s transaction team conducts a thorough and rigorous due diligence review of the opportunity to ensure the company fits our investment strategy.

Before undertaking an investment, the Adviser’s transaction team conducts a thorough and rigorous due diligence review of the opportunity to ensure the portfolio company fits our investment strategy.

Our Adviser’s investment committee (the “Investment Committee” ) is responsible for reviewing and approving our investment opportunities.

The Adviser’s Investment Committee review process is consensus-driven, multi-step and iterative, and occurs in parallel with the diligence and structuring of investments.

Others who participate in the Investment Committee process include the team responsible for conducting due diligence, others on the investing team and other senior members of Blackstone Credit.

Others who participate in the Investment Committee process include the team responsible for conducting due diligence, others on the investing team and other senior members of Blackstone and Blackstone Credit.

There are no representatives from other business groups of Blackstone involved in the Adviser’s Investment Committee process.

We pay our Adviser a management fee at an annual rate of (i) prior to an Exchange Listing (defined below), 0.75%, and (ii) following an Exchange Listing, 1.0%, in each case of the average value of our gross assets at the end of the two most recently completed calendar quarters.

We have agreed to pay our Adviser a management fee at an annual rate of 1.0% (which rate was 0.75% prior to the IPO) of the average value of our gross assets at the end of the two most recently completed calendar quarters.

We also pay the Adviser incentive fees based on income and capital gains.

See “—Investment Advisory Agreement.”

However, in order to maintain the same management fee and incentive fee arrangements that the Company had in place prior to the IPO for a period of time following the completion of the IPO, the Adviser voluntarily waived its right to receive the base management fee in excess of 0.75% and incentive fees above 15% during the Waiver Period (as defined below).

Following the IPO, we will pay the Adviser an income based incentive fee based on our aggregate pre-incentive fee net investment income from the calendar quarter then ending (including the quarter in which the IPO is consummated) and the eleven preceding calendar quarters (including the quarters prior to the consummation of the IPO).

See “— Investment Advisory Agreement" for more information.

The members of the senior management and Investment Team of the Adviser serve or may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do, or of investment funds managed by the same personnel.

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Blackstone Credit

Blackstone Credit is part of the credit-focused platform of Blackstone, which is a leading global manager of private capital.

Blackstone’s asset management businesses include investment vehicles focused on real estate, private equity, public debt and equity, growth equity, opportunistic, non-investment grade credit, real assets and secondary funds, all on a global basis.

Blackstone’s four business segments are real estate, private equity, hedge fund solutions and credit.

Blackstone Credit is part of the credit-focused platform of Blackstone, which is the largest alternative asset manager in the world with leading investment businesses across asset classes.

Blackstone’s platform provides significant competitive advantages including scale, expertise across industries and capital structures, and deep relationships with companies and financial sponsors.

Blackstone’s four business segments are real estate, private equity, hedge fund solutions and credit and insurance.

Through its different investment businesses, as of December 31, 2021, Blackstone had total assets under management of approximately $881 billion.

As of December 31, 2020, Blackstone Credit’s asset management operation had aggregate assets under management of approximatel y $145 billion a cross multiple strategies within the leveraged finance marketplace, including loans, high yield bonds, distressed and mezzanine debt and private equity, including hedge funds.

Blackstone Credit, through its affiliates, employed over 400 people in New York, London, Houston and Dublin, and satellite offices in Baltimore, San Francisco, Toronto, Frankfurt and Milan as of January 1, 2021.

As of January 1, 2021, Blackstone Credit had a 82 person U.S.

Direct Lending team (excluding Dwight Scott, a member of Blackstone Credit's senior management) focused on the sourcing, structuring, execution management and realization of performing credit investments (which includes those professionals who

focus primarily on direct lending investments).

As of December 31, 2021, Blackstone Credit’s asset management operation had aggregate assets under management of approximately $243 billion across multiple strategies within the leveraged finance marketplace, including loans, high yield bonds, distressed and mezzanine debt and private equity, including hedge funds, and approximately $258 billion with the inclusion of Harvest and BIS.

Blackstone Credit, through its affiliates, employed over 433 people headquartered in New York, with offices in London, Dublin, Houston, Baltimore, San Francisco, Toronto, Frankfurt, Madrid, Milan, Paris, Sydney, Hong Kong, Tokyo and Singapore as of January 1, 2022.

Blackstone Credit’s 125-person private origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 24-person U.S.

Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities, respectively, for BXSL.

Blackstone Credit believes that the depth and breadth of its team provides it with a significant competitive advantage in sourcing product on a global basis, structuring transactions and actively managing investments in the portfolio.

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Attractive Opportunities in Senior Secured Loans

We believe that opportunities in senior secured loans are significant because of the variable rate structure of most senior secured debt issues and because of the strong defensive characteristics of this investment class.

Given current market conditions, we believe that debt issues with variable interest rates may offer a superior return profile to fixed-rate securities, since variable interest rate structures are generally less susceptible to declines in value experienced by fixed-rate securities in a rising interest rate environment.

We believe that opportunities in senior secured loans are significant because of the strong defensive characteristics of this asset class.

While there is inherent risk in investing in any securities, senior secured debt is on the top of the capital structure and thus has priority in payment among an issuer’s security holders (i.e.

senior secured debt holders are due to receive payment before junior creditors and equity holders).

Further, these investments are secured by the issuer’s assets, which may be seized in the event of a default, if necessary.

Further, these investments are secured by the issuer’s assets, which may be collateralized in the event of a default, if necessary.

Senior secured debt often has restrictive covenants for the purpose of additional principal protection and ensuring repayment before junior creditors (i.e.

most types of unsecured bondholders, and other security holders) and preserving collateral to protect against credit deterioration.

Opportunity in Middle Market Private Companies

In addition to investing in senior secured loans generally, we believe that the market for lending to private companies, particularly middle market private companies within the United States, is underserved and presents a compelling investment opportunity.

Opportunity in U.S.

Private Companies

In addition to investing in senior secured loans generally, we believe that the market for lending to private companies, which includes middle market private companies within the United States, is underserved and presents a compelling investment opportunity.

We believe that the following characteristics support our belief:

Large and Growing Target Market .

Middle market companies represent a large and growing portion of the U.S.

According to the National Center for the Middle Market, there were nearly 200,000 middle market companies in the United States with annual revenues between $10 million and $1 billion, as of June 30, 2020.

Middle market companies have generated a significant number of investment opportunities for investment programs advised by Blackstone Credit and its affiliates over the past several years, and we believe that this market segment will continue to produce significant investment opportunities for us.

Limited Investment Competition.

Despite the size of the market, we believe that regulatory changes and other factors have diminished the role of traditional financial institutions and certain other capital providers in providing financing to middle market companies.

As tracked by S&P Capital IQ LCD, U.S.

banks’ share of senior secured loans has declined from 33.1% in 1995 to 8.1% for the year ended December 31, 2020.

In addition, due to bank consolidation, the number of banks has also rapidly declined, furthering the lack of supply in middle market lending.

As of April 2020, there were approximately 4,404 banks in the U.S., which was only one-third of the number of banks in 1984, according to Federal Reserve Economic Data.

We also believe that lending and originating new loans to middle market companies, which are often private, generally requires a greater dedication of the lender’s time and resources compared to lending to larger companies, due in part to the smaller size of each investment and the often fragmented nature of information available from these companies.

Further, we believe that many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly in regards to directly originated investments in middle market companies, and thus attractive investment opportunities are often overlooked.

In addition, middle market companies may require more active monitoring and participation on the lender’s part.

We believe that many large financial organizations, which often have relatively high cost structures, are not suited to deal with these factors and instead emphasize services and transactions to larger corporate clients with a consequent reduction in the availability of financing to middle market companies.

Secular Tailwinds in the Private Market, Including Private Credit.

One of the important drivers of growth in the strategy is the increasing secular tailwinds in the private markets (i.e., social or economic trends positively impacting private markets), including growing demand for private credit, which has created attractive opportunities for private capital providers like Blackstone Credit.

As of December 31, 2021, private equity funds with strategies focused on leveraged buyouts in North America had approximately $530.4 billion of “dry powder” (i.e., uncalled capital commitments), which should similarly drive demand for private capital providers like Blackstone Credit.

1 This shift is partially due to traditional banks continuing to face regulatory limitations and retreating from the space, creating additional opportunities for private credit to take advantage of.

Further, financial sponsors and companies are becoming increasingly interested in working directly with private lenders as they are seeing the tremendous benefits versus accessing the public credit markets.

The Company believes some of these benefits include faster execution and greater certainty, ability to partner with sophisticated lenders, more efficient process, and in some instances fewer regulatory requirements.

As a result, Blackstone Credit benefits from increasing flow of larger scale deals that have become increasingly available to direct lending universe over traditional banks and other financing institutions.

Attractive Market Segment.

We believe that the underserved nature of such a large segment of the market can at times create a significant opportunity for investment.

In many environments, we believe that middle market companies are more likely to offer attractive economics in terms of transaction pricing, up-front and ongoing fees, prepayment penalties and security features in the form of stricter covenants and quality collateral than loans to larger companies.

In addition, as compared to larger companies, middle market companies often have simpler capital structures and carry less leverage, thus aiding the

structuring and negotiation process and allowing us greater flexibility in structuring favorable transactions.

We believe that these factors will result in advantageous conditions in which to pursue our investment objectives of generating current income and, to a lesser extent, long-term capital appreciation.

In many environments, we believe that private companies are more likely to offer attractive economics in terms of transaction pricing, up-front and ongoing fees, prepayment penalties and security features in the form of stricter covenants and quality collateral than loans to public companies.

Preqin, December 2021.

Represents dry powder (i.e., uncalled capital commitments) for private equity buyouts in North America.

Limited Investment Competition.

As tracked by S&P Capital IQ LCD, U.S.

banks’ share of senior secured loans has declined from 33.1% in 1995 to 8.1% as of December 31, 2021.

In addition, due to bank consolidation, the number of banks has also rapidly declined, furthering the lack of supply in financing to private companies.

As of July 2020, there were approximately 4,375 banks in the U.S., which was only one-third of the number of banks in 1984, according to Federal Reserve Economic Data.

We also believe that lending and originating new loans to private companies generally requires a greater dedication of the lender’s time and resources compared to lending to public companies, due in part to the size of each investment and the often fragmented nature of information available from these companies.

Further, we believe that many investment firms lack the breadth and scale necessary to identify investment opportunities, particularly in regards to directly originated investments in private companies, and thus attractive investment opportunities are often overlooked.

Blackstone Credit Strengths

Blackstone Credit is a key player in the middle and upper-middle market direct lending space and in the private credit space generally.

Blackstone Credit is one of the largest private credit investment platforms globally and a key player in the direct lending space.

Blackstone Credit has experience scaling funds across its platform that invest throughout all parts of the capital structure.

Blackstone Credit strives to focus on transactions where it can differentiate itself from other providers of capital, targeting larger transactions and those where Blackstone Credit can bring its expertise and experience in negotiating and structuring.

Blackstone Credit strives to focus on transactions where it can differentiate itself from other providers of capital, targeting large transactions and those where Blackstone Credit can bring its expertise and experience in negotiating and structuring.

We believe that Blackstone Credit has the scale and platform to effectively manage a U.S.

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2 Blackstone Credit expects that in the current environment, in which committed capital from banks remains scarce (as tracked by S&P Capital IQ LCD, U.S.

banks’ share of senior secured debt to middle market companies represented 12% of the overall middle market loan volume in 2019, down from nearly 20% in 2011), the ability to provide flexible, well-structured capital commitments in appropriate sizes will enable Blackstone Credit to command more favorable terms for its investments.

Blackstone Credit believes that it occupies a differentiated position in the leveraged finance market, with investment activities that span a broad array of public and private market strategies.

We believe this presence enables Blackstone Credit to identify opportunities early and select those investments that Blackstone Credit believes offer the most attractive risk-adjusted return profile.

In addition, when banks are facing difficulties in syndicating new issues, Blackstone Credit’s ability to serve as a large “anchor” investor can help facilitate the successful completion of a transaction.

We believe the depth of the experience of Blackstone Credit’s senior management team, together with the wider resources of Blackstone Credit’s team of investment professionals (the “ Investment Team ”), which is dedicated to sourcing, structuring, executing, monitoring and harvesting a broad range of private investments, is one of Blackstone Credit's key strengths when sourcing and analyzing what we believe to be attractive investment opportunities.

banks’ share of senior secured loans has declined from 33.1% in 1995 to 8.1% as of December 31, 2021), the ability to provide flexible, well-structured capital commitments in appropriate sizes will enable Blackstone Credit to command more favorable terms for its investments.

Blackstone Credit seeks to generate investment opportunities through its direct origination channels and through syndicate and club deals (generally, investments made by a small group of investment firms).

With respect to Blackstone Credit’s origination channel, we seek to leverage the global presence of Blackstone Credit to generate access to a substantial amount of directly originated transactions with attractive investment characteristics.

We believe that the broad network of Blackstone Credit provides a significant pipeline of investment opportunities for us.

With respect to syndicate and club deals, Blackstone Credit has built a network of relationships with commercial and investment banks, finance companies and other investment funds as a result of the long track record of its investment professionals in the leveraged finance marketplace.

Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities.

Established Origination Platform with Strong Credit Expertise .

As of January 1, 2021 , Blackstone Credit had an 82 pe rson U.S.

Direct Lending Investments and Portfolio Management Team (excluding Dwight Scott, a member of Blackstone Credit's senior management) focused on the sourcing, structuring, execution, management and realization of performing credit investments (which includes those professionals who focus primarily on direct lending investments).

Performing credit investments are credit investments whose obligors are able to timely and fully pay interest on their outstanding debt, and are not financially stressed or distressed, or considered to be at substantial risk of being financially stressed or distressed, at the time of investment.

As of January 1, 2022, Blackstone Credit had 433 employees globally, including 209 investment professionals.

Blackstone Credit’s 125-person private origination investment team (excluding Dwight Scott, global head of Blackstone Credit), together with a 24-person U.S.

Direct Lending Portfolio Management team, are involved with investment activities and portfolio management activities for BXSL, respectively.

Blackstone Credit’s senior managing directors on the investment team have on average ~23 years of industry experience.

Since inception, Blackstone Credit has originated over $115 billion in private credit transactions and during 2021, Blackstone Credit originated approximately $54 billion in private credit transactions.

3 We believe that Blackstone Credit’s strong reputation and longstanding relationships with corporate boards, management teams, leveraged buyout sponsors, financial advisors, and intermediaries position Blackstone Credit as a partner and counterparty of choice and provides us with attractive sourcing capabilities.

In Blackstone Credit’s experience, these relationships help drive substantial proprietary deal flow and insight into investment opportunities.

2 As of December 31, 2021.

Issuers across portfolios include all corporate issues covered by both the Liquid Credit Strategies and Private Credit research teams across Private Credit Funds and Liquid Credit Funds, including, but not limited to, broadly syndicated assets, middle market assets, high yield bonds, investment grade assets, and mezzanine transactions.

3 As of December 30, 2021.

Includes Blackstone Credit funds that are primarily invested in privately originated investments, including Blackstone Capital Opportunities Funds, Blackstone Capital Solutions Funds, Blackstone European and U.S.

Direct Lending Funds, Blackstone Energy Select Opportunities Fund, and Blackstone Credit Alpha Funds.

Blackstone Credit believes that having one team responsible for alternatives private origination allows us to leverage the strengths and experiences of investment professionals to deliver the leading financing solutions to our companies.

The team has operated through multiple industry cycles, with deep credit expertise, providing them valuable experience and a long-term view of the market.

The team is also focused on making investments in what are characterized as “good neighborhoods”, which are industries experiencing favorable tailwinds, such as life sciences, software & technology, and renewable energy.

In addition, the team is able to leverage the expertise of other parts of Blackstone’s business that specialize in these fields.

Additionally, over the last several years, Blackstone Credit has also expanded its U.S.

origination and sponsor coverage footprint with regional offices opened in select markets.

Blackstone Credit has investment professionals across the U.S.

and Europe and has developed a reputation for being a valued partner, with the ability to provide speed, creativity, and assurance of transaction execution.

We believe that establishing this regional presence in the U.S.

may help us more effectively source investment opportunities from mid-sized leveraged buyout sponsors as well as direction from companies, while potentially strengthening the Blackstone Credit brand.

Value-Added Capital Provider and Partner Leveraging the Blackstone Credit Advantage Program.

Blackstone Credit has established a reputation fo r providing creative, value-added solutions to address a company’s financing requirements and believes our ability to “solve a problem” for a company can lead to attractive investment opportunities.

In addition, Blackstone Credit has access to the significant resources of the Blackstone platform, including the Blackstone Credit Advantage Program, which is a global platform that provides access to a range of cost saving, revenue generating and best practice sharing opportunities.

Blackstone Credit has established a reputation for providing creative, value-added solutions to address a company’s financing requirements and believes our ability to solve a need for a company can lead to attractive investment opportunities.

In addition, Blackstone Credit has access to the significant resources of the Blackstone platform, including the Blackstone Advantage Program ( “Blackstone Advantage” ), which refers to the active management of the Blackstone portfolio company network, including cross-selling efforts across all of Blackstone, and aims to ensure practice sharing, operational, and commercial synergies among portfolio companies, effective deployment of Blackstone resources, and communication of the program with businesses and partners, and the Blackstone Credit Advantage Program ( “Blackstone Credit Advantage” ), which is a global platform that provides access to a range of cost saving, revenue generating and best practice sharing opportunities.

Specifically, Blackstone Credit Advantage provides (i) partnership and best practices for portfolio companies by offering invaluable access to industry and function experts both within the Blackstone organization (including the Blackstone Portfolio Operations team) and the network among portfolio companies;

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and (iv) quarterly reports sharing meaningful insights from CEOs on business and economic trends.

Finally, one of the most important benefits of the program is Blackstone’s GPO, which is a collective purchasing platform that leverages the scale and buying power of the $5 billion of average annual spending of Blackstone’s portfolio companies with strategic partners and vendors measured over the past ten years.

Blackstone and Blackstone Credit portfolio companies have generated significant cost savings through their use of the GPO, ranging from 3% to 40%, often from existing suppliers, on maintenance, repair, operations, back office, information technology, hardware, software, telecommunications, business insurance and human resources, among others.

benefits of working with Blackstone’s GPO can include improved pricing and terms, differentiated service, and ongoing service drops straight to the bottom line.

We believe that the broad network of Blackstone Credit provides a significant pipeline of investment opportunities for us.

Blackstone Credit also has a significant trading platform, which, we believe, allows us access to the secondary market for investment opportunities.

Blackstone and Blackstone Credit portfolio companies have generated significant cost savings through their use of the GPO, up to 40%, often from existing suppliers, on maintenance, repair, operations, back office, information technology, hardware, software, telecommunications, business insurance and human resources, among others.

The benefits of working with Blackstone’s GPO can include improved pricing and terms, differentiated service, and ongoing service that drops straight to the bottom line.

As of December 31, 2021, Blackstone Advantage has grown revenue by over $300 million for Blackstone portfolio companies and Blackstone Credit Advantage has reduced annual costs by $183 million.

The dedicated Blackstone Credit operational program provides support to portfolio companies and has created over $2.0 billion in value.

4 Blackstone Advantage has 71 internal Blackstone resources available to our portfolio companies as of December 31, 2021.

Flexible Investment Approach .

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Blackstone Credit’s creativity and flexibility with regard to deal-structuring distinguishes it from other financing sources, including traditional mezzanine providers, whose investment mandates are typically more restrictive.

Over time, Blackstone Credit has demonstrated the ability to negotiate more favorable terms for its investments by providing creative structures that add value for an issuer.

Over time, Blackstone Credit has demonstrated the ability to negotiate favorable terms for its investments by providing creative structures that add value for an issuer.

Blackstone Credit will continue to seek to use this flexible investment approach to focus on principal preservation, while generating attractive returns throughout different economic and market cycles.

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We believe that freedom from such capital return requirements, which allows us to invest using a long-term focus, provides us with an attractive opportunity to increase total returns on invested capital.

4 Value creation represents $183 million of annual savings as of December 31, 2021, representing estimated savings utilizing the Blackstone Credit Advantage program at the time cost is benchmarked with portfolio companies.

Savings improved portfolio company EBITDA and created value assuming a 11x average EBITDA multiple.

Disciplined Investment Process and Income-Oriented Investment Philosophy .

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Additionally, Blackstone Credit’s senior investment professionals have dedicated their careers to the leveraged finance and private equity sectors and we believe that their experience in due diligence, credit analysis and ongoing management of investments is invaluable to the success of the U.S.

direct lending investment strategy that we will employ.

Blackstone Credit targets businesses with leading market share positions, sustainable barriers to entry, high free cash flow generation, strong asset values, liquidity to withstand market cycles, favorable underlying industry trends, strong internal controls and high-quality management teams.

direct lending investment strategy.

Blackstone Credit generally targets businesses with leading market share positions, sustainable barriers to entry, high free cash flow generation, strong asset values, liquidity to withstand market cycles, favorable underlying industry trends, strong internal controls and high-quality management teams.

Strong Investment Track Record.

Blackstone Credit’s track record in private debt lending and investing in below investment grade credit dates back to the inception of Blackstone Credit.

Since 2005, Blackstone Credit has provided approximately $69 billion in capital in privately-originated transactions with over 120 different sponsors, through various funds and accounts advised or sub-advised by Blackstone Credit.

As it relates to the U.S.

direct lending strategy, Blackstone Credit has been originating in the strategy since inception, and has invested approximately $28 billion of capital specifically in U.S.

middle market privately originated and anchor loans.

Blackstone Credit has approximately $97 billion of investor capital invested.

Since 2005 through December 31, 2021, Blackstone Credit has provided approximately $115 billion in capital in privately-originated transactions.

Blackstone Credit has approximately $185 billion of investor capital currently deployed.

Efficient Cost Structure.

We believe that we have an efficient cost structure, as compared to other publicly traded BDCs, with low management fees, expenses, and financing costs.

We believe our operating efficiency and senior investment strategy enable us to generate greater risk-adjusted investment returns for our investors relative to other publicly traded BDCs.

Scale allows for more resources to source, diligence and monitor investments, and enables us to move up market where there is often less competition.

Investment Strategy

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We seek to meet our investment objectives by:

Credit’s parent, Blackstone, in sourcing, evaluating and structuring transactions, subject to Blackstone’s policies and procedures regarding the management of conflicts of interest;

• employing a defensive investment approach focused on long-term credit performance and principal protection, generally lending on a basis of 3.5 times to 5.5 times the borrower’s earnings before interest, taxes, depreciation and amortization (“ EBITDA ”) (which is generally measured on a forward basis using estimated projections of the Adviser and may include certain adjustments) and at loan-to-value ratios of 50%-65% (with value being the Adviser’s estimate of enterprise value of the borrower) and also seeking favorable financial covenant protections.

The methodology for calculating enterprise value can vary by company and industry, but would typically be based on (i) observable market prices for the company’s debt and equity securities (when available), (ii) comparable company analysis, or (iii) discounted cash flow analysis;

• utilizing the experience and expertise of the management team of the Adviser, along with the broader resources of Blackstone Credit, which include its access to the relationships and human capital of Blackstone Credit’s parent, Blackstone, in sourcing, evaluating and structuring transactions, subject to Blackstone’s policies and procedures regarding the management of conflicts of interest;

• employing a defensive investment approach focused on long-term credit performance and principal protection, generally lending on what the Adviser believes are (i) protective multiples of the borrower’s earnings before interest, taxes, depreciation and amortization ( “EBITDA” ) to its interest coverage obligations, (ii) conservative loan-to-value ratios and (iii) favorable financial covenant protections;

• focusing primarily on loans and securities of private U.S.

companies, including syndicated loans, specifically small and middle market companies, which we define as companies with annual revenue of $50 million to $2.5 billion, at the time of investment.

Specifically, for our originated investments, we target companies with $25 million to $75 million of EBITDA.

companies, including syndicated loans, specifically small and middle market companies.

In many market environments, we believe such a focus offers an opportunity for superior risk-adjusted returns;

• investing primarily in established, stable enterprises with positive cash flows;

• maintaining rigorous portfolio monitoring in an attempt to anticipate and pre-empt negative credit events within our portfolio;

• utilizing the power and scale of Blackstone and the Blackstone Credit platform to offer operational expertise to portfolio companies through the Blackstone Credit Advantage Program.

Our portfolio is composed primarily of first lien senior secured and unitranche loans (including first out/last out loans).

To a lesser extent, we have and may continue to also invest in second lien, third lien, unsecured or subordinated loans and other debt and equity securities.

We do not currently focus on investments in issuers that are distressed or in need of rescue financing.

Subject to the limitations of the 1940 Act, we may invest in loans or other securities the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds.

Subject to the

5 As of December 31, 2021.

Investor capital currently deployed consists of fee earning AUM of $109 billion for Liquid Credit Strategies, $60 billion for Private Credit and other liquid funds (inclusive of leverage), and $16 billion for Structured Products.

limitations of the 1940 Act, we may invest in loans or other securities the proceeds of which may refinance or otherwise repay debt or securities of companies whose debt is owned by other Blackstone Credit funds.

Although we do not expect a significant portion of our portfolio to be composed of second lien, third lien, unsecured or subordinated loans, there is no limit on the amount of such loans in which we may invest, subject to compliance with our 80% policy.

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In connection with our debt investments, we may on occasion receive equity interests such as warrants or options as additional consideration.

We have and may continue to also purchase or otherwise acquire minority interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for our common shares of beneficial interest or other equity or the cash value of shares or other equity, in our target companies, generally in conjunction with one of our debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm, or a finance company transaction (such as a joint venture).

We have and may continue to also purchase or otherwise acquire minority interests in the form of common or preferred equity or equity-related securities, such as rights and warrants that may be converted into or exchanged for our common shares or other equity or the cash value of shares or other equity, in our target companies, generally in conjunction with one of our debt investments or through a co-investment with a financial sponsor, such as an institutional investor or private equity firm, or a finance company transaction (such as a joint venture).

In addition, a portion of our portfolio may be composed of unsecured bonds, CLOs, other debt securities and derivatives, including total return swaps and credit default swaps.

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When identifying prospective investment opportunities, the Adviser currently intends to rely on fundamental credit analysis in order to minimize the loss of the Company’s capital.

The Adviser expects to invest in companies possessing the following attributes, which it believes will help achieve our investment objective:

The Adviser expects to invest in companies possessing the following attributes, which it believes will help achieve our investment objectives:

Leading, Defensible Market Positions.

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The Adviser will seek companies that it believes possess advantages in scale, scope, customer loyalty, product pricing, or product quality versus their competitors, thereby minimizing business risk and protecting profitability.

Stable Companies with Positive Cash Flow.

The Adviser intends to invest in established, stable companies which have demonstrated a record of profitability and cash flows over several economic cycles.

The Adviser believes such companies are well-positioned to maintain consistent cash flow to service and repay their obligations and maintain growth in their businesses or market share.

The Adviser does not intend to invest in start-up companies, companies in turnaround situations or companies with speculative business plans.

Proven Management Teams.

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Initial Review .

The Investment Team examines information furnished by the target company and external sources, including banks, advisors and rating agencies, if applicable, to determine whether the investment meets our basic investment criteria within the context of proper allocation of our portfolio among various issuers and industries, and offers an acceptable

probability of attractive returns with identifiable downside risk.

In the case of directly originated transactions, Blackstone Credit conducts detailed due diligence investigations.

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Credit Analysis/Due Diligence .

Before undertaking an investment, the Investment Team conducts a thorough and rigorous due diligence review of the opportunity to ensure the company fits our investment strategy, which may include:

Before undertaking an investment, the Investment Team conducts a thorough and rigorous due diligence review of the opportunity to ensure the company fits our investment strategy for originated investments, which may include.

but are not limited to:

• a full operational analysis to identify the key risks and opportunities of the target’s business, including a detailed review of historical and projected financial results;

• a detailed analysis of industry and customer dynamics, competitive position, regulatory, tax and legal matters;

• a detailed analysis of industry and customer dynamics, competitive position, regulatory, tax, legal and environmental, social and governance matters;

• on-site visits and customer and supplier reference calls, if deemed necessary;

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A thorough assessment of structure and leverage of a transaction and how the particular investment fits into the overall investment strategy of the portfolio is conducted.

Blackstone Credit’s typical diligence process for an originated investment opportunity spans two to six months, from the initial screen through final approval and funding.

Blackstone Credit’s typical diligence process for an originated investment opportunity

spans two to six months, from the initial screen through final approval and funding.

Depending on the deal, each investment team typically consists of three to four investment professionals, consisting of a portfolio manager, managing director, principal or vice president and associate and/or analyst.

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• Legal due diligence

The ultimate results and findings of the investment analysis are compiled in comprehensive investment memoranda that are used as the basis to support the investment thesis and are utilized by the Investment Committee for final investment review and approval.

Each investment requires the consent of the Investment Committee, which may emphasize the following key criteria (among others) in making a decision:

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Others who participate in the Investment Committee process include the members of the Investment Team responsible for sourcing, analyzing and conducting due diligence on the investment and other senior members of Blackstone Credit.

For certain investments, generally smaller investments where the Company is participating alongside other lenders in a “club” deal, providing an anchor order or purchasing broadly syndicated loans, the Investment Committee has delegated the authority to make an investment decision to a sub-committee of the full Investment Committee.

For broadly syndicated loan investments made by the Company alongside funds within Blackstone Credit’s Liquid Credit Strategies, the portfolio managers of the Company may conduct a joint investment committee with the Liquid Credit Strategies business that follows the investment committee process for the Liquid Credit Strategies business in lieu of the Investment Committee process described above.

There are no representatives from other business groups of Blackstone involved in the Company’s Investment Committee process.

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The Adviser believes that actively managing an investment allows the Investment Team to identify problems early and work with companies to develop constructive solutions when necessary.

The Adviser will monitor our portfolio with a focus toward anticipating negative credit events.

The Adviser will monitor our portfolio with a

focus toward anticipating negative credit events.

In seeking to maintain portfolio company performance and help to ensure a successful exit, the Adviser will work closely with, as applicable, the lead equity sponsor, loan syndicator, portfolio company management, consultants, advisers and other security holders to discuss financial position, compliance with covenants, financial requirements and execution of the company’s business plan.

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Default/Workout .

An important element of Blackstone Credit’s strategy is to attempt to structure investments in a manner such that Blackstone Credit will control negotiations should an issuer violate covenants or need to restructure its balance sheet.

An important element of Blackstone Credit’s strategy for originated investments is to attempt to structure investments in a manner such that Blackstone Credit will control negotiations should an issuer violate covenants or need to restructure its balance sheet.

Blackstone Credit believes that this is typically achieved by ensuring that an investment is at or above the “fulcrum” security, if a restructuring were to occur.

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With respect to investments for which market quotations are not readily available, a valuation committee appointed by the Board of Trustees will assist the Board of Trustees in determining the fair value of such investments in good faith, based on procedures adopted by and subject to the supervision of the Board of Trustees.

We will also determine our NAV as of the last day of a month that is not also the last day of a calendar quarter and we intend to update the value of securities with reliable market quotations to the most recent market quotation.

For securities without reliable market quotations, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise).

Investments for which market quotations are readily available are recorded at such market quotations.

Managerial Assistance .

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This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance, including through the Blackstone Credit Advantage program.

The Adviser and the Administrator will provide such managerial assistance on our behalf to portfolio companies that request this assistance.

The Adviser and the Administrator will

provide such managerial assistance on our behalf to portfolio companies that request this assistance.

To the extent fees are paid for these services, we, rather than the Adviser, will retain any fees paid for such assistance.

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The co-investment would generally be allocated to us, any other Blackstone Credit BDCs and the other Blackstone Credit funds that target similar assets pro rata based on available capital in the applicable asset class.

If the Adviser determines that such investment is not appropriate for us, the investment will not be allocated to us, but the Adviser will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board at the next quarterly board meeting.

We generally are permitted to co-invest with certain of our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our independent trustees make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transaction, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching in respect of us or our shareholders on the part of any person concerned, (2) the transaction is consistent with the interests of our shareholders and is consistent with our investment objectives and strategies, and (3) the investment by our affiliates would not disadvantage us, and our participation would not be on a basis different from or less advantageous than that on which our affiliates are investing.

If the Adviser determines that such investment is not appropriate for us, the investment

will not be allocated to us, but the Adviser will be required to report such investment and the rationale for its determination for us to not participate in the investment to the Board at the next quarterly board meeting.

As of December 31, 2021 and December 31, 2020, the fair value of our investments was approximately $9,855.4 million and $5,585.9 million, respectively, in 148 and 81 portfolio companies, respectively.

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Construction & Engineering 0.30 1.07

Containers & Packaging 0.19 —

Distributors 4.52 8.10

Diversified Consumer Services 3.53 —

Diversified Financial Services 1.37 1.08

Diversified Telecommunication Services 0.93 —

Electrical Equipment 2.68 2.61

Electronic Equipment, Instruments & Components 1.10 2.19

Electric Utilities 0.32 —

Energy Equipment & Services 0.66 1.35

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Machinery 0.03 0.95

Marine 0.25 —

Oil, Gas & Consumable Fuels 1.53 2.66

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Professional Services 7.91 2.32

Real Estate Management & Development 1.28 —

Road & Rail 0.26 —

Software 13.22 2.94

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Canada 481,348 494,037 5.01 11.11

Germany 102,106 106,678 1.91 3.26

Europe 49,677 49,956 0.51 1.12

Total $ 9,745,126 $ 9,855,379 100.00 % 221.59 %

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Canada 267,544 270,126 4.84 8.27

Luxembourg 130,113 130,464 4.22 7.80

Europe 102,106 106,678 1.91 3.26

Total $ 5,575,482 $ 5,585,942 100.00 % 170.94 %

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Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financial Condition, Liquidity and Capital Resources.

Warehousing Transactions

We entered into two warehousing transactions whereby we agreed, subject to certain conditions, to purchase certain assets from parties unaffiliated with the Adviser.

Such warehousing transactions were designed to assist us in deploying capital upon receipt of drawdown proceeds.

One of these warehousing transactions related primarily to originated or anchor investments in middle market loans (the “ Middle Market Warehouse ”).

The other warehouse related primarily to broadly syndicated loans (the “ Syndicated Warehouse ” and, together with the Middle Market Warehouse, the “ Warehousing Transactions ”) prior to the acquisition of the equity interests of the Syndicated Warehouse by us and merger of the Syndicated Warehouse with our wholly-owned subsidiary, as described below.

Both the Middle Market Warehouse and the Syndicated Warehouse have been terminated.

Investment Advisory Agreement

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Under the terms of the Investment Advisory Agreement, the Adviser is responsible for the following:

• determining the composition of our portfolio, the nature and timing of the changes to our portfolio and the manner of implementing such changes in accordance with our investment objective, policies and restrictions;

• identifying investment opportunities and making investment decisions for us, including negotiating the terms of investments in, and dispositions of, portfolio securities and other instruments on our behalf;

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Management Fee

The management fee is payable quarterly in arrears at an annual rate of (i) prior to an Exchange Listing, 0.75%, and (ii) following an Exchange Listing, 1.0%, in each case of the average value of our gross assets at the end of the two most recently completed calendar quarters.

For the first calendar quarter in which the Company had operations, gross assets were measured as the average of gross assets at the Initial Drawdown Date (as defined below) and at the end of such first calendar quarter.

The management fee is payable quarterly in arrears at an annual rate 1.0% (which rate was 0.75% prior to the IPO) of the average value of our gross assets at the end of the two most recently completed calendar quarters.

For purposes of the Investment Advisory Agreement, “gross assets” means our total assets determined on a consolidated basis in accordance with accounting principles generally accepted in the United States (“ U.S.

GAAP ”), excluding undrawn commitments but including assets purchased with borrowed amounts.

If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the management fee shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

For the quarter in which the IPO occurred, the management fee shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the IPO based on the number of days in such calendar quarter before and after the IPO.

In order to maintain the same management fee arrangement that the Company had in place prior to the IPO for a period of time following the IPO, the Adviser voluntarily waived its right to receive the base management fee in excess of 0.75% of the average value of the Company’s gross assets at the end of the two most recently completed calendar quarters from the date of consummation of the IPO through the two year anniversary of the consummation of the IPO (the “ Waiver Period ”).

As a result of the fee waiver, the pre-listing management fee and incentive fee rates paid by the Company to the Adviser will not increase during the Waiver Period.

Amounts waived by the Adviser are not subject to recoupment by the Adviser.

Incentive Fee

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Pre-Incentive Fee Net Investment Income Returns, expressed as a rate of return on the value of our net assets at the end of the immediately preceding quarter, is compared to a “ hurdle rate ” of return of 1.5% per quarter (6.0% annualized).

Prior to an Exchange Listing, we pay the Adviser an incentive fee quarterly in arrears with respect to our Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:

• no incentive fee based on Pre-Incentive Fee Net Investment Income Returns in any calendar quarter in which our Pre-Incentive Fee Net Investment Income Returns do not exceed the hurdle rate of 1.5%;

• 100% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns with respect to that portion of such Pre-Incentive Fee Net Investment Income Returns, if any, that exceeds the hurdle rate but is less than a rate of return of 1.76% (7.06% annualized).

We refer to this portion of our Pre-Incentive Fee Net Investment Income Returns (which exceeds the hurdle rate but is less than 1.76%) as the “catch-up.” The “catch-up” is meant to provide the Adviser with approximately 15% of our Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.76% in any calendar quarter;

• 15% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.76% (7.06% annualized).

This reflects that once the hurdle rate is reached and the catch-up is achieved, 15% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser.

Pre-Incentive Fee Net Investment Income Returns Prior to an Exchange Listing

(expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive Fee Net Investment Income

Allocated to Quarterly Incentive Fee

Following an Exchange Listing, we will pay the Adviser an incentive fee quarterly in arrears with respect to our Pre-Incentive Fee Net Investment Income Returns in each calendar quarter as follows:

The “catch-up” is meant to provide the Adviser with approximately 17.5% of our Pre-Incentive Fee Net Investment Income Returns as if a hurdle rate did not apply if this net investment income exceeds 1.82% in any calendar quarter;

• 17.5% of the dollar amount of our Pre-Incentive Fee Net Investment Income Returns, if any, that exceed a rate of return of 1.82% (7.27% annualized).

This reflects that once the hurdle rate is reached and the catch-up is achieved, 17.5% of all Pre-Incentive Fee Net Investment Income Returns thereafter are allocated to the Adviser.

Pre-Incentive Fee Net Investment Income Returns Following an Exchange Listing

(expressed as a percentage of the value of net assets)

Percentage of Pre-Incentive Fee Net Investment Income

Allocated to Quarterly Incentive Fee

Pursuant to the Investment Advisory Agreement, the Company is to pay an income based incentive fee of 15% prior to the consummation of the IPO and 17.5% following the consummation of the IPO, with a 1.5% hurdle and 100% catch-up.

However, the Adviser has implemented a voluntary waiver with respect to the income based incentive fee.

The Adviser has voluntarily waived its right to receive an income based incentive fee above 15% during the Waiver Period.

Following the IPO, the Company pays its Adviser an income based incentive fee based on its aggregate pre-incentive fee net investment income, as adjusted as described above, from the calendar quarter then ending (including the quarter in which this offering is consummated) and the eleven preceding calendar quarters (including the quarters prior to the consummation of this offering) (such period, the “ Trailing Twelve Quarters ”).

The hurdle amount for the income based incentive fee will be determined on a quarterly basis and is equal to 1.5% multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters.

The hurdle amount is calculated after making appropriate adjustments for issuances by the Company of common shares, including issuances pursuant to its dividend reinvestment plan and distributions that occurred during the relevant Trailing Twelve Quarters.

The income based incentive fee for any partial period will be appropriately prorated.

For the income based incentive fee, the Company will pay the Adviser a quarterly incentive fee based on the amount by which (A) aggregate pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters exceeds (B) the hurdle amount for such Trailing Twelve Quarters.

The amount of the excess of (A) over (B) described in this paragraph for such Trailing Twelve Quarters is referred to as the “ Excess Income Amount.

The income based incentive fee for each quarter will be determined as follows:

• No income based incentive fee is payable to the Adviser for any calendar quarter for which there is no Excess Income Amount;

• The Adviser will be paid 100% of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters, if any, that exceeds the hurdle amount for such Trailing Twelve Quarters, but is less than or equal to an amount, which we refer to as the “ Catch-up Amount ,” determined as the sum of 1.76% (7.06% annualized) prior to the end of the Waiver Period, or 1.82% (7.27% annualized) following the Waiver Period, multiplied by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters that is included in the calculation of the Incentive Fee based on income.

• The Adviser will be paid 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the pre-incentive fee net investment income in respect of the Trailing Twelve Quarters that exceeds the Catch-up Amount.

The amount of the income based incentive fee that will be paid to the Adviser for a particular quarter will equal the excess of (a) the income based incentive fee so calculated over (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters included in the relevant Trailing Twelve Quarters subject to the Incentive Fee Cap as described below.

The income based incentive fee that will be paid to the Adviser for a particular quarter is subject to a cap (the “ Incentive Fee Cap ”).

The Incentive Fee Cap for any quarter is an amount equal to (a) 15% prior to the end of the Waiver Period, or 17.5% following the Waiver Period, of the Cumulative Net Return (as defined below) during the relevant Trailing Twelve Quarters minus (b) the aggregate income based incentive fee that was paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant Trailing Twelve Quarters.

“ Cumulative Net Return ” means (x) the pre-incentive fee net investment income in respect of the relevant Trailing Twelve Quarters minus (y) any Net Capital Loss (as defined below), if any, in respect of the relevant Trailing Twelve Quarters.

If, in any quarter, the Incentive Fee Cap is zero or a negative value, the Company will pay no income based incentive fee to the Adviser for such quarter.

If, in any quarter, the Incentive Fee Cap for such quarter is a positive value but is less than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the Incentive Fee Cap for such quarter.

If, in any quarter, the Incentive Fee Cap for such quarter is equal to or greater than the income based incentive fee that is payable to the Adviser for such quarter (before giving effect to the Incentive Fee Cap) calculated as described above, the Company will pay an income based incentive fee to the Adviser equal to the incentive fee calculated as described above for such quarter without regard to the Incentive Fee Cap.

“ Net Capital Loss ” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.

These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter.

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For example, if we receive Pre-Incentive Fee Net Investment Income Returns in excess of the quarterly hurdle rate, we will pay the applicable incentive fee even if we have incurred a loss in that calendar quarter due to realized and unrealized capital losses.

If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the incentive fee shall be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.

If the Waiver Period ends on a date other than the first day of a calendar quarter, the incentive fee applicable after the Waiver Period will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable during and after the Waiver Period based on the number of days in such calendar quarter during and after the Waiver Period.

In no event will the amendments to the income based incentive fee to include the three year income and total return lookback features allow the Adviser to receive greater cumulative income based incentive fees under the Investment Advisory Agreement than it would have under the prior investment advisory agreement.

Amounts waived by the Adviser are not subject to recoupment by the Adviser.

The following is a graphical representation of the calculation of the Incentive Fee based on income:

Incentive Fee Based on Income Prior to the end of the Waiver Period (1)

Percentage of pre-incentive fee net income comprising the Incentive Fee based on Income

(expressed as an annualized rate (2) of return on the value of net assets as of the beginning of each of the quarters included in the Trailing Twelve Quarters)

(1) Following the end of the Waiver Period, the Catch-up Amount will increase to 7.27% annualized and the income based incentive fee will increase to 17.5%

(2) The income based incentive fee is determined on a quarterly basis but has been annualized for purposes of the above diagram.

The diagram also does not reflect the Incentive Fee Cap.

(ii) Incentive Fee on Capital Gains

The second component of the incentive fee, the capital gains incentive fee, is payable at the end of each calendar year (or at the time of an Exchange Listing) in arrears.

Prior to an Exchange Listing, the amount payable equals:

• 15% of cumulative realized capital gains from inception through the end of such calendar year (or upon an Exchange Listing), computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with U.S.

Following an Exchange Listing, the amount payable equals:

• 17.5% of cumulative realized capital gains from inception through the end of such calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid incentive fee on capital gains as calculated in accordance with U.S.

If an Exchange Listing occurs on a date other than the first day of a fiscal year, a capital gains incentive fee shall be calculated as of the day before the Exchange Listing, with such capital gains incentive fee paid to the Adviser following the end of the fiscal year in which the Exchange Listing occurred.

For the avoidance of doubt, such capital gains incentive fee shall be equal to 15% of our realized capital gains on a cumulative basis from inception through the day before the Exchange Listing, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees.

Solely for purposes of calculating the capital gains incentive fee after an Exchange Listing, the Company will be deemed to have previously paid capital gains incentive fees prior to an Exchange Listing equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid capital gains incentive fees for all periods prior to an Exchange Listing by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%.

The second part of the incentive fee, the capital gains incentive fee, is payable at the end of each calendar year (or at the end of the Waiver Period) in arrears.

Following completion of the IPO, the capital gains incentive fee will be determined and payable in arrears as of the end of each calendar year in an amount equal to 17.5% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees as calculated in accordance with U.S.

However, similar to the voluntary waivers referenced above, the Adviser voluntarily waived its right to receive a capital gains based incentive fee above 15% during the Waiver Period.

The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain.

If the Waiver Period terminates on a date other than the first day of a fiscal year, a capital gains incentive fee will be calculated as of the day before the expiration of the Waiver Period, with such capital gains incentive fee paid to the Adviser following the end of the fiscal year in which the Waiver Period ended.

For the avoidance of doubt, such capital gains incentive fee will be equal to 15% of our realized capital gains on a cumulative basis from inception through the end of the Waiver Period, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gains incentive fees.

Solely for purposes of calculating the capital gains incentive fee after the Waiver Period, the Company will be deemed to have previously paid capital gains incentive fees prior to the end of the Waiver Period equal to the product obtained by multiplying (a) the actual aggregate amount of previously paid capital gains incentive fees for all periods prior to the end of the Waiver Period by (b) the percentage obtained by dividing (x) 17.5% by (y) 15%.

Amounts waived by the Adviser are not subject to recoupment by the Adviser.

Each year, the fee paid for the capital gains incentive fee is net of the aggregate amount of any previously paid capital gains incentive fee for all prior periods.

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The Adviser and the Administrator shall not be liable for any error of judgment or mistake of law or for any act or omission or any loss suffered by the Company in connection with the matters to which the Investment Advisory Agreement and Administration Agreement, respectively, relate, provided that the Adviser and Administrator shall not be protected against any liability to the Company or its shareholders to which the Adviser or Administrator would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of the reckless disregard of its duties and obligations (“ disabling conduct ”).

Each of the Investment Advisory Agreement and the Administration Agreement provides that, absent disabling conduct, each of our Adviser and our Administrator, as applicable, and its officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Adviser’s services under the Investment Advisory Agreement and our Administrator’s services under the Administration Agreement or otherwise as adviser or administrator for us.

affiliated with it are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of our Adviser’s services under the Investment Advisory Agreement and our Administrator’s services under the Administration Agreement or otherwise as adviser or administrator for us.

The Adviser and the Administrator shall not be liable under their respective agreements with us or otherwise for any loss due to the mistake, action, inaction, negligence, dishonesty, fraud or bad faith of any broker or other agent;

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Such Expense Payment must be made in any combination of cash or other immediately available funds no later than forty-five days after a written commitment from the Adviser to pay such expense, and/or by an offset against amounts due from us to the Adviser or its affiliates.

“ Reimbursement Payment ”), to the Adviser until such time as all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter have been reimbursed.

Following any calendar quarter in which Available Operating Funds (as defined in the Expense Support Agreement) exceed the cumulative distributions accrued to our shareholders based on distributions declared with respect to record dates occurring in such calendar quarter (such amount referred to as the “ Excess Operating Funds ”), we shall pay such Excess Operating Funds, or a portion thereof (each, a “ Reimbursement Payment ”), to the Adviser until such time as all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter have been reimbursed.

The amount of the Reimbursement Payment for any calendar quarter shall equal the lesser of (i) the Excess Operating Funds in such quarter and (ii) the aggregate amount of all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser.

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We generally intend to distribute substantially all of our available earnings annually by paying distributions on a quarterly basis, as determined by the Board in its discretion.

We cannot assure investors that we will achieve investment results that will allow us to make a specified level of cash distributions (particularly during the early stages of our operations) or year-to-year increases in cash distributions.

We cannot assure investors that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions.

We anticipate that our distributions will generally be paid from post-offering taxable earnings, including interest and capital gains generated by our investment portfolio, and any other income, including any other fees (other than fees for providing managerial assistance), such as commitment, origination, structuring, diligence and consulting fees or other fees, that we receive from portfolio companies.

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As a result, if the Board authorizes, and we declare, a cash dividend or other distribution, then our shareholders who have not opted out of our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares as described below, rather than receiving the cash dividend or other distribution.

Distributions on fractional shares will be credited to each participating shareholder’s account to three decimal places.

Prior to an Exchange Listing, a participating shareholder will receive an amount of shares equal to the amount of the distribution on that participant’s shares divided by the most recent fiscal quarter-end NAV per share that is available on the date such distribution was paid (unless the Board determines to use the NAV per share as of another time).

Following an Exchange Listing, a participating shareholder will receive an amount of shares equal to the amount of the distribution on that participant’s shares divided by the market price per share at the close of regular trading on the applicable stock exchange on the date of such distribution, subject to certain adjustments described in the Company’s dividend reinvestment plan.

Prior to the IPO, a participating shareholder received an amount of shares equal to the amount of the distribution on that participant’s shares divided by the most recent fiscal quarter-end NAV per share that was available on the date such distribution was paid (unless the Board determined to use the NAV per share as of another time).

Following the IPO, the number of shares to be issued to a shareholder is determined by dividing the total dollar amount of the cash dividend or distribution payable to a shareholder by the market price per common share at the close of regular trading on the NYSE on the payment date of a distribution, or if no sale is reported for such day, the average of the reported bid and ask prices.

However, if the market price per share on the payment date of a cash dividend or distribution exceeds the most recently computed net asset value per share, the Company will issue shares at the greater of (i) the most recently computed net asset value per share and (ii) 95% of the current market price per share (or such lesser discount to the

current market price per share that still exceeded the most recently computed net asset value per share).

For example, if the most recently computed net asset value per share is $25.00 and the market price on the payment date of a cash dividend is $24.00 per share, the Company will issue shares at $24.00 per share.

If the most recently computed net asset value per share is $25.00 and the market price on the payment date of a cash dividend is $27.00 per share, the Company will issue shares at $25.65 per share (95% of the current market price).

If the most recently computed net asset value per share is $25.00 and the market price on the payment date of a cash dividend is $26.00 per share, the Company will issue shares at $25.00 per share.

We intend to use newly issued shares to implement the plan.

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The plan may be terminated by the Company at any time upon notice in writing mailed to each shareholder of record.

Our Private Offering

We are conducting a private offering (the “ Private Offering ”) of shares (i) to accredited investors (as defined in Regulation D under the U.S.

Securities Act of 1933, as amended (the “ 1933 Act” )) and (ii) in the case of shares sold outside the United States, to persons that are not “U.S.

persons” (as defined in Regulation S under the 1933 Act), in reliance on exemptions from the registration requirements of the 1933 Act.

Shares will be offered for subscription continuously throughout the period

during which the Private Offering remains open.

Shares will be offered for subscription continuously throughout the Initial Closing Period (as defined below) and may be offered from time to time thereafter.

At each closing of the Private Offering, each investor participating in that closing will make a capital commitment (a “ Capital Commitment ”) to purchase our shares pursuant to a subscription agreement relating to the shares (the “ Subscription Agreement ”).

Investors will be required to fund drawdowns to purchase our shares up to the amount of their respective Capital Commitments on an as-needed basis each time we deliver a notice to the investors.

We expect closings of the Private Offering will occur, from time to time, in the Adviser’s sole discretion, during the two-year period following the initial closing of Capital Commitments (which initial closing took place on October 31, 2018) (the “ Initial Closing Period ”).

On October 31, 2020, the Initial Closing Period ended.

After the Initial Closing Period, we may permit one or more additional closings (“ Subsequent Closings ”) as additional Capital Commitments are obtained.

We currently do not expect to draw any Capital Commitments from Subsequent Closings (“ Subsequent Capital Commitments ”) until 100% of the Capital Commitments from the Initial Closing Period (“ Initial Capital Commitments ”) have been drawn down, unless otherwise determined by our Board.

We commenced our loan origination and investment activities contemporaneously with the receipt of the initial drawdown from investors in the Private Offering (the “ Initial Drawdown ”) on November 20, 2018.

The proceeds from the Initial Drawdown and borrowings from our credit facilities provided us with the necessary capital to commence operations.

See “ —Credit Facilities .” We anticipate raising additional equity capital for investment purposes through additional closings under the Private Offering.

We have entered, and expect to continue to enter, into separate Subscription Agreements with a number of investors providing for the private placement of shares pursuant to the Private Offering and may enter into additional Subscription Agreements from time to time.

We deliver drawdown requests at least ten business days prior to the required funding date.

For Initial Capital Commitments, purchases of our shares are generally made first by holders with the largest percentage of their Initial Capital Commitments undrawn and then, once all holders have the same percentage of undrawn Initial Capital Commitments outstanding, pro rata in accordance with remaining Initial Capital Commitments of all investors.

The offering price per share at the Initial Drawdown Date was $25.

Following the Initial Drawdown Date, shares have been and will be offered on a private placement basis at a price based on our NAV per share, which is approved by our Board and at all times consistent with U.S.

Each offering has been and will be subject to the limitations of Section 23(b) under the 1940 Act (which generally prohibits us from issuing shares at a price below the then-current NAV of the shares as determined within 48 hours, excluding Sundays and holidays, of such issuance (taking into account any investment valuation adjustments from the latest quarterly valuation date in accordance with the Company’s valuation policy), subject to certain exceptions).

In order to more fairly allocate organizational expenses among all shareholders, investors subscribing after the Initial Drawdown Date will be required to bear a pro rata portion of such expenses at the time of their first investment in the Company.

The “ Initial Drawdown Period ” began when Initial Capital Commitments were made and will continue until the earlier of (i) an Exchange Listing (as defined below) and (ii) the two-year anniversary of the end of the Initial Closing Period.

During the Initial Drawdown Period and any drawdown period applicable to Subsequent Capital Commitments, the Adviser may issue capital calls for any permitted Company purpose.

Subject to the share repurchase program described herein, the Company generally does not intend to return any drawn capital.

Key Person Event

A “ Key Person Event ” will occur if, during the Initial Drawdown Period, fewer than five of Bennett Goodman, Dwight Scott, Brad Marshall, Louis Salvatore, Rob Petrini, Dan Smith and Robert Zable, or their respective Qualified Replacements (as defined below) (such persons collectively, the “ Key Persons ”), are actively involved in and devoting sufficient time to the business and affairs of the Company as deemed reasonably necessary by the Adviser.

Upon the occurrence of a Key Person Event, the Company will send written notice of the Key Person Event to the shareholders within ten business days of such occurrence.

If during the forty-five day period following the sending of such written notice (the “ Notice Period ”) the Key Persons (who are the subject of such Key Person Event) have not been replaced by the Adviser with a Qualified Replacement (as defined below), the Company shall convene a meeting of the Company’s independent trustees to be held no later than thirty days following the expiration of the Notice Period for the purpose of determining whether the Initial Drawdown Period shall be continued (the “ Key Person Meeting ”).

If a majority of the independent trustees vote in favor of the proposal, the Initial Drawdown Period will be continued and shareholders will be obligated to fund drawdowns as if a Key Person Event had never occurred.

Otherwise, the Initial Drawdown Period shall be deemed to have terminated as of the date of the Key Person Meeting, except that further drawdowns may be made to fund any proposed investment (including any follow-on investment and investments pursuant to an investment commitment) for which the Adviser has, on behalf of the Company, made a commitment, placed a bid (whether binding or not) in a competitive bidding situation or entered into a letter of intent, term sheet, memorandum of understanding or other similar document (whether or not such document created a legally binding obligation to proceed with such investment) or a definitive agreement to proceed with such transaction (collectively, “ Actively Pursued Potential Investments ”) if such Actively Pursued Potential Investment was being actively pursued as of such Key Person Event.

“ Qualified Replacement ” shall mean a senior investment professional selected by the Adviser;

provided that such replacement has been approved by either (i) a majority of the independent trustees or (ii) the holders of a majority of the outstanding shares of the Company, and upon either such approval, such nominee shall constitute a Qualified Replacement.

While we expect most Subscription Agreements to reflect the terms and conditions summarized in the preceding paragraph, we reserve the right to enter into Subscription Agreements or other agreements that contain terms and conditions not found in the Subscription Agreements or other agreements entered into with other investors, subject to applicable law.

We currently expect to consummate an Exchange Listing by the four-year anniversary of the end of the Initial Closing Period, subject to market conditions.

If we have not consummated an Exchange Listing by the earlier of (i) the five-year anniversary of the end of the Initial Drawdown Period, as may be extended for up to an additional one-year period pursuant to the Adviser’s recommendation with the approval of the Board and (ii) the ten year anniversary following the date of the initial closing, then, the Board (subject to market conditions and any necessary shareholder approvals and applicable requirements of the 1940 Act) will use its commercially reasonable efforts to wind down, sell and/or liquidate and dissolve the Company in an orderly manner.

An “ Exchange Listing ” is a quotation or listing of the Company’s securities on a national securities exchange (including through an initial public offering) or a sale of all or substantially all of our assets to, or a merger or other liquidity transaction with, an entity in which the Company’s shareholders receive shares of a publicly-traded company which continues to be managed by the Adviser or an affiliate thereof.

Prior to an Exchange Listing, if the Board determines that there has been a significant adverse change in the regulatory or tax treatment of the Company or our shareholders that in its judgment makes it inadvisable for the Company to continue in its present form, then the Board will endeavor to restructure or change the form of the Company to preserve (insofar as possible) the overall benefits previously enjoyed by our shareholders as a whole or, if the Board determines it appropriate (and subject to any necessary shareholders approvals and applicable requirements of the 1940 Act), (i) cause the Company to change its form and/or jurisdiction of organization or (ii) wind down and/or liquidate and dissolve the Company.

The Board may also seek to change our form and/or jurisdiction of organization for other reasons.

The Board may, at any time and in its discretion, cause us to merge with another BDC, private fund, separately managed account or another investment vehicle without shareholder approval, subject to the requirements of the 1940 Act.

In the event of our liquidation, dissolution or winding up, each share would be entitled to share ratably in all of our assets that are legally available for distribution after we paid or otherwise provide for all debts and other liabilities and subject to any preferential rights of holders of our preferred shares, if any preferred shares are outstanding at such time.

For the purposes of this paragraph, a merger or consolidation of the Company with or into any other corporation or other entity, or a sale or conveyance of all or any part of our property or assets will not be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary.

We compete for investments with other BDCs and investment funds (including private equity funds, mezzanine funds, performing and other credit funds, and funds that invest in CLOs, structured notes, derivatives and other types of collateralized securities and structured products), as well as traditional financial services companies such as commercial banks and other sources of funding.

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Moreover, alternative investment vehicles, such as hedge funds, have begun to invest in areas in which they have not traditionally invested, including making investments in middle market private U.S.

As a result of these new entrants, competition for investment opportunities in middle market

As a result of these new entrants, competition for investment opportunities in middle market private U.S.

companies may intensify.

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The Investment Team will focus on origination, non-originated investments and transaction development and the ongoing monitoring of our investments.

Share Repurchase Program

Beginning from the end of the Initial Drawdown Period, until an Exchange Listing, we intend to commence tender offers to allow shareholders to tender their shares on a quarterly basis at a price per share expected to reflect NAV per share.

Any such share repurchase offer will be at the discretion of the Board to conduct, amend, suspend or terminate such share repurchase offer and subject to applicable law.

We will conduct any repurchase offers in accordance with Section 23(c) of the 1940 Act and Rule 13e-4 under the 1934 Act.

We intend that the NAV per share as of the last day of the applicable calendar quarter would be used for determining what amount tendering shareholders would receive in such repurchases.

We intend to limit the number of shares repurchased pursuant to any such repurchase offers to 2.5% of outstanding shares, with the exact amount to be set by the Board.

To the extent that the number of shares put to us for repurchase exceeds the number of shares that we are able to purchase, we will repurchase shares on a pro rata basis (based on the number of shares put to us for repurchase), not on a first-come, first-served basis.

Unless shareholders tender their shares, shareholders must generally maintain a minimum balance of $5,000 subsequent to submitting a portion of their shares for repurchase by us, which such minimum balance the Adviser may waive in its sole discretion.

There is no assurance that the Board will adopt such a repurchase program and the Board may amend, suspend or terminate any such share repurchase program in its discretion.

shareholders may not be able to sell their shares at all in the event our Board amends, suspends or terminates the share repurchase program, absent a liquidity event.

We will notify shareholders of such developments in our quarterly reports or other filings.

The share repurchase program has many limitations and should not be relied upon as a method to sell shares promptly or at a desired price.

Share Repurchase Plan

On October 18, 2021, our Board approved the Company 10b5-1 Plan, to acquire up to approximately $262 million (representing the net proceeds from the IPO) in the aggregate of our common shares at prices below our net asset value per share over a specified period, in accordance with the guidelines specified in Rule 10b-18 and Rule 10b5-1 of the Exchange Act.

We put the Company 10b5-1 Plan in place because we believe that, in the current market conditions, if our common shares are trading below our then-current net asset value per share, it is in the best interest of our shareholders for us to reinvest in our portfolio.

The Company 10b5-1 Plan is intended to allow us to repurchase our common shares at times when we otherwise might be prevented from doing so under insider trading laws.

The Company 10b5-1 Plan requires Morgan Stanley & Co.

LLC, as our agent, to repurchase common shares on our behalf when the market price per share is below the most recently reported net asset value per share (including any updates, corrections or adjustments publicly announced by us to any previously announced net asset value per share).

Under the Company 10b5-1 Plan, the agent will increase the volume of purchases made as the price of our common shares declines, subject to volume restrictions.

The timing and amount of any share repurchases will depend on the terms and conditions of the Company 10b5-1 Plan, the market price of our common shares and trading volumes, and no assurance can be given that any particular amount of common shares will be repurchased.

The purchase of shares pursuant to the Company 10b5-1 Plan is intended to satisfy the conditions of Rule 10b5-1 and Rule 10b-18 under the Exchange Act, and will otherwise be subject to applicable law, including Regulation M, which may prohibit purchases under certain circumstances.

The Company 10b5-1 Plan commenced on November 26, 2021 and will terminate upon the earliest to occur of (i) 12-months from its commencement (tolled for periods during which the Company 10b5-1 Plan is suspended), (ii) the end of the trading day on which the aggregate purchase price for all shares purchased under the Company 10b5-1 Plan equals approximately $262 million (representing the net proceeds from the IPO) and (iii) the occurrence of certain other events described in the Company 10b5-1 Plan.

Valuation Procedures

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Where it is possible to obtain reliable, independent market quotations from a third party vendor, we will use these quotations to determine the value of our investments.

of, the Board, based on, among other things, the input of the Adviser, the Audit Committee and independent third-party valuation firm(s) engaged at the direction of the Board to review our investments.

Debt and equity securities that are not publicly-traded or whose market prices are not readily available, as is expected to be the case for a substantial portion of our investments, will be valued at fair value as determined in good faith pursuant to procedures adopted by, and under the oversight of, the Board, based on, among other things, the input of the Adviser, the Audit Committee and independent third-party valuation firm(s) engaged at the direction of the Board to review our investments.

With respect to investments for which market quotations are not readily available, the Company uses a multi-step valuation process, which includes, among other procedures, the following:

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• The Adviser’s Valuation Committee reviews each valuation recommendation to confirm they have been calculated in accordance with the valuation policy and compares such valuations to the independent valuation firms’ valuation ranges to ensure the Adviser’s valuations are reasonable;

• The Valuation Committee makes valuation recommendations to the Audit Committee;

• The Adviser’s Valuation Committee makes valuation recommendations to the Audit Committee;

• The Audit Committee reviews the valuation recommendations made by the Adviser’s Valuation Committee, including the independent valuation firms' valuations, and once approved, recommends them for approval by the Board;

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Valuation of each of our investments will generally be made as described above as of the end of each fiscal quarter.

In cases where we determine our NAV at times other than a quarter end, we intend to update the value of securities with reliable market quotations to the most recent market quotation.

For securities without reliable market quotations, non-quarterly valuations will generally be the most recent quarterly valuation unless a material event has occurred since the most recent quarter end with respect to the investment.

Independent valuation firms are generally not used for non-quarterly valuations.

In cases where the Company determines its NAV at times other than a quarter end, the Company updates the value of securities with reliable market quotations to the most recent market quotation.

For securities without reliable market quotations, non-quarterly valuations will generally be the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise).

If the Adviser determines such a change has occurred with respect to one or more investments, the Adviser will determine whether to update the value for each relevant investment using a range of values from an independent valuation firm, where applicable, in accordance with the Company’s valuation policy, pursuant to authority delegated by the Board.

As part of the valuation process, we take into account relevant factors in determining the fair value of its investments, many of which are loans, including and in combination, as relevant, of:

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Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options or rights to purchase shares that it may have outstanding at any time.

In particular, the amount of shares that would result from

the conversion or exercise of all outstanding warrants, options or rights to purchase shares cannot exceed 25% of the BDC’s total outstanding shares.

In particular, the amount of shares that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase shares cannot exceed 25% of the BDC’s total outstanding shares.

Leverage and Senior Securities;

Coverage Ratio.

We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our shares if our asset coverage, as defined in the 1940 Act, would at least equal 150% immediately after each such issuance.

We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our shares if our asset coverage, as defined in the 1940 Act, is at or above 150% immediately after each such issuance.

On September 25, 2018, our sole shareholder approved the adoption of this 150% threshold pursuant to Section 61(a)(2) of the 1940 Act and such election became effective the following day.

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Our existing financing facilities bear, and it is anticipated that any future credit facilities will bear interest at floating rates at to be determined spreads over LIBOR.

Shareholders indirectly bear the costs associated with any borrowings under a credit facility or otherwise, including increased management fees payable to the Adviser as a result of such borrowings.

Shareholders indirectly bear the costs associated with any borrowings under a credit facility or otherwise, including increased

management fees payable to the Adviser as a result of such borrowings.

Our current credit facilities require us, and future lenders may require us to pledge assets, commitments and/or drawdowns (and the ability to enforce the payment thereof) and to comply with positive or negative covenants that could have an effect on our operations.

In addition, from time to time, our losses on leveraged investments may result in the liquidation of other investments held by us and may result in additional drawdowns to repay such amounts.

We also issued two unsecured bonds and may have additional bond offerings in the future.

We also issued five unsecured bonds and may have additional bond offerings in the future.

We may enter into a total return swap (“ TRS ”) agreement.

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To the extent the Company segregates liquid assets with a value equal (on a daily mark-to-market basis) to its obligations under TRS transactions, enters into offsetting transactions or otherwise covers such TRS transactions in accordance with applicable SEC guidance, the leverage incurred through TRS will not be considered a borrowing for purposes of the Company’s overall leverage limitation.

We may also create leverage by securitizing our assets (including in CLOs) and retaining the equity portion of the securitized vehicle.

We have also created leverage by securitizing our assets (including in CLOs) and retaining the equity portion of the securitized vehicle and may enter into other debt securitizations in the future.

Debt securitizations (including in CLOs) are a form of secured financing, which would generally be consolidated on our financial statements and subject to our overall asset coverage requirement.

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Personnel subject to the code are permitted to invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the code’s requirements.

You may read and copy this code of ethics at the SEC's Public Reference Room in Washington, D.C.

You may obtain information on the operation of the Public Reference Room by calling the SEC at (202) 551-8090.

You may also obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following email address:

publicinfo@sec.gov, or by writing the SEC's Public Reference Section, 100 F Street, N.E., Washington, D.C.

You may obtain copies of the codes of ethics, after paying a duplicating fee, by electronic request at the following email address:

publicinfo@sec.gov.

Affiliated Transactions.

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If the Company fails to qualify as a RIC or fails to satisfy the 90% distribution requirement in any taxable year, the Company would be subject to U.S.

federal income tax at regular corporate rates on its taxable income (including distributions

of net capital gain), even if such income were distributed to its shareholders, and all distributions out of earnings and profits would be taxed to shareholders as ordinary dividend income.

federal income tax at regular corporate rates on its taxable income (including distributions of net capital gain), even if such income were distributed to its shareholders, and all distributions out of earnings and profits would be taxed to shareholders as ordinary dividend income.

Such distributions generally would be eligible (i) to be treated as “qualified dividend income” in the case of individual and other noncorporate shareholders and (ii) for the dividends received deduction in the case of corporate shareholders.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business