Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information contained in this section should be read in conjunction with “Item 1. Financial Statements” hereto and “Part II, Item 8-Consolidated Financial Statement and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2023 , as updated from time to time by the Company's periodic filings with the SEC. This discussion contains forward-looking statements and involves numerous risks, uncertainties, and other factors outside of the Company’s control including, but not limited to, those set forth in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023 , as updated from time to time by the Company's periodic filings with the SEC.
Overview and Investment Framework
We are a Delaware statutory trust structured as a non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes, we elected to be treated as a RIC under the Code. We are managed by our Adviser. The Administrator will provide 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 and 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. In limited instances we may retain the “last out” portion of a first-lien loan. In such cases, the “first out” portion of the first lien loan would receive priority with respect to payment over our “last out” position. In exchange for the higher risk of loss associated with such “last out” portion, we would earn a higher rate of interest than the “first out” position. We do not currently focus on investments in issuers that are distressed or in need of rescue financing.
Key Components of Our Results of Operations
Investments
We focus primarily on loans and securities, including syndicated loans, of private U.S. companies, which includes larger and middle market companies. In many market environments, we believe such a focus offers an opportunity for superior risk-adjusted returns.
Our level of investment activity (both the number of investments and the size of each investment) can and will vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle market companies, the level of merger and acquisition activity for such companies, the general economic environment, trading prices of loans and other securities and the competitive environment for the types of investments we make.
Revenues
We generate revenues in the form of interest income from the debt securities we hold and dividends. Our debt investments typically have a term of five to eight years and bear interest at floating rates on the basis of a benchmark such as SOFR, SONIA, etc. In some instances, we receive payments on our debt investments based on scheduled amortization of the outstanding balances. In addition, we may receive repayments of some of our debt investments prior to their scheduled maturity date. The frequency or volume of these repayments fluctuates significantly from period to period. Our portfolio activity also reflects the proceeds of sales of securities. In some cases, our investments may provide for deferred interest payments or PIK interest. The principal amount of loans and any accrued but unpaid interest generally become due at the maturity date.
In addition, we generate revenue from various fees in the ordinary course of business such as in the form of commitment, loan origination, structuring, consent, waiver, amendment, syndication and other miscellaneous fees as well as fees for providing managerial assistance to our portfolio companies.
86
Table of Contents
Expenses
Except as specifically provided below, all investment professionals and staff of the Adviser, when and to the extent engaged in providing investment advisory services to us, and the base compensation, bonus and benefits, and the routine overhead expenses, of such personnel allocable to such services, will be provided and paid for by the Adviser. We bear all other costs and expenses of our operations, administration and transactions, including, but not limited to (a) investment advisory fees, including management fees and incentive fees, to the Adviser, pursuant to the Investment Advisory Agreement; (b) our allocable portion of compensation, overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) our chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, operations and other non-investment professionals (including information technology professionals) at the Administrator that perform duties for us; and (iii) any internal audit group personnel of Blackstone or any of its affiliates; and (c) all other expenses of our operations, administrations and transactions.
From time to time, the Adviser, the Administrator or their affiliates may pay third-party providers of goods or services on our behalf. We will reimburse the Adviser, Administrator or such affiliates thereof for any such amounts. From time to time, the Adviser or the Administrator may defer or waive fees and/or rights to be reimbursed for expenses. The Administrator has elected to forgo any reimbursement for rent and other occupancy costs for the three and six months ended June 30, 2024 and 2023. However, the Administrator may seek reimbursement for such costs in future periods. All of the foregoing expenses will ultimately be borne by our shareholders.
Costs and expenses of the Administrator and the Adviser that are eligible for reimbursement by us will be reasonably allocated on the basis of time spent, assets under management, usage rates, proportionate holdings, a combination thereof or other reasonable methods determined by the Administrator in accordance with policies adopted by the Board.
87
Table of Contents
Portfolio and Investment Activity
For the three months ended June 30, 2024, we made $1,286.9 million aggregate principal amount of new investment commitments (including $442.3 million of which remained unfunded as of June 30, 2024), $1,286.9 million of which was first lien debt and less than $0.1 million of which was equity.
Our investment activity is presented below (information presented herein is at amortized cost unless otherwise indicated) (dollar amounts in thousands):
As of and for the three months ended June 30,
2024 2023
Investments:
Total investments, beginning of period $ 10,496,753 $ 9,669,106
New investments purchased 890,601 116,888
Payment-in-kind interest capitalized 22,717 11,827
Net accretion of discount on investments 9,627 21,055
Net realized gain (loss) on investments 195 (813)
Investments sold or repaid (89,424) (464,777)
Total investments, end of period $ 11,330,469 $ 9,353,286
Amount of investments funded at principal:
First lien debt $ 902,786 $ 118,564
Equity 3 —
Total $ 902,789 $ 118,564
Proceeds from investments sold or repaid:
First lien debt $ (89,424) $ (413,576)
Second lien debt — (7,351)
Equity — (43,850)
Total $ (89,424) $ (464,777)
Number of new investments in new portfolio companies 23 1
Average new investment commitment amount $ 27,357 $ 18,052
Weighted average yield of new investments 10.9 % 12.0 %
Weighted average yield on investments fully sold or paid down 11.7 % 11.3 %
June 30, 2024 December 31, 2023
Number of portfolio companies 231 196
Weighted average yield on debt and income producing investments, at amortized cost (1)(2)
11.6 % 11.8 %
Weighted average yield on debt and income producing investments, at fair value (1)(2)
11.6 % 12.0 %
Average loan to value (LTV) (3)
47.4 % 48.2 %
Percentage of debt investments bearing a floating rate (6)
99.8 % 99.9 %
Percentage of debt investments bearing a fixed rate (6)
0.2 % 0.1 %
Percentage of assets on non-accrual, at amortized cost (4)(5)
0.3 % 0.0 %
(1) Computed as (a) the annual stated interest rate or yield plus the annual accretion of discounts or less the annual amortization of premiums, as applicable, on accruing debt included in such securities, divided by (b) total debt investments (at fair value or cost, as applicable) included in such securities. Actual yields earned over the life of each investment could differ materially from the yields presented above.
(2) As of June 30, 2024 and December 31, 2023, the weighted average total portfolio yield at cost was 11.5% and 11.8%, respectively. The weighted average total portfolio yield at fair value was 11.5% and 11.8%, respectively.
(3) Includes all private debt investments for which fair value is determined by our Board in conjunction with a third-party valuation firm and excludes quoted assets. Average loan-to-value represents the net ratio of loan-to-value for each portfolio company, weighted based on the fair value of total applicable private debt investments. Loan-to-value is calculated as the current total net debt through each respective loan tranche divided by the estimated enterprise value of the portfolio company as of the most recent quarter end.
(4) Amount rounds to less than 0.1% for December 31, 2023.
88
Table of Contents
(5) As a percentage of total amortized cost of investments. Assets on non-accrual represented 0.2% and less than 0.1% of total fair value of investments as of June 30, 2024 and December 31, 2023, respectively.
(6) As a percentage of total fair value of debt investments. As of June 30, 2024 and December 31, 2023, debt investments bearing a floating rate represented 98.8% and 98.9% , respectively, of total investment at fair value.
As of June 30, 2024, our portfolio companies had a weighted average annual revenue of $773.4 million and weighted average annual EBITDA of $206.2 million. These calculations include all private debt investments for which fair value is determined by the Board of Trustees in conjunction with a third-party valuation firm and excludes quoted assets. Amounts are weighted based on fair market value of each respective investment. Amounts were derived from the most recently available portfolio company financial statements, have not been independently verified by us, and may reflect a normalized or adjusted amount. Accordingly, we make no representation or warranty in respect of this information.
For additional information on our investments, see “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 4. Investments. ”
Results of Operations
The following table represents the operating results (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Total investment income $ 327,064 $ 290,365 $ 631,024 $ 555,303
Net expenses before excise tax 150,545 113,901 285,307 227,042
Net investment income before excise tax 176,519 176,464 345,717 328,261
Excise tax expense 3,421 4,979 6,771 7,601
Net investment income after excise tax 173,098 171,485 338,946 320,660
Net change in unrealized appreciation (depreciation)
21,085 (37,493) 32,850 (52,037)
Net realized gain (loss) 2,003 10,858 8,145 15,025
Net increase (decrease) in net assets resulting from operations $ 196,186 $ 144,850 $ 379,941 $ 283,648
Net increase (decrease) in net assets resulting from operations can vary from period to period as a result of various factors, including acquisitions, the level of new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation on the investment portfolio. As a result, comparisons may not be meaningful.
Investment Income
Investment income was as follows (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Interest income $ 302,828 $ 273,914 $ 586,092 $ 528,135
Payment-in-kind interest income 22,876 11,275 43,338 21,116
Dividend income 189 159 189 159
Fee income 1,171 5,017 1,405 5,893
Total investment income $ 327,064 $ 290,365 $ 631,024 $ 555,303
Total investment income increased to $327.1 million for the three months ended June 30, 2024, an increase of $36.7 million, or 13%, compared to the same period in the prior year. This was primarily attributable to an increase in the average investments at fair value. Average investments at fair value increased by 15% to $10,866.5 million during the three months ended June 30, 2024 compared to $9,457.4 million during the three months ended June 30, 2023.
89
Table of Contents
Additionally, for the three months ended June 30, 2024, we recorded $0.4 million of non-recurring interest income (e.g., prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.) as compared to $13.0 million for the same period in the prior year, primarily as a result of decreased prepayments. For the three months ended June 30, 2024 and 2023, Payment-in-kind interest income represented 7.0% and 3.9% of total investment income, respectively. We expect that investment income will vary based on a variety of factors including the pace of our originations, repayments and changes in interest rates.
Total investment income increased to $631.0 million for the six months ended June 30, 2024, an increase of $75.7 million, or 14%, compared to the same period in the prior year. This was primarily attributable to an increase in the average investments at fair value. Average investments at fair value increased by 11% to $10,533.8 million during the six months ended June 30, 2024 compared to $9,510.7 million during the six months ended June 30, 2023.
Additionally, for the six months ended June 30, 2024, we recorded $2.3 million of non-recurring interest income (e.g., prepayment premiums, accelerated accretion of upfront loan origination fees and unamortized discounts, etc.) as compared to $13.4 million for the same period in the prior year, primarily as a result of decreased prepayments. For the six months ended June 30, 2024 and 2023, Payment-in-kind interest income represented 6.9% and 3.8% of total investment income, respectively. We expect that investment income will vary based on a variety of factors including the pace of our originations, repayments and changes in interest rates.
While elevated interest rates have favorably impacted our investment income during the three and six months ended June 30, 2024, further interest rate increases and the resulting higher cost of capital have the potential to negatively impact the free cash flow and credit quality of certain borrowers which could impact their ability to make principal and interest payments. If such interest rate increases occur concurrently with a period of economic weakness or a slowdown in growth, our borrowers’ and/or our portfolio performance may be negatively impacted. Further, significant market dislocation as a result of changing economic conditions could limit the liquidity of certain assets traded in the credit markets, and this could impact our ability to sell such assets at attractive prices or in a timely manner.
Expenses
Expenses were as follows (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Interest expense $ 78,841 $ 66,148 $ 145,560 $ 132,876
Management fees
28,094 24,276 54,134 48,972
Income based incentive fees
37,380 34,493 73,225 64,886
Capital gains incentive fees
3,122 (3,949) 6,256 (5,506)
Professional fees 1,069 1,019 2,020 2,207
Board of Trustees’ fees 289 236 511 461
Administrative service expenses 765 675 1,442 1,054
Other general and administrative 985 2,000 2,159 3,605
Total expenses before excise tax 150,545 124,898 285,307 248,555
Management fees waived
— (6,069) — (12,243)
Incentive fees waived
— (4,928) — (9,270)
Net expenses before excise tax 150,545 113,901 285,307 227,042
Net investment income before excise tax 176,519 176,464 345,717 328,261
Excise tax expense 3,421 4,979 6,771 7,601
Net investment income after excise tax $ 173,098 $ 171,485 $ 338,946 $ 320,660
90
Table of Contents
Interest Expense
Total interest expense was $78.8 million for the three months ended June 30, 2024, an increase of $12.7 million and 19% from the same period in the prior year. This was primarily driven by an increase in our weighted average interest rate on our borrowings relative to the prior period and an increase in our average principal of debt outstanding. Our weighted average interest rate (including unused fees, accretion of net discounts on unsecured debt, and excluding amortization of deferred financing costs) increased to 5.26% for the three months ended June 30, 2024 from 4.84% for the same period in the prior year. The average principal of debt outstanding increased to $5,798.8 million for the three months ended June 30, 2024 from $5,377.6 million for the same period in the prior year.
Total interest expense was $145.6 million for the six months ended June 30, 2024, an increase of $12.7 million and 10% from the same period in the prior year. This was primarily driven by an increase in our weighted average interest rate on our borrowings relative to the prior period. Our weighted average interest rate (including unused fees, accretion of net discounts on unsecured debt, and excluding amortization of deferred financing costs) increased to 5.18% for the six months ended June 30, 2024 from 4.80% for the same period in the prior year. The average principal of debt outstanding decreased to $5,422.5 million for the six months ended June 30, 2024 from $5,497.8 million for the same period in the prior year.
Management Fees
Management fees increased to $28.1 million for the three months ended June 30, 2024, an increase of $3.8 million, or 16%, compared to the same period in the prior year, due to an increase in average quarter end gross assets. For the three months ended June 30, 2024, our average quarter end gross assets increased to $11,237.7 million, from $9,710.2 million for the three months ended June 30, 2023.
The Adviser voluntarily waived management fees following the IPO such that the management fee remained at 0.75% for a period of two years following the IPO (versus the contractual rate of 1.00%), which resulted in a waiver of $6.1 million for the three months ended June 30, 2023. The Waiver Period ended on October 28, 2023.
Management fees increased to $54.1 million for the six months ended June 30, 2024, an increase of $5.2 million, or 11%, compared to the same period in the prior year, due to an increase in average quarter end gross assets. For the six months ended June 30, 2024, our average quarter end gross assets increased to $10,870.0 million from $9,776.5 million for the six months ended June 30, 2023.
The Adviser voluntarily waived management fees following the IPO such that the management fee remained at 0.75% for a period of two years following the IPO (versus the contractual rate of 1.00%), which resulted in a waiver of $12.2 million for the six months ended June 30, 2023. The Waiver Period ended on October 28, 2023.
Income Based Incentive Fees
Income based incentive fees increased to $37.4 million for the three months ended June 30, 2024 from $34.5 million for the same period in the prior year primarily due to an increase in pre-incentive fee net investment income. Pre-incentive fee net investment income increased to $213.6 million for the three months ended June 30, 2024 from $197.1 million for the same period in the prior year.
The Adviser voluntarily waived incentive fees following the IPO such that the fee remained at 15.0% for a period of two years following the IPO (versus the contractual rate of 17.5%), which resulted in a waiver of $4.9 million for the three months ended June 30, 2023. The Waiver Period ended on October 28, 2023.
Income based incentive fees increased to $73.2 million for the six months ended June 30, 2024 from $64.9 million for the same period in the prior year primarily due to an increase in pre-incentive fee net investment income. Pre-incentive fee net investment income increased to $418.4 million for the six months ended June 30, 2024 from $370.8 million for the same period in the prior year.
The Adviser voluntarily waived incentive fees following the IPO such that the fee remained at 15.0% for a period of two years following the IPO (versus the contractual rate of 17.5%), which resulted in a waiver of $9.3 million for the six months ended June 30, 2023. The Waiver Period ended on October 28, 2023.
91
Table of Contents
Capital Gains Incentive Fees
We accrued capital gains incentive fees of $3.1 million for the three months ended June 30, 2024, as compared to the reversal of the previously accrued capital gains incentive fees of $(3.9) million for the three months ended June 30, 2023 primarily due to net unrealized gains for the three months ended June 30, 2024 compared to net unrealized losses during the same period in the prior year.
We accrued capital gains incentive fees of $6.3 million for the six months ended June 30, 2024, as compared to the reversal of the previously accrued capital gains incentive fees of $(5.5) million for the six months ended June 30, 2023 primarily due to net unrealized gains for the six months ended June 30, 2024 compared to net unrealized losses during the same period in the prior year.
The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less in the prior period. If such cumulative amount is negative, then there is no accrual.
Other Expenses
Professional fees include legal, rating agencies, audit, tax, valuation, technology and other professional fees incurred related to the management of us. Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including our allocable portion of the cost of certain of our executive officers, their respective staff and other non-investment professionals that perform duties for us. Other general and administrative expenses include insurance, filing, research, our sub-administrator, subscriptions and other costs.
Total other expenses decreased to $3.1 million for the three months ended June 30, 2024 from $3.9 million for the same period in the prior year primarily due to a decrease in Other General and Administrative expenses.
Total other expenses decreased to $6.1 million for the six months ended June 30, 2024 from $7.3 million for the same period in the prior year primarily due to a decrease in Other General and Administrative expenses.
Income Taxes, Including Excise Taxes
We elected to be treated as a RIC under Subchapter M of the Code, and we intend to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. To qualify for taxation as a RIC, we must, among other things, distribute to our shareholders in each taxable year generally at least 90% of the sum of our investment company taxable income, as defined by the Code (without regard to the deduction for dividends paid), and net tax-exempt income for that taxable year. To maintain our tax treatment as a RIC, we, among other things, intend to make the requisite distributions to our shareholders, which generally relieve us from corporate-level U.S. federal income taxes.
Depending on the level of taxable income earned in a tax year, we may carry forward taxable income (including net capital gains, if any) in excess of current year dividend distributions from the current tax year into the next tax year and pay a nondeductible 4% U.S. federal excise tax on such taxable income, as required. To the extent that we determine that our estimated current year annual taxable income will be in excess of estimated current year dividend distributions from such income, we will accrue excise tax on estimated excess taxable income.
For the three months ended June 30, 2024 and 2023, we accrued $3.4 million and $5.0 million, respectively, of U.S. federal excise tax.
For the six months ended June 30, 2024 and 2023, we accrued $6.8 million and $7.6 million, respectively, of U.S. federal excise tax.
92
Table of Contents
Net Unrealized Gain (Loss)
Net change in unrealized gain (loss) was comprised of the following (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Net change in unrealized gain (loss) on investments
$ 20,961 $ (37,270) $ 32,747 $ (48,673)
Net change in unrealized gain (loss) on translation of assets and liabilities in foreign currencies
124 (223) 103 (3,364)
Net change in unrealized gain (loss)
$ 21,085 $ (37,493) $ 32,850 $ (52,037)
For the three months ended June 30, 2024, the net change in unrealized gains of $21.1 million was primarily driven by the increase in the fair value of our debt investments. The fair value of our debt investments as a percentage of principal increased by 0.3%, during the three months ended June 30, 2024 driven primarily by improved portfolio company fundamentals and economic outlook.
For the six months ended June 30, 2024, the net change in unrealized gains of $32.9 million was primarily driven by the increase in the fair value of our debt investments. The fair value of our debt investments as a percentage of principal increased by 0.6%, during the six months ended June 30, 2024 driven primarily by improved portfolio company fundamentals and economic outlook.
Net Realized Gain (Loss)
The realized gains and losses on fully exited and partially exited investments comprised of the following (dollar amounts in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2024 2023 2024 2023
Net realized gain (loss) on investments $ 195 $ (813) $ 623 $ (4,299)
Net realized gain (loss) on foreign currency transactions
1,808 11,671 7,522 19,324
Net realized gain (loss) $ 2,003 $ 10,858 $ 8,145 $ 15,025
For the three and six months ended June 30, 2024, we recognized realized gains on investments of $0.2 million and $0.7 million, respectively. For the three and six months ended June 30, 2024, we recognized realized losses on investments of less than $0.1 million and $0.1 million, respectively.
Net realized gains of $1.8 million and $7.5 million were generated on foreign currency transactions during the three and six months ended June 30, 2024, respectively, primarily as a result of fluctuations in the GBP and EUR exchange rates vs. USD.
93
Table of Contents
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are generated primarily from cash flows from interest, dividends and fees earned from our investments and principal repayments, our credit facilities, debt securitization transactions, and other secured and unsecured debt. We may also generate cash flow from operations, future borrowings and future offerings of securities including public and/or private issuances of debt and/or equity securities through both registered offerings and private offerings. The primary uses of our cash and cash equivalents are for (i) originating loans and purchasing senior secured debt investments, (ii) funding the costs of our operations (including fees paid to our Adviser and expense reimbursements paid to our Administrator), (iii) debt service, repayment and other financing costs of our borrowings and (iv) cash distributions to the holders of our shares.
To facilitate public issuances of debt and/or equity securities, in July 2022, we filed a shelf registration statement with the SEC that is effective for a term of three years and expires in July 2025. The amount of securities to be issued pursuant to the shelf registration statement filed in July 2022 was not specified when it was filed and there is no specific dollar limit on the amount of securities we may issue. The securities covered by the registration statement filed in July 2022 include: (i) Common Shares; (ii) preferred shares; (iii) debt securities; (iv) subscription rights; and (v) warrants. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement, or other offering materials, at the time of any offering.
As of June 30, 2024 and December 31, 2023, our debt consisted of asset based leverage facilities, a revolving credit facility, and unsecured note issuances. We may from time to time enter into additional credit facilities, increase the size of our existing credit facilities or issue further debt securities. Any such incurrence or issuance would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors. In accordance with the 1940 Act, with certain limited exceptions, we are only allowed to incur borrowings, issue debt securities or issue preferred stock, if immediately after the borrowing or issuance, the ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred stock, is at least 150%. As of June 30, 2024 and December 31, 2023, we had an aggregate amount of $6,111.7 million and $4,937.9 million of senior securities outstanding, respectively, and our asset coverage ratio was 188.3% and 200.3%, respectively. We seek to carefully consider our unfunded commitments for the purpose of planning our ongoing financial leverage. Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation to cover any outstanding unfunded commitments we are required to fund. From time to time we may also repurchase our outstanding debt. Such repurchases, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material.
Cash and cash equivalents as of June 30, 2024, taken together with our $888.3 million of unused capacity under our credit facilities (subject to borrowing base availability, $888.3 million is available to borrow) is expected to be sufficient for our investing activities and to conduct our operations in the near term. Additionally, we held $166.0 million of Level 2 debt investments as of June 30, 2024, which could provide additional liquidity if necessary.
Although we have historically been able to obtain sufficient borrowing capacity, a deterioration in economic conditions or any other negative economic developments could restrict our access to financing in the future. We may not be able to find new financing for future investments or liquidity needs and, even if we are able to obtain such financing, such financing may not be on as favorable terms as we have previously obtained. These factors may limit our ability to make new investments and adversely impact our results of operations.
As of June 30, 2024, we had $291.3 million in cash and cash equivalents. During the six months ended June 30, 2024, cash used in operating activities was $1,104.7 million, primarily due to purchases of investments of $1,609.8 million partially offset by sales of investments and principal repayments of $276.1 million and receipt of interest payments from our investments. Cash provided by financing activities was $1,241.1 million during the period, which was primarily as a result of net borrowings on our credit facilities and Unsecured Notes of $1,171.8 million and $350.2 million of proceeds from the issuance of our Common Shares partially offset by dividends paid in cash of $279.9 million.
94
Table of Contents
Equity
We also access liquidity through our “at-the-market” offering program (the “ATM Program” ), pursuant to which we may sell, from time to time, additional Common Shares. On March 28, 2024, we filed a new prospectus supplement under which we may sell up to an aggregate sales price of $500.0 million of our Common Shares as part of the ATM Program. During the three and six months ended June 30, 2024, we sold Common Shares for net proceeds of $190.1 million and $352.2 million, respectively, through our ATM Program. As of June 30, 2024, $309.0 million of Common Shares were available for issuance under the ATM Program.
For additional information on our ATM Program, see “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 9. Net Assets. ”
Distributions
The following table summarizes our distributions declared and payable for the six months ended June 30, 2024 (dollar amounts in thousands, except per share amounts):
Date Declared Record Date Payment Date Per Share Amount Total Amount
February 28, 2024 March 31, 2024 April 26, 2024 $ 0.7700 $ 147,743
May 8, 2024 June 30, 2024 July 26, 2024 $ 0.7700 $ 152,706
Total distributions $ 1.5400 $ 300,449
With respect to distributions, we have adopted an “opt out” dividend reinvestment plan for shareholders. As a result, in the event of a declared cash distribution or other distribution, each shareholder that has not “opted out” of the dividend reinvestment plan will have their dividends or distributions automatically reinvested in additional shares rather than receiving cash distributions. Shareholders who receive distributions in the form of shares will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.
For additional information on our distributions and dividend reinvestment plan, see “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 9. Net Assets. ”
Share Repurchase Plan
In February 2023, our Board approved a share repurchase plan, under which we were authorized to repurchase up to $250 million in the aggregate of our outstanding Common Shares in the open market at prices below our NAV per share for a one-year term, in accordance with the guidelines specified in Rule 10b-18 of the Exchange Act (the “10b-18 Plan” ). The 10b-18 Plan was not renewed and terminated by its terms on February 22, 2024.
We did not repurchase any of our shares under the 10b-18 Plan for the three and six months ended June 30, 2024.
For additional information on our share repurchases, see “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 9. Net Assets. ”
Borrowings
As of June 30, 2024 and December 31, 2023, we had an aggregate principal amount of $6,111.7 million and $4,937.9 million, respectively, of debt outstanding.
For additional information on our debt obligations, see “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 7. Borrowings. ”
95
Table of Contents
Interest Rate Swaps
We use interest rate swaps to mitigate interest rate risk associated with our fixed rate liabilities, and have designated certain interest rate swaps to be in a hedge accounting relationship.
See “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 2. Significant Accounting Policies—Derivative Instruments ” and “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements— Note 6. Derivatives ” for additional disclosure regarding our derivative instruments designated in a hedge accounting relationship.
Off-Balance Sheet Arrangements
Portfolio Company Commitments
Our investment portfolio contains and is expected to continue to contain debt investments which are in the form of lines of credit or delayed draw commitments, which require us to provide funding when requested by portfolio companies in accordance with underlying loan agreements. As of June 30, 2024 and December 31, 2023, we had unfunded commitments, including delayed draw term loans and revolvers with an aggregate principal amount of $1,746.2 million and $985.9 million, respectively.
Additionally, from time to time, the Adviser and its affiliates may commit to an investment on behalf of the investment vehicles it manages, including the Company. Certain terms of these investments are not finalized at the time of the commitment and each respective investment vehicle’s allocation may change prior to the date of funding. In this regard, as of June 30, 2024 and December 31, 2023, we estimate that $260.6 million and $221.3 million, respectively, of investments were committed but not yet funded.
Other Commitments and Contingencies
From time to time, we may become a party to certain legal proceedings incidental to the normal course of our business. At June 30, 2024, management is not aware of any material pending legal proceedings.
Related-Party Transactions
We have entered into a number of business relationships with affiliated or related parties, including the following:
• the Investment Advisory Agreement; and
• the Administration Agreement.
In addition to the aforementioned agreements, we, our Adviser and certain of our Adviser’s affiliates have been granted exemptive relief by the SEC to co-invest with other funds managed by our Adviser or its affiliates in a manner consistent with our investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.
See “ Item 1. Financial Statements—Notes to Condensed Consolidated Financial Statements—Note 3. Agreements and Related Party Transactions. ”
96
Table of Contents
Recent Developments
Macroeconomic Environment
The six months ended June 30, 2024 have been characterized by continued volatility in global markets, driven by investor concerns over inflation, elevated interest rates, slowing economic growth, political and regulatory uncertainty and geopolitical conditions, including the wars in Ukraine and Russia and in the Middle East. Recent events affecting financial institutions also contributed to volatility in global markets and diminished liquidity and credit availability.
During 2023 and throughout the first half of 2024, inflation began to moderate as a result of the monetary policy tightening actions taken by central banks, including maintaining elevated interest rates. These higher interest rates have created further uncertainty for the economy and for our borrowers. Although our business model is such that elevated interest rates will, all else being equal, correlate to increases in our net income, further increases in interest rates may adversely affect our existing borrowers and lead to nonperformance, as higher costs may dampen consumer spending and slow corporate profit growth, which may negatively impact our portfolio companies as they may be susceptible to economic downturns or recessions and may be unable to repay our loans during these periods. Therefore, during these periods our non-performing assets may increase and the value of our portfolio may decrease if we are required to write down the values of our investments. Adverse economic conditions may also decrease the value of collateral securing some of our loans and the value of our equity investments. It remains difficult to predict the full impact of recent changes and any future changes with respect to interest rates or inflation.
Critical Accounting Estimates
The preparation of the condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ.
Our critical accounting policies and estimates, including those relating to the valuation of our investment portfolio, are described in our Annual Report on Form 10-K for the year ended December 31, 2023 , filed with the SEC on February 28, 2024, and elsewhere in our filings with the SEC. There have been no material changes in our critical accounting policies and practices.
97
Table of Contents