−Removed: Owning our common stock involves a number of significant risks.
−Removed: In addition to the other information contained in this Annual Report on Form 10-K, shareholders should consider carefully the following information.
−Removed: If any of the following events occur, our business, financial condition and results of operations could be materially and adversely affected.
−Removed: In such case, the net asset value of our common stock could decline, and shareholders may lose all or part of their investment.
+Added: Investing in our securities involves certain risks relating to our structure and investment objective.
+Added: You should carefully consider these risk factors, together with all of the other information included in this report, before you decide whether to make an investment in our securities.
+Added: The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable.
+Added: If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected.
+Added: In such case, our NAV and the trading price of our shares of common stock could decline, and you may lose all or part of your investment.
Risks Relating to Our Business and Structure
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Our board of directors has the authority to modify or waive our current operating policies, investment criteria and strategies without prior notice and without shareholder approval.
−Removed: We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and value of our stock.
+Added: We cannot predict the effect any changes to our current operating policies, investment criteria and strategies would have on our business, net asset value, operating results and trading price of our stock.
However, the effects might be adverse, which could negatively impact our ability to pay shareholders distributions and cause shareholders to lose all or part of their investment.
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corporate debt market may deteriorate, as seen during the 2008 financial crisis and the 2020 outbreak of the COVID-19 pandemic, which may cause pricing levels to similarly decline or be volatile.
−Removed: During the financial crisis, many institutions were forced to raise cash by selling their interests in performing assets in order to satisfy margin requirements or the equivalent of margin requirements imposed by their lenders and/or, in the case of hedge funds and other investment vehicles, to satisfy widespread redemption requests.
+Added: During the financial crisis and the 2020 outbreak of the COVID-19 pandemic, many institutions were forced to raise cash by selling their interests in performing assets in order to satisfy margin requirements or the equivalent of margin requirements imposed by their lenders and/or, in the case of hedge funds and other investment vehicles, to satisfy widespread redemption requests.
This resulted in a forced deleveraging cycle of price declines, compulsory sales, and further price declines, with falling underlying credit values, and other constraints resulting from the credit crisis generating further selling pressure.
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In addition, in the event such agreement is terminated, it may be difficult for us to replace CIM.
−Removed: Because our business model depends to a significant extent upon relationships with private equity sponsors, investment banks and commercial banks, the inability of CIM or its affiliates to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
−Removed: CIM depends on its broader organizations’ relationships with private equity sponsors, investment banks and commercial banks, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities.
+Added: Because our business model depends to a significant extent upon relationships with public and private lenders, selected middle-market private equity sponsors, large private equity sponsors (on a limited basis), investment banks and commercial banks, the inability of CIM or its affiliates to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
+Added: CIM depends on its broader organizations’ relationships with public and private lenders, selected middle-market private equity sponsors, large private equity sponsors (on a limited basis), investment banks and commercial banks, and we rely to a significant extent upon these relationships to provide us with potential investment opportunities.
If CIM or its affiliates fail to maintain their existing relationships or develop new relationships with other sponsors or sources of investment opportunities, we may not be able to grow our investment portfolio.
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If we are forced to match our competitors’ pricing, terms or structure, we may not be able to achieve acceptable returns on our investments or may bear substantial risk of capital loss.
−Removed: A significant part of our competitive advantage stems from the fact that the market for investments in small and middle-market private U.S.
−Removed: companies is underserved by traditional commercial banks and other financial sources.
−Removed: A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms.
+Added: A significant increase in the number and/or the size of our competitors in our target market could force us to accept less attractive investment terms.
Furthermore, many of our competitors have greater experience operating under, or are not subject to, the regulatory restrictions that the 1940 Act imposes on us as a BDC.
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There is a risk that investors in our common stock may not receive distributions or that our distributions may not grow over time.
−Removed: We may not achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions.
+Added: We may not maintain investment results that will allow us to make a specified level of distributions or year-to-year increases in distributions.
In addition, due to the asset coverage test applicable to us as a BDC, we may be limited in our ability to make distributions.
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Therefore, portions of the distributions that we make may represent a return of capital to shareholders that will lower their tax basis in their common stock and reduce the amount of funds we have for investment in targeted assets.
−Removed: We may fund our cash distributions to shareholders from any sources of funds available to us, including borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and expense support from CIM, which is subject to recoupment.
−Removed: On January 2, 2018, we entered into an expense support and conditional reimbursement agreement with CIM for the primary purpose of replacing CIG and AIM with CIM as the expense support provider pursuant to the terms of the expense support and conditional reimbursement agreement.
−Removed: On December 9, 2020, we further amended and restated the expense support and conditional reimbursement agreement with CIM for purposes of extending the termination date from December 31, 2020 to December 31, 2021.
+Added: We may fund our distributions to shareholders from any sources of funds available to us, including borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, and dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies.
+Added: Pursuant to an expense support and conditional reimbursement agreement entered into on January 2, 2018 between us and CIM, CIM agreed to provide expense support to us in an amount that was sufficient to:
+Added: (i) ensure that no portion of our distributions to shareholders was paid from our offering proceeds or borrowings, and/or (ii) reduce our operating expenses until we achieved economies of scale sufficient to ensure that we bore a reasonable level of expense in relation to our investment income.
+Added: On December 31, 2021, we and CIM allowed the expense support and conditional reimbursement agreement to expire in accordance with its terms.
For the years ended December 31, 2019, 2020 and 2021, none of our distributions resulted from expense support from CIM.
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In addition, the inability to satisfy the asset coverage test applicable to us as a BDC may limit our ability to pay distributions.
−Removed: All distributions are and will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations and such other factors as our board of directors may deem relevant from time to time.
+Added: All distributions are and will be paid at the discretion of our board of directors and will depend on our earnings, our financial condition, maintenance of our RIC status, compliance with applicable BDC regulations, compliance with the terms, conditions and covenants in our financing arrangements, and such other factors as our board of directors may deem relevant from time to time.
We cannot assure investors that we will continue to pay distributions to our shareholders in the future.
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Distributions from the proceeds of our borrowings also could reduce the amount of capital we ultimately invest in our portfolio companies.
−Removed: We have not established any limit on the amount of funds we may use from available sources, such as borrowings, if any, to fund distributions (which may reduce the amount of capital we ultimately invest in assets).
−Removed: For the years ended December 31, 2018, 2019 and 2020, none of our distributions resulted from expense support from CIM.
−Removed: The purpose of this arrangement is to reduce our operating expenses and to avoid such distributions being characterized as a return of capital.
−Removed: Shareholders should understand that any such distributions are not based on our investment performance, and can only be sustained if we achieve positive investment performance in future periods and/or CIM continues to provide such expense support.
−Removed: Shareholders should also understand that our future repayments of expense support to CIM will reduce the distributions that they would otherwise receive.
−Removed: There can be no assurance that we will achieve such performance in order to sustain these distributions, or be able to pay distributions at all.
−Removed: CIM has no obligation to provide expense support to us in future periods.
Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
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In the event that we are unable to develop or maintain an effective system of internal controls and maintain or achieve compliance with the Sarbanes-Oxley Act and related rules, we may be adversely affected.
+Added: Due to our Listing, we will no longer be a “non-accelerated filer” as defined in Rule 12b-2 of the Exchange Act and as a result, commencing with our Annual Report on Form 10-K for the year ending December 31, 2022, we will be required to comply with the independent auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
+Added: Complying with Section 404(b) requires a rigorous compliance program as well as adequate time and resources.
+Added: We will be subject to significant documentation and administrative burdens as a result of being required to comply with Section 404(b), which will require us to utilize additional resources, and our internal controls may not be determined to be effective, which may adversely affect investor confidence in us and, as a result, the value of our securities.
We may experience fluctuations in our quarterly results.
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In addition, decreases in the market value or fair value of our investments will reduce our net asset value.
−Removed: Risks Related to CIM and its Affiliates;
−Removed: Risks Related to AIM and its Affiliates
+Added: Risks Relating to CIM and its Affiliates
CIM and its affiliates, including our officers and some of our directors, face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders.
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CIM is not under any obligation to reimburse us for any part of the incentive fee it received that was based on accrued income that we never received as a result of a default by an entity on the obligation that resulted in the accrual of such income, and such circumstances would result in our paying an incentive fee on income we never received.
−Removed: There may be conflicts of interest related to obligations that CIM’s and Apollo’s respective senior management and investment teams have to other clients.
−Removed: The members of the senior management and investment teams of both CIM and Apollo 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.
+Added: There may be conflicts of interest related to obligations that CIM’s senior management and investment teams have to other clients.
+Added: The members of the senior management and investment teams of CIM 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.
In serving in these multiple capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may not be in our best interests or in the best interest of our shareholders.
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CIM and its officers and employees will devote only as much of its or their time to our business as CIM and its officers and employees, in their judgment, determine is reasonably required, which may be substantially less than their full time.
−Removed: AIM's investment professionals perform certain services and assist with identifying investment opportunities to CIM.
−Removed: AIM, its affiliates and their respective members, partners, officers and employees will devote as much of their time to our activities as they deem necessary and appropriate.
−Removed: Apollo and its affiliates are not restricted from engaging in other business activities that could be viewed as creating a conflict of interest in that the time and effort of the members of AIM, its affiliates and their officers and employees will not be devoted exclusively to our business.
−Removed: AIM currently acts as investment adviser to AINV, which is also a BDC and is authorized to invest in the same kinds of securities we invest or may invest in, although AINV primarily focuses on providing senior and subordinated debt to companies that are expected to have greater EBITDA than those that are our primary focus.
−Removed: Also, in connection with such business activities, AIM and its affiliates may have existing business relationships or access to material, non-public information that may prevent it from identifying investment opportunities that would otherwise fit within our investment objective.
−Removed: These activities could be viewed as creating a conflict of interest in that the time, effort and ability of the members of AIM, its affiliates and their officers and employees will not be devoted exclusively to our business, but will be allocated between us and such other accounts managed by AIM and its affiliates as AIM deems necessary and appropriate.
−Removed: It is possible that conflicts of interest will arise from time to time in connection with our prospective and existing investments and AINV or other funds or accounts managed or advised by Apollo, including, without limitation, in circumstances giving rise to the restructuring of an issuer in which we and AINV are investors, as well as follow-on investments or dispositions with respect to such issuer.
−Removed: In such circumstance, it is likely that we and CIM, on the one hand, will be walled off from Apollo and AINV, on the other hand, and accordingly the parties will not collectively discuss or participate in, for example, the restructuring with respect to such issuer.
−Removed: Further, there may also arise instances in which we and AINV are invested in the same issuer and we and/or AINV seeks to dispose of such investment in a transaction that may otherwise require exemptive relief, in which case the parties may need to obtain an exemptive order, the receipt of which cannot be assured.
−Removed: Our base management and incentive fees may induce CIM to make and identify speculative investments or to incur leverage.
+Added: Our base management and incentive fees may induce CIM to make and identify speculative investments or to incur additional leverage.
The incentive fee payable by us to CIM may create an incentive for it to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement.
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Such a practice could result in our investing in more speculative securities than would otherwise be in our best interests, which could result in higher investment losses, particularly during cyclical economic downturns.
−Removed: In addition, since AIM is a member of CIM, AIM's investment professionals may have an incentive to assist with identifying investments that are riskier or more speculative.
CIM relies on key personnel, the loss of any of whom could impair its ability to successfully manage us.
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CIM’s ability to influence the base management fee paid to it by us could reduce the amount of cash flow available for distribution to our shareholders.
−Removed: Risks Related to Business Development Companies
+Added: Risks Relating to Business Development Companies
The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy;
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As a result of the annual distribution requirement to qualify as a RIC, we may need to periodically access the capital markets to raise cash to fund new investments.
−Removed: We may issue “senior securities,” as defined under the 1940 Act, including borrowing money from banks or other financial institutions only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 200% after such incurrence or issuance (or 150% if we obtain the requisite shareholder approval and otherwise satisfy disclosure requirements in accordance with the 1940 Act).
+Added: We may issue “senior securities,” as defined under the 1940 Act, including borrowing money from banks or other financial institutions only in amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such incurrence or issuance (effective on December 31, 2021 after we obtained the requisite shareholder approval on December 30, 2021 and otherwise continue to satisfy disclosure requirements in accordance with the 1940 Act).
Our ability to issue different types of securities is also limited.
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If a person acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC.
−Removed: Similar restrictions limit our ability to transact business with our officers, directors, investment advisers, sub-advisers or their affiliates.
−Removed: As a result of these restrictions, we may be prohibited from buying or selling any security from or to any fund or any portfolio company of a fund managed by CIM or Apollo, or entering into joint arrangements such as certain co-investments with these companies or funds without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
+Added: Similar restrictions limit our ability to transact business with our officers, directors, CIM or their respective affiliates.
+Added: As a result of these restrictions, we may be prohibited from buying or selling any security from or to any fund or any portfolio company of a fund managed by CIM or entering into joint arrangements such as certain co-investments with these companies or funds without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
We are uncertain of our sources for funding our future capital needs;
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However, we will be subject to the diversification requirements applicable to RICs under Subchapter M of the Code.
−Removed: Risks Related to Our Investments
+Added: We are subject to risks related to corporate social responsibility.
+Added: Our business faces increasing public scrutiny related to environmental, social and governance, or ESG, activities, which are increasingly considered to contribute to the long-term sustainability of a company’s performance.
+Added: A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized.
+Added: In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions.
+Added: Our brand and reputation may be negatively impacted if we fail to act responsibly in a number of areas, such as considering ESG factors in our investment processes.
+Added: Adverse incidents with respect to ESG activities could impact the value of our brand and our relationships with investors, which could adversely affect our business and results of operations.
+Added: Additionally, new regulatory initiatives related to ESG could adversely affect our business.
+Added: For example, the SEC has announced that it may require disclosure of certain ESG-related matters.
+Added: There is a risk that a significant reorientation in the market following the implementation of these and further measures could be adverse to our portfolio companies if they are perceived to be less valuable as a consequence of, e.g., their carbon footprint or “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case).
+Added: At this time, there is uncertainty regarding the scope of such proposals or when they would become effective (if at all).
+Added: Compliance with any new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our portfolio companies conduct our businesses and adversely affect our profitability.
+Added: Risks Relating to Our Investments
Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.
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• Original issue discount instruments may create heightened credit risks because the inducement to trade higher rates for the deferral of cash payments typically represents, to some extent, speculation on the part of the borrower.
−Removed: • For accounting purposes, cash distributions to shareholders representing original issue discount income do not come from paid-in capital, although they may be paid from the offering proceeds.
+Added: • For accounting purposes, distributions to shareholders representing original issue discount income do not come from paid-in capital, although they may be paid from the offering proceeds.
Thus, although a distribution of original issue discount income comes from the cash invested by shareholders, the 1940 Act does not require that shareholders be given notice of this fact.
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In addition, an increase in interest rates would make it more expensive to use debt for our financing needs, if any.
−Removed: Changes to and replacement of the LIBOR benchmark interest rate could adversely affect our business, financial condition, and results of operations.
−Removed: Certain financial instruments in which we invest use a floating interest rate based on LIBOR, the offered rate for short-term Eurodollar deposits between large international banks.
−Removed: LIBOR has recently faced scrutiny over concerns that its rate-setting process, which is based on a limited number of interbank transactions, is susceptible to manipulation.
−Removed: As a result, many central banks, including the U.S.
−Removed: Federal Reserve Board, or the Federal Reserve, have begun studying potential replacements for LIBOR and reforms to other interest rate benchmarks.
−Removed: Notably, on July 27, 2017, the U.K.
−Removed: Financial Conduct Authority announced that it intended to stop persuading or compelling banks to submit LIBOR rates after 2021.
−Removed: It is expected that a transition away from the widespread use of LIBOR and similar reference rates to alternative rates based on observable market transactions and other potential interest rate benchmark reforms will occur over the course of the next few years.
−Removed: At this time, no consensus appears to exist as to what rate or rates will become accepted alternatives to LIBOR, although the Alternative Reference Rates Committee, established by the Federal Reserve, announced the replacement of LIBOR with a new index calculated by short-term repurchase agreements collateralized by U.S.
−Removed: Treasury securities, called the Secured Overnight Financing Rate, or SOFR.
−Removed: The Federal Reserve Bank of New York began publishing SOFR in April 2018.
−Removed: Given the inherent differences between LIBOR and SOFR, or any other alternative benchmark rate that may be established, there are many uncertainties regarding a transition from LIBOR, including, but not limited to, the need to amend all contracts with LIBOR as the referenced rate and how this will impact the cost of variable rate debt and certain derivative financial instruments.
−Removed: In addition, SOFR or other replacement rates may fail to gain market acceptance.
−Removed: Because the future of LIBOR is uncertain, the impact to us of a transition away from LIBOR cannot presently be determined.
−Removed: The market transition away from LIBOR and other current reference rates to alternative reference rates is complex and could have a range of adverse impacts on our investment program, financial condition and results of operations.
−Removed: Among other negative consequences, this transition could:
−Removed: • Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked securities, loans and derivatives in which we may invest;
−Removed: • Require extensive negotiations of and/or amendments to agreements and other documentation governing LIBOR-linked investments products;
−Removed: • Lead to disputes, litigation or other actions with counterparties or portfolio companies regarding the interpretation and enforceability of “fall back” provisions that provide for an alternative reference rate in the event of LIBOR’s unavailability;
−Removed: • Cause us to incur additional costs in relation to any of the above factors.
−Removed: The risks associated with the above factors are heightened with respect to investments in LIBOR-based products that do not include a fall back provision that addresses how interest rates will be determined if LIBOR stops being published.
−Removed: Other important factors include the pace of the transition, the specific terms of alternative reference rates accepted in the market, the depth of the market for investments based on alternative reference rates, and CIM’s ability to develop appropriate investment and compliance systems capable of addressing alternative reference rates.
+Added: Interest rates in the United States are currently at historically low levels.
+Added: Certain countries have experienced negative interest rates on certain fixed-income instruments.
+Added: Changing interest rates, including rates that fall below zero, may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such interest rates and/or volatility.
+Added: The Federal Reserve recently indicated that, in light of the economic recovery and higher than anticipated inflation, it expects to raise interest rates as early as March 2022.
+Added: However, the timing, number and amount of any such future interest rate increases are uncertain.
+Added: The discontinuation of the LIBOR benchmark interest rate could adversely affect the value of LIBOR‑indexed, floating‑rate debt securities in our portfolio or the cost of our borrowings, resulting in an adverse effect on our business, financial condition, and results of operations.
+Added: National and international regulators and law enforcement agencies have conducted investigations into a number of rates or indices that are deemed to be “reference rates.” Actions by such regulators and law enforcement agencies may result in changes to the manner in which certain reference rates are determined, their discontinuance, or the establishment of alternative reference rates.
+Added: In particular, on July 27, 2017, the Chief Executive of the U.K.
+Added: Financial Conduct Authority, or the FCA, which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of LIBOR after 2021.
+Added: On November 30, 2020, ICE Benchmark Administration, or the IBA, the administrator of LIBOR tenors, with the support of the U.S.
+Added: Federal Reserve and the FCA, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one-week and two-month USD LIBOR, and on June 30, 2023 for all other USD LIBOR tenors.
+Added: Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021.
+Added: On March 5, 2021, the IBA confirmed its intention to cease publication of (i) one-week and two-month USD LIBOR tenors after December 31, 2021 and (ii) remaining USD LIBOR tenors after June 30, 2023.
+Added: On the same day, the FCA, as supervisor of IBA, made its announcement on the future cessation and loss of representativeness of the LIBOR benchmarks.
+Added: Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.
+Added: financial institutions, is expected to replace U.S.
+Added: dollar LIBOR with a new index calculated by short‑term repurchase agreements, backed by Treasury securities, the “Secured Overnight Financing Rate”, or SOFR, plus a recommended spread adjustment as LIBOR’s replacement.
+Added: Although there have been certain issuances utilizing SOFR or the Sterling Over Night Index Average (an alternative reference rate that is based on transactions), it is unknown whether SOFR or any other alternative reference rates will attain market acceptance as replacements for LIBOR.
+Added: Given the inherent differences between LIBOR and SOFR, or any other alternative reference rates that may be established, the transition from LIBOR may disrupt the overall financial markets and adversely affect the market for LIBOR‑based securities, including our portfolio of LIBOR‑indexed, floating‑rate debt securities, or the cost of our borrowings.
+Added: In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR‑based securities, including the value and/or transferability of the LIBOR‑indexed, floating‑rate debt securities in our portfolio, or the cost of our borrowings.
+Added: The transition from LIBOR to SOFR or other alternative reference rates may also introduce operational risks in our accounting, financial reporting, loan servicing, liability management and other aspects of our business.
+Added: We are assessing the impact of a transition from LIBOR;
+Added: however, we cannot reasonably estimate the impact of the transition at this time.
+Added: Additionally, the phase-out or replacement of LIBOR may decrease the demand for floating-rate loans, which could adversely impact our business and financial condition.
+Added: We may need to renegotiate the credit agreements extending beyond June 30, 2023 with our portfolio companies that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with SOFR or other alternative reference rates, which could require us to incur significant expense and may subject us to disputes or litigation over the appropriateness or comparability to the relevant replacement reference index.
+Added: Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
+Added: Certain of our portfolio companies may be impacted by inflation.
+Added: If such portfolio companies are unable to pass any increases in their costs along to their customers, it could adversely affect their results and impact their ability to pay interest and principal on our loans.
+Added: In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments.
+Added: Any decreases in the fair value of our investments could result in future unrealized losses and therefore reduce our net assets resulting from operations.
International investments create additional risks.
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Additionally, prepayments, net of prepayment fees, could negatively impact our return on equity.
−Removed: Risks Relating to Debt Financings
−Removed: Recent legislation may allow us to incur additional leverage.
−Removed: As a BDC, we are generally not permitted to incur indebtedness unless immediately after such borrowings we have an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets).
−Removed: On March 23, 2018, an amendment to Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC’s debt to equity from a maximum of 1-to-1 to a maximum 2-to-1, so long as certain approval and disclosure requirements are satisfied.
+Added: The effect of global climate change may impact the operations of our portfolio companies.
+Added: There may be evidence of global climate change.
+Added: Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change.
+Added: For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity.
+Added: To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes.
+Added: Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business.
+Added: A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition through, for example, decreased revenues.
+Added: Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.
+Added: Risks Relating to Our Debt Financings
+Added: The Small Business Credit Availability Act of 2018 allows us to incur additional leverage and our shareholders have approved a proposal permitting us to incur additional leverage, effective December 31, 2021.
+Added: As a BDC, we were generally not permitted to incur indebtedness unless immediately after such borrowings we had an asset coverage for total borrowings of at least 200% (i.e., the amount of debt may not exceed 50% of the value of our assets).
+Added: On March 23, 2018, the Small Business Credit Availability of 2018, which amended Section 61(a) of the 1940 Act was signed into law to permit BDCs to reduce the minimum “asset coverage” ratio from 200% to 150% and, as a result, to potentially increase the ratio of a BDC’s debt to equity from a maximum of 1-to-1 to a maximum 2-to-1, so long as certain approval and disclosure requirements are satisfied.
Specifically, a BDC is permitted to apply a lower minimum asset coverage ratio of 150% if:
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or (B) the BDC obtains, at a special or annual meeting of its shareholders at which a quorum is present, the approval of more than 50% of the votes cast for the application of such a lower minimum asset coverage ratio to the BDC, in which case the 150% minimum asset coverage ratio will become effective on the first day after the date of such shareholder approval.
−Removed: In 2021, we intend to seek the approval of our shareholders to reduce our minimum "asset coverage" ratio from 200% to 150% in accordance with the 1940 Act.
−Removed: As a result, we may be able to incur additional indebtedness in the future, and, therefore, your risk of an investment in us may increase.
+Added: On December 30, 2021, we received approval from our shareholders to reduce our minimum "asset coverage" ratio from 200% to 150% in accordance with the 1940 Act, effective December 31, 2021.
+Added: We are required to make certain disclosures on our website and in SEC filings regarding, among other things, the receipt of approval to increase our leverage, our leverage capacity and usage, and risks related to leverage.
+Added: Leverage magnifies the potential for loss on investments in our indebtedness and on invested equity capital.
+Added: We are also subject to asset coverage requirements for total borrowings under our financing arrangements.
+Added: As we use leverage to partially finance our investments, you will experience increased risks of investing in our securities.
+Added: If the value of our assets increases, then leveraging would cause the net asset value attributable to our common stock to increase more sharply than it would have had we not leveraged.
+Added: Conversely, if the value of our assets decreases, leveraging would cause net asset value to decline more sharply than it otherwise would have had we not leveraged our business.
+Added: Similarly, any increase in our income in excess of interest payable on the borrowed funds would cause our net investment income to increase more than it would without the leverage, while any decrease in our income would cause net investment income to decline more sharply than it would have had we not borrowed.
+Added: Such a decline could negatively affect our ability to pay common stock distributions, scheduled debt payments or other payments related to our securities.
+Added: Leverage is generally considered a speculative investment technique.
+Added: Because we borrow money, the potential for loss on amounts invested in us is magnified and may increase the risk of investing in us.
Since we have borrowed money, the potential for loss on amounts invested in us is magnified and may increase the risk of investing in us.
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In such an event, we may be forced to sell assets at significantly depressed prices due to market conditions or otherwise, which may result in losses.
−Removed: As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future, of at least 200%.
+Added: As a BDC, we generally are required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that we may issue in the future.
+Added: Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met.
+Added: See "Recent legislation may allow us to incur additional leverage” above for more information.
+Added: On December 30, 2021, we received approval from our shareholders to reduce our minimum "asset coverage" ratio from 200% to 150% in accordance with the 1940 Act, which allows us to increase the maximum amount of leverage that we are permitted to incur.
If this ratio declines below 150%, we cannot incur additional debt and could be required to sell a portion of our investments to repay some debt when it is disadvantageous to do so.
This could have a material adverse effect on our operations and investment activities.
−Removed: Recent legislation has modified the 1940 Act by allowing a BDC to increase the maximum amount of leverage it may incur from an asset coverage ratio of 200% to an asset coverage ratio of 150%, if certain requirements are met, which we intend to seek in 2021.
−Removed: See "Recent legislation may allow us to incur additional leverage” above for more information.
Moreover, our ability to make distributions to shareholders may be significantly restricted or we may not be able to make any such distributions whatsoever.
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Illustration .
−Removed: The following table illus trates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses.
+Added: Th e following table illus trates the effect of leverage on returns from an investment in our common stock assuming various annual returns, net of expenses.
The calculations in the table below are hypothetical and actual returns may be higher or lower than those appearing below.
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Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle rate and may result in a substantial increase in the amount of incentive fees payable to CIM with respect to pre-incentive fee net investment income.
−Removed: The 2026 Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
−Removed: The 2026 Notes are generally not secured by any of our assets or any of the assets of our subsidiaries.
−Removed: As a result, the 2026 Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness.
+Added: The 2026 Notes and the More Term Loan are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
+Added: The 2026 Notes and the More Term Loan are generally not secured by any of our assets or any of the assets of our subsidiaries.
+Added: As a result, the 2026 Notes the More Term Loan are effectively subordinated to any secured indebtedness we or our subsidiaries have currently incurred and may incur in the future (or any indebtedness that is initially unsecured to which we subsequently grant security) to the extent of the value of the assets securing such indebtedness.
In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the 2026 Notes.
−Removed: As a result, the indebtedness under the JPM Credit Facility and the UBS facility is therefore effectively senior in right of payment to our 2026 Notes to the extent of the value of such assets.
+Added: As a result, the indebtedness under the JPM Credit Facility and the UBS facility is therefore effectively senior in right of payment to our 2026 Notes and More Term Loan to the extent of the value of such assets.
Federal Income Tax Risks
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In addition, deferred PIK interest instruments create the risk of non-refundable cash payments to our investment adviser based on non-cash accruals that ultimately may not be realized.
−Removed: For accounting purposes, any cash distributions to shareholders representing deferred PIK interest income are not treated as coming from paid-in capital, even though the cash to pay these distributions may come from offering proceeds.
+Added: For accounting purposes, any distributions to shareholders representing deferred PIK interest income are not treated as coming from paid-in capital, even though the cash to pay these distributions may come from offering proceeds.
Thus, although a distribution of deferred PIK interest may come from the cash invested by shareholders, the 1940 Act does not require that shareholders be given notice of this fact by reporting it as a return of capital.
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Risks Relating to an Investment in Our Common Stock
+Added: The market price of our common stock may fluctuate significantly.
+Added: The market price and liquidity of the market for shares of our common stock that will prevail in the market may be higher or lower than the price you pay and may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.
+Added: These factors include:
+Added: • significant volatility in the market price and trading volume of securities of BDCs or other companies in our sector, which are not necessarily related to the operating performance of these companies;
+Added: • price and volume fluctuations in the overall stock market from time to time;
+Added: • the inclusion or exclusion of our stock from certain indices;
+Added: • changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;
+Added: • any loss of RIC or BDC status;
+Added: • changes in earnings or perceived changes or variations in operating results;
+Added: • changes or perceived changes in the value of our portfolio of investments;
+Added: • changes in accounting guidelines governing valuation of our investments;
+Added: • any shortfall in revenue or net income or any increase in losses from levels expected by investors or securities analysts;
+Added: • the inability of CIM to employ additional experienced investment professionals or the departure of any of CIM’s key personnel;
+Added: • short-selling pressure with respect to shares of our common stock or BDCs generally;
+Added: • future sales of our securities convertible into or exchangeable or exercisable for our common stock or the conversion of such securities;
+Added: • uncertainty surrounding the strength of the U.S.
+Added: • concerns regarding European sovereign debt and economic activity generally;
+Added: • operating performance of companies comparable to us;
+Added: • general economic trends and other external factors;
+Added: • loss of a major funding source.
+Added: In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been brought against that company.
+Added: If our stock price fluctuates significantly, we may be the target of securities litigation in the future.
+Added: Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
+Added: We cannot assure you that a market for shares of our common stock will be maintained or the market price of our shares will trade close to NAV.
+Added: We cannot assure you that a trading market for our common stock can be sustained.
+Added: In addition, we cannot predict the prices at which our common stock will trade, whether at, above or below NAV.
+Added: Shares of closed-end investment companies, including BDCs, frequently trade at a discount from NAV, and our common stock may also be discounted in the market.
+Added: In addition, if our common stock trades below its NAV, we will generally not be able to sell additional shares of our common stock to the public at its market price without, among other things, the requisite shareholders approve such a sale.
+Added: Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
+Added: Sales of substantial amounts of our common stock, or the availability of such shares for sale, could adversely affect the prevailing market prices for our common stock.
+Added: If this occurs and continues, it could impair our ability to raise additional capital through the sale of equity securities should we desire to do so.
+Added: We may in the future determine to issue preferred stock, which could adversely affect the market value of our common stock.
+Added: The issuance of shares of preferred stock with dividend or conversion rights, liquidation preferences or other economic terms more favorable to the holders of preferred stock than to our common shareholders could adversely affect the market price for our common stock by making an investment in the common stock less attractive.
+Added: In addition, the dividends on any preferred stock we issue must be cumulative.
+Added: Payment of dividends and repayment of the liquidation preference of preferred stock must take preference over any distributions or other payments to our common shareholders, and holders of preferred stock are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible preferred stock that converts into common stock).
+Added: In addition, under the 1940 Act, participating preferred stock and preferred stock constitutes a “senior security” for purposes of the asset coverage test.
+Added: We may incur significant costs as a result of being a public company.
+Added: Public companies incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act.
+Added: Accordingly, we may incur significant additional costs as a result of being a public company.
+Added: These requirements may place a strain on our systems and resources.
+Added: The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal controls over financial reporting, which are discussed below.
+Added: In order to maintain and improve the effectiveness of our disclosure controls and procedures and internal controls, significant resources and management oversight may be required.
+Added: We may be implementing additional procedures, processes, policies and practices for the purpose of addressing the standards and requirements applicable to public companies.
+Added: These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
+Added: We may incur significant additional annual expenses related to these steps and, among other things, directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, additional administrative expenses payable to CIM, as our administrator, to compensate it for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses.
+Added: We are obligated to maintain proper and effective internal control over financial reporting.
+Added: We may not complete our analysis of our internal control over financial reporting in a timely manner, or our internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
+Added: Since our shares of common stock listed on the NYSE on October 5, 2021, we are now required to comply with the independent auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2022.
+Added: Complying with Section 404 requires a rigorous compliance program as well as adequate time and resources.
+Added: We may not be able to complete our internal control evaluation, testing and any required remediation in a timely fashion.
+Added: Additionally, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective.
+Added: If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to attest to management’s report on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.
In 2021 we obtained, and in 2022 we intend to seek, the approval of our shareholders to issue shares of our common stock at prices below the then current NAV per share of our common stock.
If we issue such shares and again receive such approval from shareholders in the future, we may issue shares of our common stock at a price below the then current NAV per share of common stock.
−Removed: Any such issuance could materially dilute your interest in our common stock and reduce our NAV per share.
+Added: Any such issuance could materially dilute your interest in our common stock and reduce our NAV per share and potentially the trading price of our common stock.
In August 2021, we obtained approval from our shareholders authorizing us to issue shares of our common stock at prices below the then current NAV per share of our common stock in one or more offerings for a 12-month period.
−Removed: We have not issued any such shares as of the date of this report and do not currently intend to do so through August 2021 (the 12-month anniversary of such shareholder approval).
+Added: We have not issued any such shares as of the date of this report.
In 2022, we intend to seek to obtain from our shareholders and they may approve a proposal that again authorizes us to issue shares of our common stock at prices below the then current NAV per share of our common stock in one or more offerings for a 12-month period.
Such approval would allow us to access the capital markets in a way that we were previously unable to do as a result of restrictions that, absent shareholder approval, apply to BDCs under the 1940 Act.
−Removed: Any sale or other issuance of shares of our common stock at a price below NAV per share will result in an immediate dilution to your interest in our common stock and a reduction of our NAV per share.
+Added: Any sale or other issuance of shares of our common stock at a price below NAV per share will result in an immediate dilution to your interest in our common stock and a reduction of our NAV per share and potentially the trading price of our common stock.
This dilution would occur as a result of a proportionately greater decrease in a shareholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance.
Because the number of future shares of common stock that may be issued below our NAV per share and the price and timing of such issuances are not currently known, we cannot predict the actual dilutive effect of any such issuance.
−Removed: We also cannot determine the resulting reduction in our NAV per share of any such issuance at this time.
+Added: We also cannot determine the resulting reduction in our NAV per share or the trading price of our common stock of any such issuance at this time.
We caution you that such effects may be material, and we undertake to describe all the material risks and dilutive effects of any actual offerings we may make at a price below our then current NAV in the future.
1 unchanged sentence
Whenever we do not have current shareholder approval to issue shares of our common stock at a price per share below our then current NAV per share, the offering price per share (after any sales commission or discounts (if applicable)) will equal or exceed our then current NAV per share, based on the value of our portfolio securities and other assets determined in good faith by our board of directors.
−Removed: Our common stock is not currently listed on an exchange or quoted through a quotation system.
−Removed: Therefore, shareholders will have limited liquidity and may not receive a full return of shareholder invested capital if shareholders sell their common stock.
−Removed: We are not obligated to complete a liquidity event by a specified date;
−Removed: therefore, until we complete a liquidity event, it is unlikely that shareholders will be able to sell their common stock.
−Removed: Our shares are illiquid assets for which there is not currently a secondary market.
−Removed: Prior to the completion of a liquidity event, our share repurchase program provides a limited opportunity for investors to achieve liquidity, subject to certain restrictions and limitations, at a price which may reflect a discount from the purchase price paid for the common stock being repurchased.
−Removed: However, there can be no assurance that we will complete a liquidity event.
−Removed: Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities – Share Repurchase Program” for a detailed description of our share repurchase program.
−Removed: Although our shares are not currently listed for trading on a national securities exchange, we intend to seek to complete a liquidity event by listing on such an exchange within nine to eighteen months following the date on which this Annual Report on Form 10-K was filed with the SEC, or at such earlier or later time as our board of directors may determine, taking into consideration market conditions and other factors.
−Removed: In making the decision to apply for listing of our common stock, our board of directors will try to determine whether listing our common stock will result in greater value for our shareholders.
−Removed: In making this determination, our board of directors, including our independent directors, may consider a variety of criteria, including, but not limited to, maintaining a broad portfolio of investments, portfolio performance, our financial condition, potential access to capital as a listed company, the investment advisory experience of CIM and market conditions for the listing of our common stock and the potential for shareholder liquidity.
−Removed: There can be no assurance that we will complete a liquidity event.
−Removed: Until we complete a liquidity event, it is unlikely that shareholders will be able to sell their shares.
−Removed: If our common stock is listed, we cannot assure shareholders that a public trading market will develop.
−Removed: Further, even if we do complete a liquidity event, shareholders may not receive a return of all of their invested capital.
−Removed: Beginning in the first quarter of 2014, we began offering to repurchase shares of our common stock on a quarterly basis.
−Removed: As a result, shareholders have limited opportunities to sell their shares of our common stock and, to the extent they are able to sell their shares of our common stock under the program, they may not be able to recover the amount of their investment in our common stock.
−Removed: Beginning in the first quarter of 2014, we commenced tender offers to allow shareholders to tender their shares of common stock on a quarterly basis.
−Removed: Commencing with our quarterly repurchase offer for the fourth quarter of 2016 and on a quarterly basis thereafter, we repurchase shares from tendering shareholders at a price equal to the estimated net asset value per share on the date of repurchase.
−Removed: The share repurchase program includes numerous restrictions that limit shareholders’ ability to sell their shares of common stock.
−Removed: We limit the number of shares of common stock repurchased pursuant to our share repurchase program as follows:
−Removed: (1) we currently limit the number of shares of common stock to be repurchased during any calendar year to the number of shares of common stock we can repurchase with the proceeds we receive from the issuance of shares of our common stock pursuant to our fifth amended and restated distribution reinvestment plan, although at the discretion of our board of directors, we may also use cash on hand, cash available from borrowings and cash from liquidation of securities investments as of the end of the applicable period to repurchase shares of common stock;
−Removed: (2) we will not repurchase shares of common stock in any calendar year in excess of 15% of the weighted average number of shares of common stock outstanding in the prior calendar year, or 3.75% in each quarter;
−Removed: (3) unless a shareholder tenders all of his or her shares of common stock, he or she must tender at least 25% of the amount of common stock the shareholder purchased in the offering and must generally maintain a minimum balance of $5,000 subsequent to submitting a portion of his or her shares of common stock for repurchase by us;
−Removed: and (4) to the extent that the number of shares of common stock put to us for repurchase exceeds the number of shares of common stock that we are able to purchase, we will repurchase shares of common stock on a pro rata basis, not on a first-come, first-served basis.
−Removed: Further, we will have no obligation to repurchase shares of common stock if the repurchase would violate the restrictions on distributions under federal law or Maryland law.
−Removed: Although we have adopted a share repurchase program, we have discretion to not repurchase shares of common stock, to suspend the program, and to cease repurchases.
−Removed: Our board of directors may amend, suspend or terminate the share repurchase program upon 30 days’ notice.
−Removed: Shareholders may not be able to sell their shares at all in the event our board of directors amends, suspends or terminates the share repurchase program, absent a liquidity event.
−Removed: We will notify shareholders of such developments (1) in our quarterly reports or (2) by means of a separate mailing to shareholders, accompanied by disclosure in a current or periodic report under the Exchange Act.
−Removed: The share repurchase program has many limitations and should not be relied upon as a method to sell shares of common stock promptly or at a desired price.
−Removed: The timing of our repurchase offers pursuant to our share repurchase program may be at a time that is disadvantageous to our shareholders.
−Removed: When we make quarterly repurchase offers pursuant to the share repurchase program, the repurchase price will be lower than the price that investors paid for common stock in our offering, unless we experience substantial capital appreciation and capital gains.
−Removed: As a result, to the extent investors have the ability to sell their common stock to us as part of our share repurchase program, the price at which an investor may sell common stock, which will be the estimated net asset value per share on the date of repurchase, may be lower than what an investor paid in connection with the purchase of common stock in our offering.
−Removed: In addition, in the event an investor chooses to participate in our share repurchase program, the investor will be required to provide us with notice of intent to participate prior to knowing what the estimated net asset value per share will be on the repurchase date.
−Removed: Although an investor will have the ability to withdraw a repurchase request prior to the repurchase date, to the extent an investor seeks to sell common stock to us as part of our periodic share repurchase program, the investor will be required to do so without knowledge of what the repurchase price of our common stock will be on the repurchase date.
A shareholder’s interest in us will be diluted if we issue additional shares of common stock, which could reduce the overall value of an investment in us.
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These anti-takeover provisions may inhibit a change of control in circumstances that could give the holders of our common stock the opportunity to realize a premium over the value of our common stock.
−Removed: Certain provisions of our articles of incorporation complying with the Omnibus Guidelines of the North American Securities Administrators Association will terminate upon a listing of our shares on an exchange or quoted through a quotation system.
−Removed: In the event that our shares are listed on an exchange or quoted through a quotation system, Article XIII of our current articles of incorporation provides that certain provisions of our articles will no longer apply, including, for example, provisions relating to deferred payments, suitability of investors, votes required for amendments to the articles of incorporation, investment objectives and limitations, conflicts of interest and roll-up transactions.
−Removed: These provisions are required by the Omnibus Guidelines for non-listed public companies and are not required for listed public companies.
−Removed: The elimination of these provisions may mean that shareholders have less protection than they did prior to the listing of our shares.
Investing in our common stock involves a high degree of risk.
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General Risk Factors
−Removed: The impact of financial reform legislation on us is uncertain.
−Removed: In light of recent conditions in the U.S.
−Removed: and global financial markets and the U.S.
−Removed: and global economy, legislators, the presidential administration and regulators have increased their focus on the regulation of the financial services industry.
−Removed: The Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, institutes a wide range of reforms that will have an impact on all financial institutions.
−Removed: Many of the requirements called for in the Dodd-Frank Act will be implemented over time, most of which will be subject to implementing regulations over the course of the next several years.
−Removed: Given the uncertainty associated with the manner in which the provisions of the Dodd-Frank Act will be implemented by the various regulatory agencies and through regulations, the full impact such requirements will have on our business, results of operations or financial condition is unclear.
−Removed: The changes resulting from the Dodd-Frank Act may require us to invest significant management attention and resources to evaluate and make necessary changes in order to comply with new statutory and regulatory requirements.
−Removed: Failure to comply with any such laws, regulations or principles, or changes thereto, may negatively impact our business, results of operations and financial condition.
−Removed: While we cannot predict what effect any changes in the laws or regulations or their interpretations would have on us as a result of the Dodd-Frank Act, these changes could be materially adverse to us and our shareholders.
−Removed: Global markets could enter a period of severe disruption and instability due to catastrophic events, such as terrorist attacks, acts of war, natural disasters, and outbreaks of epidemic, pandemic or contagious diseases, which could impair our portfolio companies’ financial positions and operating results and affect the industries in which we invest and, in turn, harm our operating results.
−Removed: and global markets have, from time to time, experienced periods of disruption due to events such as terrorist attacks;
−Removed: natural disasters, such as earthquakes, tsunamis, fires, floods or hurricanes;
−Removed: and outbreaks of epidemic, pandemic or contagious diseases.
−Removed: Such events have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability.
−Removed: In particular, outbreaks of epidemic, pandemic or contagious diseases may cause serious harm to our business, operating results and financial condition.
−Removed: Historically, disease pandemics such as the Ebola virus, Middle East Respiratory Syndrome, and Severe Acute Respiratory Syndrome (or the H1N1 virus), have diverted resources and priorities towards the treatment of such diseases.
−Removed: During the first quarter of 2020, there was a global outbreak of a novel coronavirus, or COVID-19, which spread to over 100 countries, including the United States, and spread to every state in the United States.
−Removed: The World Health Organization designated COVID-19 as a pandemic, and numerous countries, including the United States, declared national emergencies with respect to COVID-19.
−Removed: The global impact of the outbreak was and has been rapidly evolving, and as cases of COVID-19 continued to be identified in additional countries, many countries reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of non-essential businesses.
−Removed: Such actions created and will continue to create disruption in global supply chains, and adversely impacted global commercial activity and a number of industries.
−Removed: See “Item 1A.
−Removed: Risk Factors - Risks Related to Our Business and Structure - The outbreak of COVID-19 has caused severe disruptions in the U.S.
−Removed: and global economy, and initially had and may again have a materially adverse impact on our financial condition and results of operations.”
−Removed: Any prolonged disruptions in the business of our portfolio companies, including a disruption in their supply chains, may adversely affect their ability to obtain the necessary raw materials or components to make their products or cause a decline in the demand for their products or services, leading to a negative impact on their operating results.
−Removed: In addition, such events may lead to restrictions on travel to and from the affected areas, making it more difficult for our portfolio companies to conduct their businesses.
−Removed: As a result of pandemic outbreaks, including COVID-19, businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions.
−Removed: Governmental mandates may require forced shutdowns of our portfolio companies’ facilities for extended or indefinite periods.
−Removed: In addition, these widespread outbreaks of illness, particularly in North America, Europe, or other locations significant to the operations of our portfolio companies, could adversely affect their workforce, resulting in serious health issues and absenteeism, and may cause serious harm to our results of operations, business, or prospects.
−Removed: Furthermore, future terrorist activities, military or security operations, natural disasters, disease outbreaks, pandemics or other similar events could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies.
−Removed: During these periods of disruption, general economic conditions may deteriorate with material and adverse consequences for the broader financial and credit markets, and the availability of debt and equity capital for the market as a whole, and financial services firms in particular.
−Removed: Such economic adversity could impair our portfolio companies’ financial positions and operating results and affect the industries in which we invest, which could, in turn, harm our operating results.
−Removed: These conditions may reoccur for a prolonged period of time or materially worsen in the future.
−Removed: The outbreak of COVID-19 has caused severe disruptions in the U.S.
−Removed: and global economy, and initially had and may again have a materially adverse impact on our financial condition and results of operations.
−Removed: During the first quarter of 2020, there was a global outbreak of a novel coronavirus, COVID-19, which spread to over 100 countries, including the United States, and spread to every state in the United States.
−Removed: On March 11, 2020, the World Health Organization designated COVID-19 as a pandemic, and on March 13, 2020, the United States declared a national emergency with respect to COVID-19.
−Removed: The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19 continued to be identified in additional countries, many countries reacted by instituting quarantines, restrictions on travel, closing financial markets and/or restricting trading, and limiting hours of operations of non-essential businesses.
−Removed: Such actions created and will continue to create disruption in global supply chains, and adversely impacted many industries, including industries in which our portfolio companies operate.
−Removed: The outbreak could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown.
−Removed: The outbreak of COVID-19 initially had, and may again have, a material adverse impact on our NAV, financial condition, liquidity, results of operations, and the businesses of our portfolio companies, among other factors.
−Removed: We expect that the impacts of the pandemic on the U.S.
−Removed: and global economy are likely to continue to some extent as the outbreak persists and potentially even longer.
−Removed: Although many or all facets of our business have been or could be impacted by COVID-19, we currently believe the following impacts to be the most material to us:
−Removed: • During the first quarter of 2020, our NAV significantly decreased as a result of the outbreak;
−Removed: our NAV per share was $7.29 as of March 31, 2020 as compared to $8.40 as of December 31, 2019.
−Removed: Our NAV per share has steadily increased to $7.75 as of December 31, 2020.
−Removed: We expect our NAV per share in the future will be different, and possibly materially different, from our December 31, 2020 NAV per share.
−Removed: The decrease during the first quarter of 2020 was the result of significant mark downs in the fair value of our investment portfolio, including our quoted syndicated loan investments and our private loan and other investments.
−Removed: The fair value of these investments deteriorated as a result of market conditions triggered by COVID-19, including increased credit risk for our portfolio companies as their businesses were impacted by the outbreak and technical selling pressure as other market participants began selling assets in an effort to realize liquidity.
−Removed: It is possible that the fair value of our investments, and therefore our NAV per share, could begin to decrease again during this continued period of the COVID-19 outbreak and potentially longer.
−Removed: We believe our investments in portfolio companies in certain industries were most affected by the COVID-19 outbreak, but the majority of our investments were not materially affected by the outbreak.
−Removed: • On March 19, 2020, our board of directors, including the independent directors, temporarily suspended our share repurchase program commencing with the second quarter of 2020 and included the third quarter of 2020.
−Removed: On November 13, 2020, we recommenced the share repurchase program for the fourth quarter of 2020.
−Removed: Also, beginning on March 19, 2020, we temporarily suspended the payment of distributions to shareholders commencing with the month ended April 30, 2020, whether in cash or pursuant to our distribution reinvestment plan.
−Removed: On July 15, 2020, our board of directors determined to recommence the payment of distributions to shareholders in August 2020.
−Removed: Any future uncertainty caused by the continued outbreak of COVID-19 could cause limitations on our ability to make distributions to and/or repurchase shares from our shareholders due to potential material adverse impacts on our cash flows from operations or liquidity.
−Removed: • The portfolio companies adversely affected by the COVID-19 pandemic that are borrowers of our loans may not be able to make interest payments, which would adversely impact our net income and results of operations.
−Removed: Many of these portfolio companies’ businesses are adversely affected by COVID-19 and are experiencing lost revenue as quarantines and other social disruption have slowed or stopped purchases of their products or services or have forced them to limit or suspend operations.
−Removed: Furthermore, although most of our loans are secured by first lien security interests in the applicable portfolio company’s assets, if a portfolio company defaults on its loan there is no guarantee we will be able to recover the principal amount of the loan.
−Removed: • Disruption in the financial markets caused by the COVID-19 outbreak may restrict our access to financing.
−Removed: 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 could have obtained prior to the outbreak of the pandemic.
−Removed: Furthermore, if there are declining values of certain of our assets, we may need to post additional unencumbered assets to secure certain of our financing arrangements, leaving less remaining unencumbered assets for future financing.
−Removed: These factors may limit our ability to make new investments and adversely impact our results of operations.
−Removed: Additionally, we may experience other negative impacts to our business as a result of COVID-19 or a related or future pandemic that could exacerbate other risks described in this report, including:
−Removed: • weakening financial conditions of or the bankruptcy or insolvency of portfolio companies, which may result in the inability of such portfolio companies to meet debt obligations, delays in collecting accounts receivable, defaults, or forgiveness or deferral of interest payments from such portfolio companies;
−Removed: • deteriorations in credit and financing market conditions, which may adversely impact our ability to access financing for our investments on favorable terms or at all;
−Removed: • operational impacts on our service providers, vendors and counterparties, including our lenders and other providers of financing, brokers and other counterparties that we purchase and sell assets to and from, and legal and diligence professionals that we rely on for acquiring our investments;
−Removed: • limitations on our ability to ensure business continuity in the event our, or our third-party service providers’, continuity of operations plan is not effective or improperly implemented or deployed during a disruption;
−Removed: • the availability of key personnel of our service providers as they face changed circumstances and potential illness during the pandemic;
−Removed: • difficulty in valuing our assets in light of significant changes in the financial markets, including difficulty in forecasting discount rates and making market comparisons, and circumstances affecting our service providers’ personnel during the pandemic;
−Removed: • limitations on our ability to raise new capital;
−Removed: • significant changes to the valuations of pending investments;
−Removed: • limitations on our ability to make distributions to and/or repurchase shares from our shareholders due to material adverse impacts on our cash flows from operations or liquidity.
−Removed: The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions, and, as a result, present material uncertainty and risk with respect to us and the performance of our investments.
−Removed: The full extent of the impact and effects of COVID-19 will depend on future developments, including, among other factors, the duration and spread of the outbreak, along with related travel advisories, quarantines and restrictions, the recovery time of the disrupted supply chains and industries, the impact of labor market interruptions, the impact of government interventions, and uncertainty with respect to the duration of the global economic slowdown.
−Removed: COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations and ability to pay distributions to our shareholders.
+Added: Global economic, political and market conditions may adversely affect our business, financial condition and results of operations, including our revenue growth and profitability.
+Added: The current worldwide financial market situation, as well as various social and political tensions in the United States and around the world, have contributed and may continue to contribute to increased market volatility, may have long-term effects on the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide.
+Added: We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.
+Added: Our business is directly influenced by the economic cycle and could be negatively impacted by a downturn in economic activity in the U.S.
+Added: as well as globally.
+Added: Fiscal and monetary actions taken by U.S.
+Added: government and regulatory authorities could have a material adverse impact on our business.
+Added: To the extent uncertainty regarding the U.S.
+Added: or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be adversely affected.
+Added: Moreover, Federal Reserve policy, including with respect to certain interest rates, along with the general policies of the current Presidential administration, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities.
+Added: These conditions, government actions and future developments may cause interest rates and borrowing costs to rise, which may adversely affect our ability to access debt financing on favorable terms and may increase the interest costs of our borrowers, hampering their ability to repay us.
+Added: Continued or future adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations.
+Added: If key economic indicators, such as the unemployment rate or inflation, do not progress at a rate consistent with the Federal Reserve’s objectives, the target range for the federal funds rate may increase and cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms and may also increase the costs of our borrowers, hampering their ability to repay us.
+Added: The Federal Reserve recently indicated that, in light of the economic recovery and higher than anticipated inflation, it expects to raise interest rates as early as March 2022.
+Added: However, the timing, number and amount of any such future interest rate increases are uncertain.
+Added: Legislation may be adopted that could significantly affect the regulation of U.S.
+Added: financial markets.
+Added: Areas subject to potential change, amendment or repeal include the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, and the authority of the Federal Reserve and the Financial Stability Oversight Council.
+Added: These or other regulatory changes could result in greater competition from banks and other lenders with which we compete for lending and other investment opportunities.
+Added: The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States.
+Added: We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the United States.
+Added: Such actions could have a material adverse effect on our business, financial condition and results of operations.
+Added: Political, social and economic uncertainty, including uncertainty related to the COVID-19 pandemic, creates and exacerbates risks.
+Added: The COVID-19 pandemic has created disruptions in supply chains and economic activity, contributed to labor difficulties and is having a particularly adverse impact on transportation, hospitality, tourism, entertainment and other industries, which may in the future adversely affect our financial condition, liquidity and results of operations.
+Added: The extent to which the COVID-19 pandemic will negatively affect our financial condition, liquidity and results of operations will depend on future developments, including the emergence of new variants of COVID-19, such as Delta and Omicron, and the effectiveness of vaccines and treatments over the long term and against new variants, which are highly uncertain and cannot be predicted.
+Added: While financial markets have rebounded from the significant declines that occurred early in the pandemic and global economic conditions generally improved in 2021, certain of the circumstances that arose or became more pronounced after the onset of the COVID-19 pandemic persisted in 2021, including (i) relatively weak consumer confidence;
+Added: (ii) low levels of the federal funds rate and yields on U.S.
+Added: Treasury securities which, at times, were near zero;
+Added: (iii) ongoing heightened credit risk with regard to industries that have been most severely impacted by the pandemic, including, at times, oil and gas, gaming and lodging, and airlines;
+Added: (iv) higher cyber security, information security and operational risks;
+Added: and (v) interruptions in the supply chain that have adversely affected many businesses and have contributed to higher rates of inflation.
+Added: Depending on the duration and severity of the pandemic going forward, as well as the effects of the pandemic on consumer and corporate confidence, the conditions noted above could continue for an extended period and other adverse developments may occur or reoccur, including (i) the decline in value and performance of us and our portfolio companies, (ii) the ability of our borrowers to continue to meet loan covenants or repay loans provided by us on a timely basis or at all, which may require us to restructure our investments or write down the value of our investments, (iii) our ability to comply with the covenants and other terms of our debt obligations and to repay such obligations, on a timely basis or at all, (iv) our ability to comply with certain regulatory requirements, such as asset coverage requirements under the 1940 Act, (v) our ability maintain our distributions at their current level or to pay them at all or (vi) our ability to source, manage and divest investments and achieve our investment objectives, all of which could result in significant losses to us.
+Added: We will also be negatively affected if the operations and effectiveness of any of our portfolio companies (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted.
+Added: Governmental authorities worldwide have taken increased measures to stabilize the markets and support economic growth.
+Added: The continued success of these measures is unknown and they may not be sufficient to address future market dislocations or avert severe and prolonged reductions in economic activity.
+Added: Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
+Added: These events could limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our investments.
+Added: The capital markets are currently in a period of disruption and economic uncertainty.
+Added: Such market conditions have materially and adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on our business and operations.
+Added: capital markets have experienced extreme disruption since the global outbreak of COVID-19.
+Added: Such disruptions have been evidenced by volatility in global stock markets as a result of, among other things, uncertainty regarding the COVID-19 pandemic and the fluctuating price of commodities such as oil.
+Added: Despite actions of the U.S.
+Added: federal government and foreign governments, these events have contributed to worsening general economic conditions that are materially and adversely impacting broader financial and credit markets and reducing the availability of debt and equity capital for the market as a whole.
+Added: These conditions could continue for a prolonged period of time or worsen in the future.
+Added: Significant changes or volatility in the capital markets may negatively affect, the valuations of our investments.
+Added: While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan to hold an investment to maturity).
+Added: Our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that may not reflect the full impact of the COVID-19 pandemic and measures taken in response thereto.
+Added: Any public health emergency, including the COVID-19 pandemic or an outbreak of other existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
+Added: Significant changes in the capital markets, such as the disruption in economic activity caused by the COVID-19 pandemic, could limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our debt and equity investments.
+Added: Additionally, the recent disruption in economic activity caused by the COVID-19 pandemic has had, and may continue to have, a negative effect on the potential for liquidity events involving our investments.
+Added: The illiquidity of our investments may make it difficult for us to sell such investments to access capital, if required.
+Added: As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them to increase our liquidity.
+Added: An inability on our part to raise incremental capital, and any required sale of all or a portion of our investments as a result, could have a material adverse effect on our business, financial condition or results of operations.
+Added: Further, current market conditions may make it difficult to raise equity capital, extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business.
+Added: The debt capital available to us in the future, if available at all, may bear a higher interest rate and may be available only on terms and conditions less favorable than those of our existing debt and such debt may need to be incurred in a rising interest rate environment.
+Added: If we are unable to raise new debt or refinance our existing debt, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage, and we may be unable to make new commitments or to fund existing commitments to our portfolio companies.
+Added: Any inability to extend the maturity of or refinance our existing debt, or to obtain new debt, could have a material adverse effect on our business, financial condition or results of operations.
+Added: Terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition.
+Added: Terrorist acts, acts of war, including Russia’s invasion of Ukraine in 2022, global health emergencies or natural disasters may disrupt our operations, as well as the operations of the businesses in which we invest.
+Added: Such acts have created, and continue to create, economic and political uncertainties and have contributed to global economic instability.
+Added: Future terrorist activities, military or security operations, global health emergencies or natural disasters could further weaken the domestic/global economies and create additional uncertainties, which may negatively impact the businesses in which we invest directly or indirectly and, in turn, could have a material adverse impact on our business, operating results and financial condition.
+Added: Losses from terrorist attacks, global health emergencies and natural disasters are generally uninsurable.
We are subject to risks associated with cybersecurity and cyber incidents.
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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.