What changed in this filing

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Item 1. Business

2023-03-15 compared with 2022-03-17 · 42 added, 41 removed, 795 unchanged (9% of the section changed)

12 unchanged sentences

• Price declines in the large corporate leveraged loan market may adversely affect the fair value of debt securities we hold, reducing our net asset value (“NAV”) through increased net unrealized depreciation;

• Our ability to achieve our investment objective depends on our Adviser’s and its affiliates’ ability to manage and support our investment process.

• Our ability to achieve our investment objective depends on our Adviser’s (as defined below) and its affiliates’ ability to manage and support our investment process.

If our Adviser were to lose any members of its senior management team, our ability to achieve our investment objective could be significantly harmed;

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On August 25, 2021, we filed the Certificate of Designation for the series A preferred stock (the “Series A Preferred Stock”).

On the same day, we entered into subscription agreements (collectively the “Preferred Subscription Agreements”) with certain investors (the “Investors,” and each, an “Investor”), pursuant to which Investors made new capital commitments to purchase shares of our Series A Preferred Stock.

As of December 31, 2021, total capital commitments of Series A Preferred Stock were $27.5 million.

On the same day, we entered into subscription agreements (collectively the “Preferred Subscription Agreements”) with investors, pursuant to which investors made new capital commitments (the “Preferred Capital Commitments”) to purchase shares of our Series A Preferred Stock.

As of December 31, 2022, total Preferred Capital Commitments of Series A Preferred Stock were $77.5 million.

Our investment objective is to generate both current income and capital appreciation through debt and equity investments.

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middle market companies.

We define middle market companies as those with annual revenues up to $1 billion, although we may invest in larger or smaller companies.

We define middle market companies as those with EBITDA of between $25 million and $100 million annually, although we may invest in larger or smaller companies.

We also may purchase interests in loans or corporate bonds through secondary market transactions, which refers to acquisitions from secondary market participants rather than from the portfolio company directly.

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The Adviser is a subsidiary of BSP and is also registered as an investment adviser under the Advisers Act.

BSP is a leading credit-focused alternative asset management firm with over $38 billion in assets under management as of January 31, 2022.

BSP is a leading credit-focused alternative asset management firm with approximately $77 1 billion in assets under management as of January 31, 2023.

Established in 2008, the BSP platform manages funds for institutions and high-net-worth investors across various credit funds and complementary strategies, including private/opportunistic debt, structured credit, high yield, special situations, and commercial real estate debt.

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Through its specialist investment managers, the company brings extensive capabilities in equity, fixed income, alternatives and custom multi-asset solutions.

With offices in over 30 countries and 1,300 investment professionals, the company has more than 70 years of investment experience and approximately $1.6 trillion in assets under management as of December 31, 2021.

With offices in over 30 countries and 1,300 investment professionals, the company has more than 75 years of investment experience and approximately $1.5 trillion in assets under management as of January 31, 2023.

Investment Strategy

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middle market companies.

We define middle market companies as those with annual revenues up to $1 billion, although we may invest in larger or smaller companies.

We define middle market companies as those with EBITDA of between $25 million and $100 million annually, although we may invest in larger or smaller companies.

We also may purchase interests in loans or corporate bonds through secondary market transactions.

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• maintaining downside protection through risk management and diversification;

1 Assets under management represent combined assets of Franklin Templeton Investments, Legg Mason, and subsidiary investment management groups.

Franklin Templeton Investments acquired Legg Mason on July 31, 2020.

1 Assets under management represent all credit funds and separately managed accounts managed and administered by Benefit Street Partners or Alcentra.

Benefit Street Partners acquired Alcentra on November 1, 2022.

• ability to take advantage of opportunities Benefit Street Partners believes are mispriced.

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This imbalance is driven by substantial long-term changes in the debt capital markets following the credit crisis.

Benefit Street Partners believes that the Company’s target market segment represents a large opportunity set for the Company, given Benefit Street Partners’ over $38 billion in assets under management, of which $13 billion is in private debt as of January 31, 2022, which it believes can offer greater efficiencies with respect to research and origination, deep credit markets experience, and access to proprietary sourcing networks.

Benefit Street Partners believes that the Company’s target market segment represents a large opportunity set for the Company, given Benefit Street Partners’ approximately $77 1 billion in assets under management which it believes can offer greater efficiencies with respect to research and origination, deep credit markets experience, and access to proprietary sourcing networks.

Our current opportunity is highlighted by the following factors:

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Benefit Street Partners’ fundamental analysis involves close scrutiny of financial statements to reveal key drivers of revenues, expenses and cash flow.

Benefit Street Partners also typically conducts extensive management team interviews to uncover incremental insights into these drivers as well as other potential issues that could affect the company’s performance and its ability to service its debt obligations.

Benefit Street Partners also typically conducts extensive management team interviews to uncover incremental insights into these drivers as well as other potential issues that could affect

the company’s performance and its ability to service its debt obligations.

To ensure completeness of its due diligence process, Benefit Street Partners supplements in-house resources as necessary with leading third-party specialists including accountants, appraisers, consultants and attorneys.

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Our Adviser’s internal performance ratings do not constitute any rating of investments by a nationally recognized statistical rating organization or represent or reflect any third-party assessment of any of our investments.

The weighted average risk rating of our investments based on fair value was 2.00 as of December 31, 2021.

As of December 31, 2021, we did not have any portfolio companies on non-accrual status.

We commenced our investment operations on January 7, 2021;

therefore, had no investment activity for the year ended December 31, 2020.

The following table shows the distribution of our investments on the 1 to 5 internal performance rating scale at fair value as of December 31, 2021 (dollars in thousands):

December 31, 2021

Internal Performance Rating Investments at Fair Value Percentage of Total Investments

The weighted average risk rating of our investments based on fair value was 2.1 and 2.0 as of December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021, the company had no portfolio companies on non-accrual status, respectively.

The following table shows the distribution of our investments on the 1 to 5 internal performance rating scale at fair value as of December 31, 2022 and 2021 (dollars in thousands):

December 31, 2022 December 31, 2021

Internal Performance Rating Investments at Fair Value Percentage of Total Investments Investments at Fair Value Percentage of Total Investments

1 $ 4,112 0.5 % $ — — %

2 657,763 84.1 485,488 93.9

3 86,536 11.1 — —

Not Rated (1)

33,969 4.3 31,812 6.1

Total $ 782,380 100.0 % $ 517,300 100.0 %

14 unchanged sentences

However, in certain instances due to regulatory, tax, investment, or other restrictions, certain investment opportunities may not be appropriate for either us or other funds managed by the Adviser or its affiliates.

The Board of Directors renewed the Investment Advisory Agreement on January 30, 2023.

Management Fee

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Prior to a liquidity event, the Management Fee payable under the Investment Advisory Agreement will be calculated at an annual rate of 0.5% of the Company’s average gross assets.

A “liquidity event” is defined as any of:

(1) a merger or another transaction approved by the Board of Directors in which the Company’s stockholders will receive cash or shares of a publicly traded company (or a company that becomes publicly traded concurrently with the closing of such transaction), which may include an entity advised by the Adviser or its affiliates, (2) an initial public offering (“IPO”) or a listing (an “Exchange Listing”) of the Common Stock on a national securities exchange, or (3) the sale of all or substantially all of the Company’s assets either on a complete portfolio basis or individually followed by a liquidation.

After a liquidity event, the Management Fee payable under the Investment Advisory Agreement will be calculated at an annual rate of 1.50% of the Company’s average gross assets, provided, that the Management Fee will be calculated at an annual rate of 1.00% of the Company’s average gross assets purchased with borrowed funds above 1.0x debt-to-equity (equivalent to $1 of debt outstanding for each $1 of equity), and provided further that for a period of 15 months commencing on the date of the closing of a liquidity event, the Adviser will irrevocably waive Management Fees in excess of 0.5% of the Company’s average gross assets.

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Notwithstanding anything herein to the contrary, the Adviser will waive all Incentive Fees for the first twelve calendar quarters of operations of the Company.

Incentive Fee on Income .

The incentive fee consists of two parts.

The first part is referred to as the “incentive fee on income” and it is calculated and payable quarterly in arrears based on the Company’s “Pre-Incentive Fee Net Investment Income” for the immediately preceding quarter.

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Any fees waived under the Investment Advisory Agreement are not subject to reimbursement to the Adviser.

Incentive Fee on Capital Gains .

The second part of the incentive fee, referred to as the “incentive fee on capital gains during operations,” is an incentive fee on capital gains earned on cumulative realized capital gains of the Company net of cumulative realized capital losses and unrealized capital depreciation and is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement, if earlier).

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The Adviser serves as our investment adviser pursuant to the Investment Advisory Agreement, which was initially approved by our Board of Directors in March 2020.

The Board renewed the Investment Advisory Agreement on January 31, 2022.

Unless terminated earlier, it will remain in effect until February 2023 and shall continue in effect from year to year if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons.

The Board most recently approved the Investment Advisory Agreement in January 2023, and unless terminated earlier, it will remain in effect from year to year if approved annually by our Board of Directors or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons.

The Investment Advisory Agreement will automatically terminate in the event of its assignment.

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These factors included the nature, extent and quality of services provided to us by the Adviser, the costs of providing services to us, the profitability of the relationship between us and the Adviser, comparative information on fees and expenses borne by other comparable BDCs or registered investment companies and, as applicable, other advised accounts, and the extent to which economies of scale would be realized as we grow and whether fee levels reflect these economies of scale for the benefit of our investors.

Based on the information reviewed and the considerations detailed above, our Board of Directors, including all of our directors who are not interest persons of us or the Adviser, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and approved the Investment Advisory Agreement as being in the best interests of our stockholders.

Based on the information reviewed and the considerations detailed above, our Board of Directors, including all of our directors who are not interested persons of us or the Adviser, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and approved the Investment Advisory Agreement as being in the best interests of our stockholders.

Indemnification

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The 1940 Act generally prohibits BDCs from entering into negotiated co-investments with affiliates absent an order from the SEC.

The SEC has granted exemptive relief to affiliates of the Adviser that allows us to enter into certain negotiated co-investment transactions alongside other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”).

Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.

The SEC staff has granted the Company exemptive relief that allows it to enter into certain negotiated co-investment transactions alongside with other funds managed by the Adviser or its affiliates (“Affiliated Funds”) in a manner consistent with its investment objective, positions, policies, strategies, and restrictions as well as regulatory requirements and other pertinent factors, subject to compliance with certain conditions (the “Order”).

Pursuant to the Order, the Company is permitted to co-invest with its affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of its eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and the Company's stockholders and do not involve overreaching in respect of the Company or the Company's stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s stockholders and is consistent with the Company’s investment objective and strategies.

Private Placement

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On November 9, 2021, the Board of Directors extended the Initial Closing Period to December 18, 2022.

After the Initial Closing Period, the Company may permit one or more additional closings with the approval of the Board of Directors.

Drawdowns of Capital Commitments are made at the discretion of the Adviser until the earlier of (i) a Liquidity Event (as defined below) or (ii) the two-year anniversary of the end of the Initial Closing Period, provided that this period may be extended by an additional one-year extension in the discretion of the Board of Directors (the “Drawdown Period”).

On December 16, 2022, the Board of Directors extended the Initial Closing Period to December 18, 2023.

Drawdowns of Capital Commitments are made at the discretion of the Adviser until the earlier of (i) a liquidity event or (ii) the two-year anniversary of the end of the Initial Closing Period, provided that this period may be extended by an additional one-year extension in the discretion of the Board of Directors (the “Drawdown Period”).

After the end of the Drawdown Period, the Company may draw down Capital Commitments to the extent necessary to:

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Valuation Procedures

The Adviser, acting pursuant to delegated authority from, and under the oversight of our Board of Directors, assists the Board of Directors in its determination of the NAV of our investment portfolio each quarter and at such other times as may be required by law.

The Adviser, acting pursuant to delegated authority from, and under the oversight of our Board of Directors, determines the NAV of our investment portfolio each quarter and at such other times as may be required by law.

The NAV per share of our outstanding shares of Common Stock is determined quarterly by dividing the value of total assets minus liabilities by the total number of shares outstanding.

Securities for which market quotations are readily available are valued at the reported closing price on the valuation date.

Securities for which market quotations are not readily available are valued at fair value as determined by our Board of Directors.

In connection with that determination, our Adviser facilitates the preparation, through the use each quarter of independent valuation firms, portfolio company valuations using relevant inputs, including but not limited to, indicative dealer quotes, values of like securities, the most recent portfolio company financial statements and forecasts.

Securities for which market quotations are not readily available are valued at fair value as determined by our valuation designee (the “Valuation Designee”).

In connection with that determination, our Valuation Designee utilizes independent valuation firms, portfolio company valuations using relevant inputs, including but not limited to, indicative dealer quotes, values of like securities, the most recent portfolio company financial statements and forecasts.

We classify the fair value measurements of our assets and liabilities into a fair value hierarchy in accordance with Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurement , based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.

5 unchanged sentences

and Level 3, defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its own assumptions.

With respect to investments for which market quotations are not readily available, the Adviser undertakes a multi-step valuation process each quarter, as described below:

• Each portfolio company or investment will be valued by the Adviser, with assistance from one or more independent valuation firms engaged by the Company’s Board of Directors;

With respect to investments for which market quotations are not readily available, our Valuation Designee undertakes a multi-step valuation process each quarter, as described below:

• Each portfolio company or investment will be valued by our Valuation Designee, with assistance from one or more independent valuation firms engaged by the Company’s Board of Directors;

• The independent valuation firm(s) conduct independent appraisals and make an independent assessment of the value of each investment;

• The Board of Directors determines the fair value of each investment, in good faith, based on the input of the Adviser and independent valuation firm (to the extent applicable).

• Our Valuation Designee, under the supervision of the Board of Directors, determines the fair value of each investment, in good faith, based on the input of the Adviser and independent valuation firm (to the extent applicable) and our Valuation Designee’s own analysis.

Our Valuation Designee also has established a Valuation Committee to assist our Valuation Designee in carrying out its designated responsibilities, subject to oversight of the Board of Directors.

Determination of fair values involves subjective judgments and estimates.

Below is a description of factors that our Board of Directors may consider when valuing our debt and equity investments.

Below is a description of factors that our Valuation Designee may consider when valuing our debt and equity investments.

Securities for which market quotations are readily available on an exchange are valued at the reported closing price on the valuation date.

We may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets.

Our Valuation Designee may also obtain quotes with respect to certain of our investments from pricing services or brokers or dealers in order to value assets.

When doing so, we determine whether the quote obtained is readily available according to U.S.

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The measurement is based on the value indicated by current market expectations about those future amounts.

In following these approaches, the types of factors that we may take into account in fair value pricing our investments include, as relevant:

In following these approaches, the types of factors that our Valuation Designee may take into account in fair value pricing our investments include, as relevant:

available current market data, including relevant and applicable market trading and transaction comparables, applicable market yields and multiples, security covenants, call protection provisions, information rights, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flows, the markets in which the portfolio company does business, comparisons of financial ratios of peer companies that are public, M&A comparables, and enterprise values, among other factors.

When available, broker quotations and/or quotations provided by pricing services are considered as an input in the valuation process.

The SEC recently adopted new Rule 2a-5 under the 1940 Act.

This establishes requirements for determining fair value in good faith for purposes of the 1940 Act.

We will comply with the new rule’s valuation requirements on or before the SEC’s compliance date in September 2022.

Regulation as a Business Development Company

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Any restructuring may also result in our recognition of a substantial amount of non-qualifying income for purposes of the 90% Income Test, such as cancellation of indebtedness income in connection with the work-out of a leveraged investment (which, while not free from doubt, may be treated as non-qualifying income) or the receipt of other non-qualifying income.

Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants generally will generally be treated as capital gain or loss.

Gain or loss realized by us from warrants acquired by us as well as any loss attributable to the lapse of such warrants will generally be treated as capital gain or loss.

Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.

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The rules dealing with U.S.

federal income taxation are constantly under review by persons involved in the legislative process any by the IRS and the U.S.

federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S.

Treasury Department, resulting in revisions of regulations and revised interpretations of established concepts as well as statutory changes.

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

What changed 10-K

Item 1. Business