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Item 7. Management’s Discussion and Analysis

2023-03-15 compared with 2022-03-17 · 151 added, 90 removed, 331 unchanged (42% of the section changed)

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Actual results could differ materially from those anticipated in forward-looking statements and future results could differ materially from historical performance.

In addition to factors previously disclosed in our U.S.

Securities and Exchange Commission (“SEC”) reports and those identified elsewhere in this report, including the “Risk Factors” section, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

In addition to factors previously disclosed in our SEC reports and those identified elsewhere in this report, including the “Risk Factors” section, the following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

• our future operating results;

• the impact of the COVID-19 pandemic on our business and our portfolio companies, including our and their ability to access capital and liquidity;

• changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including the effect of the current COVID-19 pandemic and recent supply chain disruptions;

• changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including the effect of rising interest rates and a potential global recession;

• the impact of geo-political conditions, including revolution, insurgency, terrorism or war, including those arising out of the ongoing conflict between Russia and Ukraine;

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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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On August 25, 2021, we filed the Certificate of Designation for the Series A Preferred Stock.

On the same day, we entered into the Preferred Subscription Agreements with certain Investors, 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 preferred stock were $27.5 million.

On the same day, we entered into the Preferred Subscription Agreements with certain investors, pursuant to which investors made new 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.

Financial and Operating Highlights

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Operating Results for the Year Ended December 31, 2022:

Net investment income per share - basic 0.78

Net increase in net assets resulting from operations attributable to common stockholders 1.30

Net investment income 4,143

Net realized and unrealized gain 2,726

Net increase in net assets resulting from operations attributable to common stockholders 6,869

Net investment income (loss) per share - basic 1.68

Net increase (decrease) in net assets resulting from operations attributable to common stockholders and participating securities 1.24

Net investment income (loss) 31,470

Net realized and unrealized gain (loss) (8,270)

Net increase (decrease) in net assets resulting from operations attributable to common stockholders 21,830

Portfolio and Investment Activity

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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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The total portfolio of debt investments at fair value consisted of 98.3% bearing variable interest rates and 1.7% bearing fixed interest rates.

We commenced our investment operations on January 7, 2021.

During the period from January 29, 2020 (inception) to December 31, 2020, we had no investment activities.

Our portfolio composition, based on fair value at December 31, 2022 was as follows:

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Percentage of

Total Portfolio Weighted Average Current Yield for Total Portfolio (1)

Total Portfolio (1)

Weighted Average Current Yield for Total Portfolio (2)

Senior Secured First Lien Debt 84.8 % 10.8 %

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Total 100.0 % 10.8 %

(1) As of December 31, 2022, we held investments in Encina Equipment Finance, LLC (“Encina”) consisting of subordinated debt and equity, which represented 4.0% and 3.9% of our total portfolio, respectively.

Encina’s primary business involves equipment finance transactions secured by mission-critical equipment of middle market companies.

If we were to treat the investments in Encina as senior secured first lien investments, given the underlying business of this portfolio company, then our portfolio composition as of December 31, 2022 would be as follows:

December 31, 2022

Percentage of

Total Portfolio

Senior Secured First Lien Debt 92.7 %

Senior Secured Second Lien Debt 6.9

Senior Secured - Subtotal 99.6 %

Equity/Other 0.4

Total 100.0 %

(2) Includes the effect of the amortization or accretion of loan premiums or discounts.

During the year ended December 31, 2021, we made $522.8 million of investments in new portfolio companies and had $8.7 million in aggregate amount of sales and repayments, resulting in net investments of $514.1 million for the period.

The total portfolio of debt investments at fair value consisted of 97.5% bearing variable interest rates and 2.5% bearing fixed interest rates.

Our portfolio composition, based on fair value at December 31, 2021 was as follows:

December 31, 2021

Percentage of

Total Portfolio (1)

Weighted Average Current Yield for Total Portfolio (2)

Senior Secured First Lien Debt 78.7 % 7.0 %

Senior Secured Second Lien Debt 10.4 7.6

Subordinated Debt 4.7 9.1

Debt Subtotal 93.8 % 7.2 %

Total 100.0 % 7.3 %

(1) As of December 31, 2021, we held investments in Encina Equipment Finance, LLC (“Encina”) consisting of subordinated debt and equity, which represented 4.7% and 5.9% of our total portfolio, respectively.

Encina’s primary business involves equipment finance transactions secured by mission-critical equipment of middle market companies.

December 31, 2021

Percentage of

Total Portfolio

Senior Secured First Lien Debt 89.4 %

Senior Secured Second Lien Debt 10.4

Senior Secured - Subtotal 99.8 %

Total 100.0 %

(2) Includes the effect of the amortization or accretion of loan premiums or discounts.

Portfolio Asset Quality

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5 Underperforming debt investment with expected loss of interest and some principal.

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, the Company had no portfolio companies on non-accrual status.

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

As of December 31, 2022 and 2021, the Company had no p ortfolio companies on non-accrual status, respectively.

Refer to Note 2 - Summary of Significant Accounting Policies - for additional details regarding the Company’s non-accrual policy.

We commenced our investment operations on January 7, 2021.

As a result, during the period from January 29, 2020 (inception) to December 31, 2020, we had no investment activities.

RESULTS OF OPERATIONS

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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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• all other expenses incurred by the Company or the Administrator in connection with administering the Company’s business, including, but not limited to, payments under the Administration Agreement based upon the Company’s allocable portion of the Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, travel and the allocable portion of the cost of the Company’s chief compliance officer and chief financial officer and their respective staffs, including operations and tax professionals and administrative staff who provide support services in respect of the Company.

Our operating results for the year ended December 31, 2021 and for the period ended December 31, 2020 were as follows (dollars in thousands):

Our operating results for the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020 were as follows (dollars in thousands):

For the year ended December 31, For the period from January 29, 2020 (date of inception) through December 31,

2022 2021 2020

Total investment income $ 56,744 $ 12,245 $ —

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Fee income consists primarily of commitment fees.

For the year ended December 31, 2021, total investment income was $12.2 million and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $252.0 million and a weighted average current yield of 7.3%.

Included within total investment income was $0.3 million of fee income for the year ended December 31, 2021.

Fee income consists primarily of commitment fees.

We commenced our investment operations on January 7, 2021;

therefore, during the period from January 29, 2020 (inception) to December 31, 2020, we had no investment income.

The increase in investment income was primarily driven by our deployment of capital and increasing invested balance.

The increase in investment income from the period ended December 31, 2020 to the year ended December 31, 2022 was primarily driven by our deployment of capital and increasing invested balance.

Operating Expenses

The composition of our operating expenses for the year ended December 31, 2021 and for the period ended December 31, 2020 were as follows (dollars in thousands):

The composition of our operating expenses for the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020, were as follows (dollars in thousands):

For the year ended December 31, For the period from January 29, 2020 (date of inception) through December 31,

2022 2021 2020

Management fees $ 3,378 $ 1,109 $ —

Organization costs — 297

Organizational costs — — 297

Incentive fee on income 4,720 711 —

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Interest and debt fees

Interest and debt fees increased from $0 for the period ended December 31, 2020 to $3.5 million for the year ended December 31, 2021.

This was primarily driven by the establishment of our credit facilities, and the subsequent increase in our average daily borrowings.

For the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020, we incurred interest and debt fees of $17.5 million, $3.5 million, and $0, respectively.

The increase in interest and debt fees from the period ended December 31, 2020 to the year ended December 31, 2022 was primarily driven by the increase in our average daily borrowings, and rising rate environment.

Management Fees

Management fees increased from $0 for the period ended December 31, 2020 to $1.1 million for the year ended December 31, 2021.

This was primarily driven by an increase in the size of our portfolio.

For the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020, we incurred management fees of $3.4 million, $1.1 million, and $0, respectively.

The increase in management fees from the period ended December 31, 2020 to the year ended December 31, 2022 was primarily driven by an increase in the size of our portfolio.

Professional Fees and Other General and Administrative Expenses

Professional fees and other general and administrative expenses increased from $0.1 million for the period ended December 31, 2020 to $2.3 million for the year ended December 31, 2021, primarily driven by an increase in the size of the portfolio and an increase in costs associated with servicing a larger investment portfolio.

For the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020 we incurred professional fees and other general and administrative expenses of $2.9 million, $2.3 million, and $0.1 million, respectively.

The increase in professional fees and other general and administrative expenses from the period ended December 31, 2020 to the year ended December 31, 2022 was primarily driven by an increase in the size of the portfolio and an increase in costs associated with servicing a larger investment portfolio.

Net Realized Gain (Loss) and Net Change in Unrealized Appreciation (Depreciation) on Investments

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments for the year ended December 31, 2021 and for the period ended December 31, 2020 were as follows (dollars in thousands):

Net realized gain (loss) and net change in unrealized appreciation (depreciation) on investments for the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020, were as follows (dollars in thousands):

For the year ended December 31, For the period from January 29, 2020 (date of inception) through December 31,

Net realized gain

2022 2021 2020

Net realized gain (loss)

Affiliate Investments $ — $ 567 $ —

Non-affiliate investments $ 467 $ 51 $ —

Total net realized gain 618 —

Net change in unrealized appreciation on investments

Total net realized gain (loss) $ 467 $ 618 $ —

Net change in unrealized appreciation (depreciation) on investments

Control investments $ 43 $ — $ —

Affiliate Investments $ — $ 103 $ —

Non-affiliate investments $ (8,000) $ 2,005 $ —

Total net change in unrealized appreciation on investments 2,108 —

Net realized and unrealized gain $ 2,726 $ —

Impact of COVID-19 Pandemic

The COVID-19 pandemic has resulted in governments around the world implementing a broad suite of measures to help control the spread of the virus, including quarantines, travel restrictions and business curtailments and others.

The emergence of COVID-19 created economic and financial disruptions that may affect our business, financial condition, liquidity, and certain of our portfolio companies' results of operations and liquidity.

The extent to which the COVID-19 pandemic will affect our business, financial condition, liquidity and certain of our portfolio companies’ results of operations and liquidity will depend on future developments, which are highly uncertain and cannot be predicted.

Given the unprecedented nature of the COVID-19 exigency and the fiscal and monetary response designed to mitigate strain to businesses and the economy, the operating environment of certain of our portfolio companies is evolving rapidly.

We have been in frequent communication with management, as well as the private equity sponsors, of our portfolio companies in order to understand the impact of the COVID-19 pandemic on their particular businesses and assess their ability to meet their obligations.

We closely monitor our investment portfolio in order to be positioned to respond appropriately.

Net change in deferred taxes $ (780) $ — $ —

Total net change in unrealized appreciation (depreciation) on investments $ (8,737) $ 2,108 $ —

Net realized and unrealized gain (loss) $ (8,270) $ 2,726 $ —

The net realized and unrealized loss for the year ended December 31, 2022 was primarily driven by unrealized losses on senior secured investments.

The net realized and unrealized gain for the year ended December 31, 2021 was primarily driven by unrealized losses on senior secured investments.

Recent Developments

On January 31, 2022, we entered into a third amendment to the loan and servicing agreement (together with the other documents executed in connection therewith, the “MS Credit Facility”) to, among other things, increase the maximum permissible borrowings from $250.0 million to $300.0 million on a committed basis, transition the benchmark rate to Adjusted Term SOFR and included the Canadian Imperial Bank of Commerce (“CIBC”) as a lender.

On February 4, 2022, the Board of Directors declared a distribution of $0.30 per share of Common Stock, which is payable on February 22, 2022 to stockholders of record as of January 31, 2022.

On February 4, 2022, the Board of Directors declared a distribution of $19.49 per share of Series A Preferred Stock, which is payable on February 22, 2022 to stockholders of record as of January 31, 2022.

On March 8, 2022, we entered into Preferred Subscription Agreements with certain Investors, pursuant to which the Investors made new capital commitments to purchase shares of our Series A Preferred Stock, in a total aggregate amount of approximately $50.0 million.

Pursuant to their respective Preferred Subscription Agreements, each Investor is required to fund drawdowns to purchase shares of the Series A Preferred Stock up to the amount of their respective capital commitments on an as-needed basis, upon a minimum of 10 business days’ prior notice at a per-share price equal to the Liquidation Preference.

The sale and issuance of shares of Series A Preferred Stock is exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) thereof and Regulation D thereunder.

We shall rely, in part, upon representations from the Investors in the relevant Preferred Subscription Agreements that each Investor is an “accredited investor,” as defined in Regulation D under the Securities Act.

On February 24, 2023, the Board of Directors declared a distribution of $0.43 per share of Common Stock, which is payable on March 24, 2023 to stockholders of record as of February 24, 2023.

On February 24, 2023, the Board of Directors declared a distribution of $28.31 per share of Series A Preferred Stock, which is payable on March 24, 2023 to stockholders of record as of February 24, 2023.

On March 14, 2023, we delivered drawdown notices to our Common Stock investors for an aggregate offering price of approximately $8.1 million.

On March 14, 2023, we delivered drawdown notices to our Series A Preferred Stock investors for an aggregate offering price of approximately $41.4 million.

Liquidity and Capital Resources

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We had also issued 36,147 shares of Series A Preferred Stock for gross proceeds of $36.1 million.

As of December 31, 2021, we had issued 15.3 million shares of our Common Stock for net proceeds of $231.8 million, including shares issued pursuant to the DRIP.

We had also issued 5,000 shares of Series A Preferred Stock for gross proceeds of $5.0 million.

As of December 31, 2022, we had $26.2 million of cash.

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The cash flows used in operating activities for the year ended December 31, 2022 was primarily a result of purchases of investments of $327.9 million, offset by sales and repayments of investments of $58.6 million.

Net cash provided by financing activities of $504.3 million during the year ended December 31, 2021 primarily related to proceeds from debt of $239.9 million, proceeds from issuance of common stock of $222.6 million and proceeds from short-term borrowings of $41.3 million partially offset by payments on financing costs of $3.0 million and stockholder distributions of $1.5 million.

As of December 31, 2021, we had $12.9 million of cash.

For the year ended December 31, 2021, net cash used in operating activities was $491.4 million.

The level of cash flows used in or provided by operating activities is affected by the timing of purchases, redemptions, and sales of portfolio investments.

The cash flows used in operating activities for the year ended December 31, 2021 was primarily a result of purchases of investments of $522.8 million, offset by sales and repayments of investments of $8.7 million.

Net cash provided by financing activities of $272.9 million during the year ended December 31, 2022 primarily related to proceeds from debt of $242.5 million, proceeds from issuance of common stock of $142.0 million, proceeds from issuance of preferred stock of $31.1 million and proceeds from short-term borrowings of $189.1 million partially offset by payments on debt of $100.5 million, repayments on short-term borrowings of $209.6 million and common stockholder distributions of $19.2 million.

Net cash provided by financing activities of $504.3 million during the year ended December 31, 2021 primarily related to proceeds from debt of $269.9 million, proceeds from issuance of common stock of $222.6 million and proceeds from short-term borrowings of $60.9 million partially offset by payments on debt of $30.0 million and repayments on short-term borrowings of $19.6 million.

We also fund a portion of our investments through borrowings from banks.

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As of December 31, 2022, we had $43.5 million of availability under the MS Credit Facility (subject to borrowing base availability), $0.1 million of availability under the MS Subscription Facility and had approximately $262.6 million of uncalled capital commitments to purchase shares of our Common Stock and Series A Preferred Stock.

As of December 31, 2021, we had $60.0 million of availability under the MS Credit Facility (subject to borrowing base availability), $0.1 million of availability under the MS Subscription Facility and had approximately $365.2 million of uncalled capital commitments to purchase shares of our Common Stock and Series A Preferred Stock.

We expect to have sufficient liquidity for our investing activities and to conduct our operations in the near term.

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Distributions

On October 28, 2021, our Board of Directors declared a cash dividend of $0.30 per share of Common Stock, payable on November 15, 2021 to stockholders of record as of October 28, 2021.

The amount of each such distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions.

The amount of each distribution is subject to the discretion of the Board of Directors and applicable legal restrictions related to the payment of distributions.

The Company calculates each stockholder’s specific distribution amount for the quarter using record and declaration dates.

The distributions are payable by the fifth day following each record date.

The table shows the components of the distributions we have declared and/or paid to common stockholders for the year ended December 31, 2021 and for the period ended December 31, 2020 (dollars in thousands):

For the year ended December 31, 2021 For the period from January 29, 2020 (date of inception) through December 31, 2020

The table shows the components of the distributions we have declared and/or paid to common stockholders for the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020 (dollars in thousands):

For the years ended December 31, For the period from January 29, 2020 (date of inception) through December 31,

2022 2021 2020

Distributions declared $ 27,309 $ 2,293 $ —

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Portion of distributions paid in DRIP shares $ 8,073 $ 790 $ —

The table shows the components of the distributions we have declared and/or paid to preferred stockholders during the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020 (dollars in thousands):

For the years ended December 31, For the period from January 29, 2020 (date of inception) through December 31,

2022 2021 2020

Distributions declared $ 1,367 $ — $ —

Distributions paid $ 1,367 $ — $ —

Portion of distributions paid in cash $ 1,367 $ — $ —

Portion of distributions paid in DRIP shares $ — $ — $ —

We may fund our cash distributions to stockholders from any sources of funds available to us, including advances from the Adviser that are subject to reimbursement, as well as offering proceeds, borrowings, net investment income from operations, capital gain proceeds from the sale of assets, and non-capital gain proceeds from the sale of assets.

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We may have distributions which could be characterized as a return of capital for tax purposes.

During the year ended December 31, 2021, and for the period ended December 31, 2020, no portion of our distributions was characterized as return of capital for tax purposes.

During the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020, no portion of our distributions was characterized as return of capital for tax purposes.

The specific tax characteristics of our distributions made in respect of our anticipated fiscal year ending December 31, 2022 will be reported to stockholders shortly after the end of the calendar year 2022 as well as in our periodic reports with the SEC.

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We entered into an Investment Advisory Agreement, dated as of September 23, 2020, which was approved by our Board of Directors and our sole stockholder for a two year term, under which the Adviser, subject to the overall supervision of our Board of Directors manages the day-to-day operations of, and provides investment advisory services to us.

Affiliates of the Adviser also provide investment advisory services to other funds that have investment mandates that are similar, in whole and in part, with ours, including Franklin BSP Lending Corporation (formerly, Business Development Corporation of America), a BDC advised by an affiliate of the Adviser.

Affiliates of the Adviser also serve as investment adviser or sub-adviser to private funds and registered open-end funds, and as an investment adviser to a public real estate investment trust.

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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.

Administration Agreement

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The Administration Agreement may be terminated by either party without penalty upon not less than 60 days’ written notice to the other.

For the year ended December 31, 2021 and the period ended December 31, 2020, the Company incurred $0.7 million and $0, respectively, in administrative service fees under the administrative agreement, which are included in other general and administrative on the consolidated statements of operations in the accompanying consolidated financial statements.

For the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020, the Company incurred $0.8 million, $0.7 million, and $0, respectively, in administrative service fees under the administrative agreement, which are included in other general and administrative on the consolidated statements of operations in the accompanying consolidated financial statements.

Co-Investment Relief

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Due to Related Party

Included within other liabilities on the consolidated statement of assets and liabilities as of December 31, 2021, and December 31, 2020, are $1.7 million and $1.0 million of payables to Affiliated Funds or the Adviser, respectively.

Included within other liabilities on the consolidated statement of assets and liabilities as of December 31, 2022 and 2021, are $0 and $1.7 million of payables to Affiliated Funds or the Adviser, respectively.

We are only allowed to borrow money such that our asset coverage, which, as defined in the 1940 Act, measures the ratio of total assets less total liabilities not represented by senior securities to total borrowings, equals at least 150% after such borrowing, with certain limited exceptions.

We are continually exploring forms of debt financing which could include new or expanded credit facilities or the issuance of debt securities.

We are continually exploring forms of debt financing which could include new or expanded credit facilities or the issuance of senior securities that are debt or stock.

We may use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our stockholders by reducing our overall cost of capital.

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MS Credit Facility

On March 15, 2021, the Company, FBCC Lending, and the Adviser, as the servicer, entered into a loan and servicing agreement (together with the other documents executed in connection therewith, the “MS Credit Facility”) with Morgan Stanley Asset Funding, Inc.

On March 15, 2021, the Company, FBCC Lending I, LLC, a wholly-owned, special purpose financing subsidiary of the Company (“FBCC Lending”), and the Adviser, as the servicer, entered into a loan and servicing agreement (together with the other documents executed in connection therewith, the “MS Credit Facility”) with Morgan Stanley Asset Funding, Inc.

as administrative agent, Morgan Stanley Bank, N.A., as the lender, and U.S.

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Any amounts borrowed under the MS Credit Facility will mature, and will be due and payable, on the maturity date, which is March 15, 2025.

Borrowings under the MS Credit Facility bear interest at three-month LIBOR, with a LIBOR floor of zero, plus a spread of 2.25%.

Prior to the Third Amendment (defined below), borrowings under the MS Credit Facility bore interest at three-month LIBOR, with a LIBOR floor of zero, plus a spread of 2.25%.

Interest is payable quarterly in arrears.

FBCC Lending is subject to a non-usage fee of 0.50% on the difference between total commitments and the greater of the (i) drawn amounts and (ii) minimum utilization requirement, and, in addition, after the ramp-up period, FBCC Lending would pay interest on undrawn amounts up to the minimum utilization requirement under the MS Credit Facility, at three-month LIBOR floor of zero, plus spread of 1.125%, if drawn amounts are less than such minimum utilization requirement.

On July 1, 2021, FBCC Lending, amended the MS Credit Facility to, among other things, increase the maximum permissible borrowings under the MS Credit Facility from $100.0 million to $200.0 million on a committed basis.

On December 15, 2021, FBCC Lending, amended the MS Credit Facility to, among other things, increase the maximum permissible borrowings under the MS Credit Facility from $200.0 million to $250.0 million on a committed basis.

FBCC Lending is subject to a non-usage fee of 0.50% on the difference between total commitments and the greater of the (i) drawn amounts and (ii) minimum utilization requirement, and, in addition, after the ramp-up period, FBCC Lending would pay interest on undrawn amounts up to the minimum utilization requirement under the MS Credit Facility if drawn amounts are less than such minimum utilization requirement.

The Company paid an upfront fee and incurred other customary costs and expenses in connection with the MS Credit Facility.

On July 1, 2021, FBCC Lending amended the MS Credit Facility to, among other things, increase the maximum permissible borrowings under the MS Credit Facility from $100.0 million to $200.0 million on a committed basis (the “First Amendment”).

On December 15, 2021, FBCC Lending amended the MS Credit Facility to, among other things, increase the maximum permissible borrowings under the MS Credit Facility from $200.0 million to $250.0 million on a committed basis (the “Second Amendment”).

On January 31, 2022, FBCC Lending amended the MS Credit Facility to, among other things, increase the maximum permissible borrowings from $250.0 million to $300.0 million on a committed basis, transition the benchmark rate to Adjusted Term SOFR and included the Canadian Imperial Bank of Commerce (“CIBC”) as a lender (the “Third Amendment”).

Following the Third Amendment, borrowings under the MS Credit Facility bear interest at Adjusted Term SOFR, with an Adjusted Term SOFR floor of zero, plus a spread of 2.00%.

FBCC Lending is subject to non-usage fee of 0.50% on the difference between total commitments and the greater of the (i) drawn amounts and (ii) minimum utilization requirement, and, in addition after the ramp-up period, FBCC Lending would pay interest on undrawn amounts up to the minimum utilization requirement under the MS Credit Facility, at three month SOFR floor of zero, plus spread of 1.125%, if drawn amounts are less than such minimum utilization requirement.

The entire facility is subject to a 0.25% administrative agent fee.

On June 28, 2022, FBCC Lending entered into a fourth amendment (together with any documents executed in connection therewith, the “Fourth Amendment”) to the MS Credit Facility.

The Fourth Amendment, among other things, increases the maximum permissible borrowings under the MS Credit Facility to $400.0 million from $300.0 million on a committed basis and amends the spread on borrowings under the MS Credit Facility to 2.25%.

MS Subscription Facility

On April 22, 2021, we entered into a revolving credit agreement (the “MS Subscription Facility”) with Morgan Stanley Asset Funding, Inc., as administrative agent and sole lead arranger, and Morgan Stanley Bank, N.A., as the letter of credit issuer and lender.

The MS Subscription Facility allows the Company to borrow up to $50.0 million, subject to certain restrictions, including availability under the borrowing base, which is based on unused capital commitments.

On April 22, 2021, we entered into a $50.0 million revolving credit agreement (the “MS Subscription Facility”) with Morgan Stanley Asset Funding, Inc., as administrative agent and sole lead arranger, and Morgan Stanley Bank, N.A., as the letter of credit issuer and lender.

The MS Subscription Facility is subject to certain restrictions, including availability under the borrowing base, which is based on unfunded capital commitments.

The amount of permissible borrowings under the MS Subscription Facility may be increased up to an aggregate of $150.0 million with the consent of the lenders.

The MS Subscription Facility has a maturity date of April 22, 2022, which may be extended for an additional two terms of not more than 12 months each with the consent of the administrative agent and lenders.

The MS Subscription Facility bears interest at a rate of:

The MS Subscription Facility had a maturity date of April 22, 2022, which may be extended for an additional two terms of not more than 12 months each with the consent of the administrative agent and lenders.

On April 20, 2022, we entered into a first amendment (the “First Amendment”) to the MS Subscription Facility, which extended the maturity date to April 21, 2023, which may be extended for an additional term of not more than 12 months each with the consent of the administrative agent and lenders.

On September 30, 2022, pursuant to the terms of the agreement, we voluntarily reduced commitments from $50.0 million to $44.5 million and on December 9, 2022, pursuant to the terms of the agreement, we voluntarily reduced commitments from $44.5 million to $25.5 million (together, the “MS Subscription Facility Downsizes”).

Prior to the First Amendment, the MS Subscription Facility bore interest at a rate of:

(i) with respect LIBOR Rate Loans, Adjusted LIBOR (as defined in the MS Subscription Facility) for the applicable interest period plus 2.00% per annum and (ii) with respect to Base Rate Loans, the greatest of (a) the Prime Rate in effect on such day plus 1.00% per annum, (b) the Federal Funds Rate in effect on such day plus 0.50%, plus 1.00% per annum and (c) except during any period of time during which LIBOR is unavailable, one-month Adjusted LIBOR plus, without duplication, 100 basis points per annum.

The Company paid an upfront fee and incurred other customary costs and expenses in connection with the MS Subscription Facility.

Subsequent to the First Amendment, the MS Subscription Facility bears interest at a rate of:

(i) with respect to Term SOFR Loans, Term SOFR with a one-month Interest Period plus 2.10% per annum and (ii) with respect to Base Rate Loans, the greatest of (a) the Prime Rate in effect on such day plus 100 basis points (1.00%) per annum, (b) the Federal Funds Rate in effect on such day plus 0.50% plus 1.00% per annum and (c) except during any period of time during which Term SOFR is unavailable, Term SOFR for a one-month tenor in effect on such day plus without duplication, 100 basis points (1.00%) per annum plus 100 basis points (1.00%) per annum.

The Company paid an upfront fee and incurred other customary costs and expenses in connection with the First Amendment to MS Subscription Facility.

In addition, the Company will be subject to an unused commitment fee of 0.30%.

Short-Term Borrowings

From time to time, we finance the purchase of certain investments through repurchase agreements.

In the repurchase agreements, we enter into a trade to sell an investment and contemporaneously enter into a trade to buy the same investment back on a specified date in the future with the same counterparty.

From time to time, the Company finances the purchase of certain investments through repurchase agreements.

In the repurchase agreements, the Company enters into a trade to sell an investment and contemporaneously enter into a trade to buy the same investment back on a specified date in the future with the same counterparty.

Investments sold under repurchase agreements are accounted for as collateralized borrowings as the sale of the investment does not qualify for sale accounting under ASC Topic 860—Transfers and Servicing and remains as an investment on the consolidated statements of assets and liabilities.

We use repurchase agreements as a short-term financing alternative.

As of December 31, 2021 and 2020, we had short-term borrowings outstanding of $41.3 million and $0, respectively.

For the year ended December 31, 2021 and for the period ended December 31, 2020, we recorded interest expense of $0.1 million and $0, respectively, in connection with short-term borrowings.

For the period October 29, 2021 through December 31, 2021 (period for which the Company had short-term borrowings), we had an average outstanding balance of short-term borrowings of $19.3 million and bore interest at a weighted average rate of 0.01%.

The Company uses repurchase agreements as a short-term financing alternative.

As of December 31, 2022 and 2021, the Company had short-term borrowings outstanding of $20.8 million and $41.3 million, respectively.

For the years ended December 31, 2022 and 2021, and for the period ended December 31, 2020, the Company recorded interest expense of $2.2 million, $0.1 million, and $0, respectively, in connection with short-term borrowings.

For the year ended December 31, 2022, the Company had an average outstanding balance of short-term borrowings of $44.0 million and bore interest at a weighted average rate of 0.01%.

For the period October 29, 2021 through December 31, 2021 (period for which the Company had short-term borrowings), the Company had an average outstanding balance of short-term borrowings of $19.3 million and bore interest at a weighted average rate of 0.01%.

Contractual Obligations

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(2) As of December 31, 2022, we had $0.1 million in unused borrowing capacity under the MS Subscription Facility.

As of December 31, 2020, we had not commenced investing operations and did not have any significant contractual payment obligations.

Off-Balance Sheet Arrangements

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As of December 31, 2022, we had unfunded commitments on delayed draw term loans of $56.1 million and unfunded commitments on revolver term loans of $47.5 million.

As of December 31, 2021, we had unfunded commitments on delayed draw term loans of $63.0 million and unfunded commitments on revolver term loans of $27.8 million.

We maintain sufficient cash on hand, unfunded commitments to purchase our Common Stock, and available borrowings to fund such unfunded commitments.

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Significant Accounting Estimates and Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

The preparation of financial statements in conformity with U.S.

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Portfolio investments are reported on the statements of assets and liabilities at fair value.

On a quarterly basis we perform an analysis of each investment to determine fair value as follows:

The Board of Directors has delegated to the Adviser as Valuation Designee the responsibility of determining the fair value of the Company’s investment portfolio, subject to oversight of the Board of Directors, pursuant to Rule 2a-5 under the 1940 Act.

As such, our Valuation Designee is charged with determining the fair value of the Company’s investment portfolio, subject to oversight of the Board of Directors.

On a quarterly basis our Valuation Designee performs an analysis of each investment to determine fair value as follows:

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.

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

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, our Valuation Designee determines whether the quote obtained is readily available according to U.S.

GAAP to determine the fair value of the security.

If determined readily available, we use the quote obtained.

If determined readily available, our Valuation Designee uses the quote obtained.

Investments without a readily determined market value are primarily valued using a market approach, an income approach, or both approaches, as appropriate.

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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.

As part of our quarterly valuation process the Adviser may be assisted by one or more independent valuation firms engaged by us.

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

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, potentially with assistance from one or more independent valuation firms engaged by our Board of Directors;

As part of our quarterly valuation process our Valuation Designee may be assisted by one or more independent valuation firms engaged by us.

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 independent valuation firm(s) (to the extent applicable) and our Valuation Designee’s own analysis.

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 our 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) and the audit committee of the Board of Directors.

Because there is not a readily available market value for most of the investments in our portfolio, we value substantially all of our portfolio investments at fair value as determined in good faith by our Board of Directors, as described herein.

• 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 independent valuation firms (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.

Because there is not a readily available market value for most of the investments in our portfolio, our Valuation Designee values substantially all of our portfolio investments at fair value as determined in good faith by our Board of Directors, as described herein.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period.

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In general, we may not deduct organizational expenses, and instead amortize organizational expenses over at least a 180-month period for tax purposes.

In connection with the our private placement of shares of it’s preferred stock designated as Series A Preferred Stock, the we incurred various offering costs.

In connection with the private placement of shares of our preferred stock designated as Series A Preferred Stock, we incurred various offering costs.

These costs are capitalized as a deferred cost and included within redeemable convertible preferred stock Series A on the consolidated statement of assets and liabilities as the preferred shares are issued.

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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 7. Management’s Discussion and Analysis