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Item 7. Management’s Discussion and Analysis

2024-03-15 compared with 2023-03-15 · 300 added, 205 removed, 277 unchanged (65% of the section changed)

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(the “ Adviser ” ).

Forward Looking Statements

This report, and other statements that we may make, may contain forward-looking statements with respect to future financial or business performance, strategies, or expectations.

Forward-looking statements are typically identified by words or phrases such as “ trend, ” “ opportunity, ” “ pipeline, ” “ believe, ” “ comfortable, ” “ expect, ” “ anticipate, ” “ current, ” “ intention, ” “ estimate, ” “ position, ” “ assume, ” “ potential, ” “ outlook, ” “ continue, ” “ remain, ” “ maintain, ” “ sustain, ” “ seek, ” “ achieve, ” and similar expressions, or future conditional verbs such as “ will, ” “ would, ” “ should, ” “ could, ” “ may, ” or similar expressions.

Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time.

Forward-looking statements speak only as of the date they are made, and we assume no duty to and do not undertake to update forward-looking statements.

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 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;

• 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;

• the impact that the discontinuation of LIBOR and the transition to new reference rates could have on the value of any LIBOR-indexed portfolio investments we may hold and the cost of borrowing under any credit facilities we may enter into;

• the impact of the investments that we expect to make;

• the ability of our portfolio companies to achieve their objectives;

• our contractual arrangements and relationships with third parties;

• our expected financings and investments;

• the adequacy of our cash resources and working capital;

• the timing of cash flows, if any, from the operations of our portfolio companies;

• our repurchase of shares;

• actual and potential conflicts of interest with our Adviser and its affiliates;

• the dependence of our future success on the general economy and its effect on the industries in which we invest;

• the ability to qualify and maintain our qualifications as a RIC and a BDC;

• the timing, form, and amount of any distributions;

• the impact of fluctuations in interest rates on our business;

• the valuation of any investments in portfolio companies, particularly those having no liquid trading market;

• the impact of changes to generally accepted accounting principles;

• the impact of changes to tax legislation and, generally, our tax position;

• the ability of our Adviser to locate suitable investments for us and to monitor and administer our investments;

• the ability of our Adviser and its affiliates to attract and retain highly talented professionals.

You should not place undue reliance on these forward-looking statements.

The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made.

We undertake no obligations to update any forward-looking statement to reflect events or circumstances occurring after the date of this Annual Report on Form 10-K.

In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions.

Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in Item 1A — “Risk Factors” in this Annual Report on Form 10-K.

We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC, and has elected to be treated for U.S.

federal income tax purposes, as a RIC under the Internal Revenue Code of 1986, as amended (the “Code”).

federal income tax purposes, as a RIC under the Code.

We are managed by the Adviser.

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

Closings of the private placement of our Common Stock are expected to occur, from time to time, during the Initial Closing Period which our Board of Directors has extended such that it currently will end December 18, 2023.

Closings of the private placement of our Common Stock occurred, from time to time, during the Initial Closing Period which our Board of Directors extended such that it ended December 18, 2023.

After the Initial Closing Period, we may permit one or more additional closings of the private placement of our Common Stock with the approval of our Board of Directors.

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As of December 31, 2023, total Preferred Capital Commitments of Series A Preferred Stock were $77.5 million.

On January 24, 2024, we consummated the transactions contemplated by the Agreement and Plan of Merger (the “Merger Agreement”) with Franklin BSP Lending Corporation, a Maryland corporation (“FBLC”), Franklin BSP Merger Sub, Inc., a Maryland corporation and our direct wholly-owned subsidiary (“Merger Sub”), and, solely for the limited purposes set forth therein, the Adviser.

In connection therewith, Merger Sub merged with and into FBLC (the “Merger”), with FBLC continuing as the surviving company and as our wholly-owned subsidiary, followed by FBLC merging with and into us (together with the Merger, the “Mergers”), and with us continuing as the surviving company.

See “ Recent Developments—Mergers ” for further information regarding the Mergers.

Financial and Operating Highlights

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Debt (net of deferred financing costs) 319,918

Short-term borrowings 20,792

Secured borrowings 33,344

Net asset value per share attributable to common stock 14.88

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Total 100.0 % 12.0 %

(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:

(1) As of December 31, 2023, we held investments in Post Road Equipment Finance, LLC (“Post Road”) consisting of subordinated debt and equity, which represented 4.7% and 4.3% of our total portfolio, respectively.

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

If we were to treat the investments in Post Road as senior secured first lien investments, given the underlying business of this portfolio company, then our portfolio composition as of December 31, 2023 would be as follows:

December 31, 2023

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Total 100.0 % 10.8 %

(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.

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

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

December 31, 2022

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The weighted average risk rating of our investments based on fair value was 2.3 and 2.1 a s of December 31, 2023 and 2022, 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.

As of December 31, 2023 and 2022, we had no p ortfolio companies on non-accrual status, respectively.

Refer to Note 2 - Summary of Significant Accounting Policies - for additional details regarding our non-accrual policy.

RESULTS OF OPERATIONS

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We will bear all out-of-pocket costs and expenses of our operations and transactions, including, but not limited to:

• expenses incurred by the Adviser and payable to third parties, including agents, consultants and other advisors, in monitoring the financial and legal affairs of the Company, news and quotation subscriptions, and market or industry research expenses;

• the cost of calculating the Company’s NAV;

• expenses incurred by the Adviser and payable to third parties, including agents, consultants and other advisors, in monitoring our financial and legal affairs, news and quotation subscriptions, and market or industry research expenses;

• the cost of calculating our NAV;

the cost of effecting sales and repurchases of shares of our Common Stock and other securities;

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rating agency expenses;

fees to arrange debt financings for the Company;

• distributions on the Company’s shares;

fees to arrange our debt financings;

• distributions on our shares;

administration fees payable under the Administration Agreement;

• the allocated costs incurred by the Administrator in providing managerial assistance to those portfolio companies that request it;

• the allocated costs incurred by our Administrator in providing managerial assistance to those portfolio companies that request it;

transfer agent and custodial fees;

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federal, state, local, and other taxes;

• costs and expenses incurred in relation to compliance with applicable laws and regulations and the operation and administration of the Company generally;

• costs and expenses incurred in relation to compliance with applicable laws and regulations and our operation and administration generally;

• independent directors’ fees and expenses;

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costs of preparing government filings, including periodic and current reports with the SEC;

the Company’s fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;

our fidelity bond, directors and officers/errors and omissions liability insurance, and any other insurance premiums;

indemnification payments;

• expenses relating to the development and maintenance of the Company’s website, if any;

• expenses relating to the development and maintenance of our website, if any;

other operations and technology costs;

• direct costs and expenses of administration, including printing, mailing, copying, telephone, fees of independent accountants and outside legal costs;

• 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 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,

• all other expenses incurred by us or our Administrator in connection with administering our business, including, but not limited to, payments under the Administration Agreement based upon our allocable portion of our Administrator’s overhead in performing its obligations under the Administration Agreement, including rent, travel and the allocable portion of the cost of our 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 us.

Our operating results for the years ended December 31, 2023, 2022, and 2021 were as follows (dollars in thousands):

For the year ended December 31,

2023 2022 2021

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Investment Income

For the year ended December 31, 2022, total investment income was $56.7 million and was primarily attributable to interest income from investments in portfolio companies with an average portfolio fair value of $649.8 million and a weighted average current yield of 10.8%.

Included within total investment income was $1.6 million of fee income for the year ended December 31, 2022.

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 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.

Investment income increased from $56.7 million for the year ended December 31, 2022 to $94.7 million for the year ended December 31, 2023.

The increase is primarily driven by the increase in rising base rates on our variable debt, which is 98.0% of our portfolio as of December 31, 2023, as well as deployment of $51.0 million of capital commitments slightly offset by a decrease in our portfolio due to repayment activity.

As of December 31, 2023, the weighted average yield of our investment portfolio was 15.4% increased from 10.8% as of December 31, 2022.

Our investment portfolio at amortized cost decreased to $769.0 million for the year ended December 31, 2023 from $788.2 million for the year ended December 31, 2022.

PIK income from investments increased from $2.0 million for the year ended December 31, 2022 to $3.2 million for the year ended December 31, 2023.

Fee and other income, included within total investment income, increased from $1.6 million for the year ended December 31, 2022 to $1.8 million for the year ended December 31, 2023, primarily due to an increase in one-time fees earned on certain investments, including commitment, prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns.

Investment income increased from $12.2 million for the year ended December 31, 2021 to $56.7 million for the year ended December 31, 2022.

The increase was primarily driven by the increase in rising base rates on our variable debt, which was 98.3% of our portfolio December 31, 2022, as well as increase size of our portfolio due to the deployment of $165.0 million of capital commitments.

As of December 31, 2022, the weighted average yield of our investment portfolio was 10.8% increased from 7.3% as of December 31, 2021.

Our investment portfolio at amortized cost increased to $788.2 million for the year ended December 31, 2022 from $515.2 million for the year ended December 31, 2021.

PIK income from investments increased from $0.1 million for the year ended December 31, 2021 to $2.0 million for the year ended December 31, 2022.

Fee and other income, included within total investment income, increased from $0.3 million for the year ended December 31, 2021 to $1.6 million of fee and other income for the year ended December 31, 2022, primarily due to an increase in one-time fees earned on certain investments, including commitment, prepayment fees and accelerated amortization of upfront fees from unscheduled paydowns.

Operating Expenses

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,

The composition of our operating expenses for the years ended December 31, 2023, 2022, and 2021 were as follows (dollars in thousands):

For the year ended December 31,

2023 2022 2021

Management fees $ 4,187 $ 3,378 $ 1,109

Organizational costs — — 297

Incentive fee on income 7,704 4,720 711

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Other general and administrative 2,073 1,205 979

Amortization of offering costs 16 596 —

Amortization of common stock offering costs — 16 596

Administrative services 302 226 113

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Interest and debt fees

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.

Interest and debt fees increased from $17.5 million for the year ended December 31, 2022 to $31.1 million for the year ended December 31, 2023.

The increase is primarily driven by the increase in debt borrowing and rising base interest rates of our variable rate debt.

The average daily debt outstanding for facility borrowings for the year ended December 31, 2022 was $324.3 million compared to $346.1 million for the year ended December 31, 2023.

The weighted average annualized interest cost of the facility borrowings for the years ended December 31, 2023 and 2022 were 7.76% and 4.14%, respectively.

Interest and debt fees increased from $3.5 million for the year ended December 31, 2021 to $17.5 million for the year ended December 31, 2022.

The increase was primarily driven by the increase in debt borrowing and rising base interest rates of our variable rate debt.

The average daily debt outstanding for facility borrowings for the year ended December 31, 2021 was $106.9 million compared to $324.3 million for the year ended December 31, 2022.

The weighted average annualized interest cost of the facility borrowings for the years ended December 31, 2022 and 2021 were 4.14% and 2.32%, respectively.

Management Fees

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.

Management Fees increased from $3.4 million for the year ended December 31, 2022 to $4.2 million for the year ended December 31, 2023.

The increase in management fees from December 31, 2022 to December 31, 2023 was driven by an increase in the size of total assets.

Total assets increased from $816.2 million as of December 31, 2022 to $831.6 million as of December 31, 2023.

Management Fees increased from $1.1 million for the year ended December 31, 2021 to $3.4 million for the year ended December 31, 2022.

The increase in management fees from December 31, 2021 to December 31, 2022 was driven by an increase in the size of total assets.

Total assets increased from $541.3 million as of December 31, 2021 to $816.2 million as of December 31, 2022.

Professional Fees and Other General and Administrative Expenses

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.

Professional fees and other general and administrative expenses increased from $2.9 million for the year ended December 31, 2022 to $4.1 million for the year ended December 31, 2023.

The increase in professional fees and other general and administrative expenses from December 31, 2022 to December 31, 2023 was primarily driven by an increase in costs associated with servicing a larger investment portfolio.

Professional fees and other general and administrative expenses increased from $2.3 million for the year ended December 31, 2021 to $2.9 million for the year ended December 31, 2022.

The increase in professional fees and other general and administrative expenses from December 31, 2021 to December 31, 2022 was primarily driven by 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 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 (loss) and net change in unrealized appreciation (depreciation) on investments for the years ended December 31, 2023, 2022, and 2021 were as follows (dollars in thousands):

For the year ended December 31,

2023 2022 2021

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Non-affiliate investments 496 467 51

Net realized loss on extinguishment of debt (1,483) — —

Total net realized gain (loss) $ (987) $ 467 $ 618

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Net realized and unrealized gain (loss) $ (8,796) $ (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.

Net Realized Gain (Loss) on Investments

Realized gains or losses are measured using the specific identification method whereby we measure the gain or loss by the difference between the net proceeds from repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized.

For the year ended December 31, 2023, we recorded a net realized loss of $1.0 million.

The net realized loss was primarily driven by an October 2023 refinancing of our MS Credit Facility with our JPM Credit Facility.

The refinancing led to a $1.5 million realized loss on the extinguishment of debt.

The loss on the extinguishment of debt was partially offset by net realized gains on the portfolio of $0.5 million.

For the year ended December 31, 2022, we recorded a net realized gain of $0.5 million.

The net realized gain was primarily driven by two investments.

In December 2022, we partially exited our first lien debt position of Monumental RSN LLC, which led to a realized gain of $0.1 million.

In July 2022, we fully exited our first lien debt position of Chudy Group LLC, which also led to a realized gain of $0.1 million.

For the year ended December 31, 2021, we recorded a net realized gain of $0.6 million.

The net realized gain was primarily driven by the exit of our subordinated debt position of Jakks Pacific, Inc.

in July 2021, which lead to a realized gain of $0.6 million.

Net Change in Unrealized Appreciation (Depreciation) on Investments

Net change in unrealized appreciation or depreciation is the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

For the year ended December 31, 2023, we recorded unrealized appreciation of $5.8 million on 81 portfolio company investments, which was offset by $12.8 million of unrealized depreciation on 84 portfolio company investments.

The unrealized appreciation primarily resulted from improved performance of certain portfolio companies and the reversal of unrealized depreciation.

The unrealized depreciation was primarily due to isolated deterioration in the credit performance of a small number of portfolio companies.

Additionally, $0.8 million of the net unrealized loss was driven by a change in deferred taxes.

The overall unrealized net depreciation on our portfolio was primarily driven by market volatility during 2023.

For the year ended December 31, 2022, we recorded an unrealized appreciation of $2.0 million on 51 portfolio company investments which was offset by $10.0 million of unrealized depreciation on 77 portfolio company investments.

The unrealized appreciation primarily resulted from improved performance of certain portfolio companies and the reversal of previously recorded unrealized depreciation.

The unrealized depreciation primarily resulted from overall price declines across our portfolio and the reversal of unrealized appreciation in 2021.

Additionally, $0.8 million of the net unrealized loss was driven by a change in deferred taxes.

The overall unrealized net depreciation on our portfolio was primarily driven by market volatility during 2022.

For the year ended December 31, 2021, we recorded an unrealized appreciation of $2.4 million on 55 portfolio company investments which was offset by $0.3 million of unrealized depreciation on 27 portfolio company investments.

The appreciation was primarily driven by an overall improvement of the market from the pandemic and high credit performance of certain portfolio company investments.

The unrealized depreciation primarily resulted from isolated deterioration in the credit performance of a small number of portfolio companies.

Recent Developments

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.

On January 24, 2024, we completed our previously announced acquisition of FBLC.

Pursuant to the Merger Agreement, Merger Sub was first merged with and into FBLC, with FBLC continuing as the surviving company, and, immediately following the Merger, FBLC was then merged with and into us, with us continuing as the surviving company.

In accordance with the terms of the Merger Agreement, at the effective time of the Merger, each outstanding share of FBLC's common stock was converted into the right to receive 0.4647 shares of our Common Stock.

As a result of the Mergers, we issued an aggregate of 110.0 million shares of our Common Stock to FBLC stockholders.

The Mergers will be accounted for as an asset acquisition of FBLC by us in accordance with the asset acquisition method of accounting as detailed in ASC 805-50, Business Combinations – Related Issues , with the fair value of total consideration paid in conjunction with the Mergers allocated to the assets acquired and liabilities assumed based on their relative fair values as of the date of the Mergers.

Generally, under asset acquisition accounting, acquiring assets in groups not only requires ascertaining the cost of the asset (or net assets), but also allocating that cost to the individual assets (or individual assets and liabilities) that make up the group.

The cost of the group of assets acquired in an asset acquisition is allocated to the individual assets acquired or liabilities assumed based on their relative fair values of net identifiable assets acquired other than certain “non-qualifying” assets (for example cash) and does not give rise to goodwill.

We will be the accounting survivor of the Mergers.

Appointment of Officers

On January 23, 2024, our Board of Directors appointed George Talarico as our Chief Compliance Officer, effective January 23, 2024, upon the resignation of Colleen Corwell from such position.

Corwell’s resignation is not a result of any disagreement with us on any matter relating to our operations, policies, practices or accounting matters.

On March 13, 2024, our Board of Directors appointed Blair Faulstich as our President, effective March 13, 2024.

Faulstich is a senior managing director with BSP.

Prior to joining BSP in 2011, Mr.

Faulstich was a managing director and co-head of media and communications investment banking at Citadel Securities.

Previously, he was a managing director in the media and communications investment banking group at Merrill Lynch.

Faulstich has also held various positions at Deutsche Bank Alex.

Brown and Arthur Andersen.

Faulstich received a Master of Business Administration from Cornell University and a Bachelor of Arts from Principia College.

Effective as of March 13, 2024, Richard Byrne transitioned his responsibilities as the President of the Company to Mr.

Byrne will continue to serve as the Company's Chief Executive Officer and the Chairman of our Board of Directors.

Talarico nor Mr.

Faulstich have any family relationships with any director or executive officer of the Company, and none of which is a party to any transaction that is required to be reported pursuant to Item 404(a) of Regulation S-K.

Distribution Declarations

On January 9, 2024, our Board of Directors declared a distribution of $0.43 per share of Common Stock, which we paid on January 11, 2024 to stockholders of record as of January 10, 2024.

On January 9, 2024, our Board of Directors declared a distribution of $28.35 per share of Series A Preferred Stock, which we paid on January 11, 2024 to stockholders of record as of January 10, 2024.

Liquidity and Capital Resources

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As of December 31, 2023, we had $55.2 million of cash.

For the year ended December 31, 2022, net cash used in operating activities was $259.5 million.

For the year ended December 31, 2023, net cash provided by operating activities was $66.1 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.

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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 used in financing activities of $37.1 million during the year ended December 31, 2023 primarily related to payments on debt of $443.9 million, repayments on short-term borrowings of $89.4 million, common stockholder distributions of $31.2 million, and preferred stockholder distributions of $7.6 million partially offset by proceeds from debt of $384.0 million, proceeds from issuance of common stock of $9.9 million, proceeds from issuance of preferred stock of $41.4 million, proceeds from short-term borrowings of $68.6 million, and proceeds from secured borrowings of $33.3 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.

Our primary use of cash will be investments in portfolio companies, payments of our expenses and payment of cash distributions to our stockholders.

As of December 31, 2022, we are party to the MS Credit Facility and MS Subscription Facility, each of which is defined in and described in more detail in Note 5 - Borrowings.

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, 2023, we are party to the JPM Credit Facility, which is defined in and described in more detail in Note 5 - Borrowings .

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.

As of December 31, 2023, our asset coverage ratio was 197%.

As of December 31, 2023, we had $78.0 million of availability under the JPM Credit Facility (subject to borrowing base availability), and had approximately $0.9 million of uncalled capital commitments to purchase shares of our Common Stock.

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federal income tax.

If we fail to qualify as a RIC for any reason and become subject to corporate tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

If we fail to qualify as a RIC for any reason and become subject to U.S federal income corporate tax, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution and the amount of our distributions.

Such a failure would have a material adverse effect on us and our stockholders.

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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 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,

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

We calculate each stockholder’s specific distribution amount for the quarter using record and declaration dates.

The table shows the components of the distributions we have declared and/or paid to common stockholders for the years ended December 31, 2023, 2022, and 2021 (dollars in thousands):

For the years ended December 31,

2023 2022 2021

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Portion of distributions paid in DRIP shares $ 12,439 $ 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,

The table shows the components of the distributions we have declared and/or paid to preferred stockholders during the years ended December 31, 2023, 2022, and 2021 (dollars in thousands):

For the years ended December 31,

2023 2022 2021

6 unchanged sentences

We may have distributions which could be characterized as a 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.

During the years ended December 31, 2023, 2022, and 2021, 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, 2023 will be reported to stockholders shortly after the end of the calendar year 2023 as well as in our periodic reports with the SEC.

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Investment Advisory Agreement

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, a BDC advised by an affiliate of the Adviser.

We entered into an amendment and restatement of the Investment Advisory Agreement (the “Amended and Restated Investment Advisory Agreement”), dated as of January 24, 2024, which was approved by our Board of Directors and our stockholders in connection with the consummation of the Mergers, 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.

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.

2 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.

Administration Agreement

On September 23, 2020, we entered into the Administration Agreement with BSP, pursuant to which BSP provides us with office facilities and administrative services.

We reimburse BSP quarterly for all administrative costs and expenses incurred by our Adviser in performing our obligations under the Administration Agreement and annually for overhead expenses incurred in the course of performing our obligations under the Administration Agreement, including rent, travel and the allocable portion of the cost of our Chief Compliance Officer and Chief Financial Officer and their respective staffs, including operations and tax professionals, and administrative staff providing support services in respect of us.

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

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.

For the years ended December 31, 2023, 2022, and 2021, we incurred $1.2 million, $0.8 million, and $0.7 million, 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

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”).

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 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 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.

Due to Related Party

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.

As of December 31, 2023, the aggregate principal amount outstanding of the senior securities issued by us was $399.5 million and our asset coverage was 197%.

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.

We currently have credit facilities with Morgan Stanley.

MS Credit Facility

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.

Bank National Association as collateral agent, account bank and collateral custodian, that provides for borrowings of up to $100.0 million on a committed basis.

Obligations under the MS Credit Facility are secured by a first priority security interest in substantially all of the assets of FBCC Lending, including its portfolio of investments and the Company’s equity interest in FBCC Lending.

The obligations of FBCC Lending under the MS Credit Facility are nonrecourse to us.

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.

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%.

We currently have credit facilities with JPMorgan.

JPM Credit Facility

On October 4, 2023, we refinanced the MS Credit Facility with a $400.0 million credit facility with FBCC Jupiter Funding, LLC, a wholly-owned, consolidated special purpose financing subsidiary of us, as borrower (“Jupiter Funding”), the Adviser, as portfolio manager, the lenders party thereto, U.S.

Bank National Association, as securities intermediary, U.S.

Bank Trust Company, National Association as collateral administrator and collateral agent, and JPMorgan Chase Bank, National Association, as administrative agent (the “JPM Credit Facility”).

The JPM Credit Facility provides for borrowings through October 4, 2026, and any amounts borrowed under the JPM Credit Facility will mature on October 4, 2027.

Borrowings under the JPM Credit Facility will bear interest at a benchmark rate, currently SOFR, plus a margin of 2.75% per annum, which is inclusive of an administrative agent fee.

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 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 $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 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%.

Jupiter Funding will be subject to a non-usage fee of 0.75%, which is inclusive of the administrative agent fee, to the extent the commitments available under the JPM Credit Facility have not been borrowed.

Jupiter Funding paid an upfront fee and incurred other customary costs and expenses in connection with the JPM Credit Facility.

Short-Term Borrowings

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.

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.

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.

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%.

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

As of December 31, 2023 and 2022, we had short-term borrowings outstanding of $0 and $20.8 million, respectively.

For the years ended December 31, 2023, 2022, and 2021, we recorded interest expense of $1.7 million, $2.2 million, and $0.1 million, respectively, in connection with short-term borrowings.

For the period January 1, 2023 through August 14, 2023 (period for which we had short-term borrowings), we had an average outstanding balance of short-term borrowings of $32.7 million and bore interest at a weighted average rate of 0.02%.

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

Secured Borrowings

On August 21, 2023, we entered into a total return swap (“TRS”) with Nomura.

A TRS is a contract in which one party agrees to make periodic payments to another party based on the change in the market value of the assets underlying the TRS, which may include a specified security, basket of securities or securities indices during the specified period, in return for periodic payments based on a fixed or variable interest rate.

We pay interest to Nomura for each loan at a rate equal to three-month SOFR plus 3.60% per annum.

Upon the termination or repayment of any loan under the TRS, we will either receive from Nomura the appreciation in the value of such loan or pay to Nomura any depreciation in the value of such loan.

The scheduled termination date for the TRS is February 17, 2025.

We may terminate the TRS prior to February 17, 2025 upon the occurrence of certain events but in certain circumstances may be required to pay certain termination fees.

As of December 31, 2023, all total return swaps on the Nomura TRS were entered into contemporaneously with our sale of their reference assets.

Due to our continuing involvement in these assets, these assets are not derecognized under ASC Topic 860 -- Transfers and Servicing , and are presented on our consolidated schedule of investments.

Financing amounts related to these assets are presented as secured borrowings on our consolidated statement of assets and liabilities.

Any margin paid to the counterparty under the terms of the TRS agreement is included in the “Due from broker” on our consolidated statements of assets and liabilities.

The TRS is subject to the SEC rule related to the use of derivatives, reverse repurchase agreements and certain other transactions by registered investment companies.

The rule requires that we trade derivatives and other transactions that create future payment or delivery obligations subject to a value-at-risk leverage limit and certain derivatives risk management program and reporting requirements.

Generally, these requirements apply unless we qualify as a “limited derivatives user,” as defined in the rule, in which case certain exceptions to these conditions would apply.

We may qualify as a limited derivatives user if it adopts and implements written policies and procedures reasonably designed to manage our derivatives risk and our derivatives exposure does not exceed 10 percent of our net assets as calculated in accordance with the rule.

As of December 31, 2023 and December 31, 2022, we had secured borrowings outstanding of $33.3 million and $0, respectively.

For the years ended December 31, 2023, 2022, and 2021 we recorded interest expense of $0.8 million, $0, and $0, respectively, in connection with secured borrowings.

For the period August 21, 2023 through December 31, 2023, we had an average outstanding balance of secured borrowings of $30.5 million and bore interest at a weighted average rate of 8.98%.

FBLC Borrowing Assumptions

The following is FBLC’s debt assumed by us as a result of the Mergers:

Wells Fargo Credit Facility

On August 28, 2020, FBLC entered into a $300.0 million revolving credit facility with FBLC, as collateral manager, Funding I, a wholly owned, consolidated special purpose financing subsidiary, as borrower, the lenders party thereto, Wells Fargo, as administrative agent, and U.S.

Bank Trust Company, National Association, as collateral agent and collateral custodian (the “Wells Fargo Credit Facility”).

Pursuant to an amendment entered into on August 25, 2023 (the "Third Amendment"), the Wells Fargo Credit Facility provides for borrowings through August 25, 2026, and any amounts borrowed under the Wells Fargo Credit Facility will mature on August 25, 2028.

Effective with the Third Amendment, the Wells Fargo Credit Facility has an interest rate of daily simple SOFR (with a daily simple SOFR floor of zero), plus a spread of 2.75% per annum.

Interest is payable quarterly in arrears.

Funding I will be subject to a non-usage fee to the extent the commitments available under the Wells Fargo Credit Facility have not been borrowed.

The non-usage fee per annum is 0.50% for the first 25% of the unused balance and increases to 2.00% for any remaining unused balance.

Previously, pursuant to an amendment entered into on May 27, 2022 (the "Second Amendment"), the benchmark rate was transitioned from LIBOR to SOFR.

Effective with the Second Amendment, the Wells Fargo Credit Facility had an interest rate of daily simple SOFR (with a daily simple SOFR floor of zero), plus a spread calculated based upon the composition of loans in the collateral pool, not to exceed 2.60% per annum.

Prior to the Second Amendment, the Wells Fargo Credit Facility had an interest rate of three-month LIBOR (with a LIBOR floor of zero) plus a spread calculated based upon the composition of loans in the collateral pool, not to exceed 2.75% per annum.

Funding I paid a structuring fee and incurred other customary costs and expenses in connection with the Wells Fargo Credit Facility and the amendments thereto.

Pursuant to an amendment entered into on April 6, 2021(the "First Amendment"), the non-usage fee for any unused portion of the Wells Fargo Credit Facility was temporarily reduced until September 30, 2021.

Additionally, the maximum spread was reduced from 2.75% to 2.50% as a result of this amendment.

The other terms of the Wells Fargo Credit Facility were unchanged.

Funding I’s obligations under the Wells Fargo Credit Facility are secured by a first priority security interest in substantially all of the assets of Funding I, including its portfolio of investments and FBLC’s equity interest in Funding I.

The obligations of Funding I under the Wells Fargo Credit Facility are non-recourse to FBLC.

In connection with the Wells Fargo Credit Facility, FBLC and Funding I have made certain representations and warranties and are required to comply with various covenants and other customary requirements.

The Wells Fargo Credit Facility contains customary default provisions pursuant to which the administrative agent and the lenders under the Wells Fargo Credit Facility may terminate FBLC in its capacity as collateral manager/portfolio manager under the Wells Fargo Credit Facility.

Upon the occurrence of an event of default under the Wells Fargo Credit Facility, the administrative agent or the lenders may declare the outstanding advances and all other obligations under the Wells Fargo Credit Facility immediately due and payable.

Following the Mergers, the Wells Fargo Credit Facility was assumed by the Company.

FBLC JPM Credit Facility

On August 28, 2020, FBLC, through a wholly-owned, consolidated special purpose financing subsidiary, 57th Street, entered into a $300.0 million revolving credit facility (subsequently amended to $400.0 million, as described below) with JPMorgan, and U.S.

Bank Trust Company, National Association, as collateral agent, collateral administrator and securities intermediary (the “FBLC JPM Credit Facility”).

Pursuant to an amendment entered into on September 15, 2023 (the "FBLC JPM 2023 Amendment"), the FBLC JPM Credit Facility provides for borrowings through September 15, 2026, and any amounts borrowed under the FBLC JPM Credit Facility will mature on September 15, 2027.

In addition to extending the reinvestment period and maturity date of the FBLC JPM Credit Facility, the FBLC JPM 2023 Amendment, among other things, (1) changed the interest rate to SOFR plus 2.80% (subject to further increases consistent with the terms of the FBLC JPM Credit Facility), which is inclusive of an administrative agent fee, (2) increased the financing amount for which FBLC and 57th Street are permitted to submit a commitment increase request to up to $800.0 million, and (3) amended the non-usage fee to be 0.75%, inclusive of an administrative agent fee.

The non-usage fee of 0.75% (inclusive of an administrative agent fee) applies to the first 20% of the unused balance and increases to 3.00% for any remaining unused balance.

57th Street paid an upfront fee and incurred other customary costs and expenses in connection with the FBLC JPM 2023 Amendment.

Interest is payable quarterly in arrears.

Previously, on December 9, 2022, FBLC and 57th Street entered into an amendment (the "FBLC JPM 2022 Amendment") to the FBLC JPM Credit Facility.

The FBLC JPM 2022 Amendment, among other things, (1) extended the maturity date of the FBLC JPM Credit Facility to August 28, 2024, (2) extended the maturity date, upon the exercise of the Extension Options (as defined in the FBLC JPM Credit Facility), of the FBLC JPM Credit Facility to August 28, 2025, and (3) changed the benchmark rate and applicable interest rate under the FBLC JPM Credit Facility to three-month Term SOFR plus 3.00% per annum (subject to further increases consistent with the terms of the FBLC JPM Credit Facility).

Pursuant to the FBLC JPM 2022 Amendment, the non-usage fee per annum was 0.75% for the first 20% of the unused balance and increased to 3.00% for any remaining unused balance.

57th Street paid an upfront fee and incurred other customary costs and expenses in connection with the FBLC JPM 2022 Amendment.

Prior to the FBLC JPM 2022 Amendment, the FBLC JPM Credit Facility had an interest rate of three-month LIBOR (with a LIBOR floor of zero), plus a spread of 2.75% per annum.

For the period from August 28, 2021 to December 8, 2022, the non-usage fee per annum was 0.75% for the first 20% of the unused balance and increased to 2.75% for any remaining unused balance.

For the period from January 21, 2021 to August 27, 2021, the non-usage fee per annum was 0.50% for the first 20% of the unused balance and increased to 2.75% for any remaining unused balance.

57th Street paid a structuring fee and incurred other customary costs and expenses in connection with the FBLC JPM Credit Facility.

Previously, on January 21, 2021, FBLC entered into an amendment (the “FBLC JPM Amendment”) to the FBLC JPM Credit Facility.

The FBLC JPM Amendment, among other things, increased the amount that 57th Street is permitted to borrow under the FBLC JPM Credit Agreement from $300.0 million to $400.0 million.

On April 12, 2021, FBLC, through 57th Street, amended and restated the FBLC JPM Credit Facility.

The amendment and restatement temporarily reduced the previous minimum funding amount until October 13, 2021.

The other material terms of the FBLC JPM Credit Facility were unchanged.

57th Street’s obligations under the FBLC JPM Credit Facility are secured by a first priority security interest in substantially all of the assets of 57th Street, including its portfolio of investments and FBLC’s equity interest in 57th Street.

The obligations of 57th Street under the FBLC JPM Credit Facility are non-recourse to FBLC.

In connection with the FBLC JPM Credit Facility, FBLC and 57th Street have made certain representations and warranties and are required to comply with various covenants and other customary requirements.

The FBLC JPM Credit Facility contains customary default provisions pursuant to which the administrative agent and the lenders under the FBLC JPM Credit Facility may terminate FBLC in its capacity as collateral manager/portfolio manager under the FBLC JPM Credit Facility.

Upon the occurrence of an event of default under the FBLC JPM Credit Facility, the administrative agent or the lenders may declare the outstanding advances and all other obligations under the FBLC JPM Credit Facility immediately due and payable.

Following the Mergers, the FBLC JPM Credit Facility was assumed by the Company.

FBLC JPM Revolver Facility

On June 10, 2022, FBLC entered into a $495.0 million revolving credit facility with JPMorgan, as administrative agent and as collateral agent, MUFG Union Bank, N.A., Sumitomo Mitsui Banking Corporation, and Wells Fargo Bank, National Association as syndication agents, as well as other Lender parties (the “FBLC JPM Revolver Facility”).

The FBLC JPM Revolver Facility provides for borrowings through June 10, 2026, and any amounts borrowed under the FBLC JPM Revolver Facility will mature on June 10, 2027.

The FBLC JPM Revolver Facility is priced at three-month Term SOFR, plus a spread calculated based upon the composition of loans in the collateral pool, which will not exceed 1.98% per annum.

Interest is payable quarterly in arrears.

FBLC will be subject to a non-usage fee of 0.38% to the extent the commitments available under the FBLC JPM Revolver Facility have not been borrowed.

FBLC paid a structuring fee and incurred other customary costs and expenses in connection with the FBLC JPM Revolver Facility.

In connection with the FBLC JPM Revolver Facility, FBLC has made certain customary representations and warranties and is required to comply with various covenants, reporting requirements and other customary requirements for similar facilities.

The FBLC JPM Revolver Facility contains customary events of default for similar financing transactions.

Upon the occurrence and during the continuation of an event of default, JPM may declare the outstanding advances and all other obligations under the FBLC JPM Revolver Facility immediately due and payable.

On December 8, 2023, FBLC amended and restated the FBLC JPM Revolver Facility (the “A&R FBLC JPM Revolver Facility”).

The A&R FBLC JPM Revolver Facility, among other things, increases the aggregate amount of the lenders’ commitments to $505.0 million, extends the period for borrowings through December 8, 2027 and extends the maturity date for any amounts borrowed to December 8, 2028.

The other material terms of the FBLC JPM Revolver Facility were unchanged.

FBLC agreed to pay administrative agent fees and incurred other customary costs and expenses in connection with the A&R FBLC JPM Revolver Facility.

Following the Mergers, the A&R FBLC JPM Revolver Facility was assumed by the Company.

On December 3, 2019, FBLC entered into a Purchase Agreement (the “2024 Notes Purchase Agreement”) with Sandler O’Neill & Partners, L.P (the “Initial Purchaser”) relating to FBLC’s sale of $100.0 million aggregate principal amount of its 4.85% fixed rate notes due 2024 (the “2024 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act, and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to institutional accredited investors under Rule 501 (a)(1), (2), (3), or (7) under the Securities Act.

FBLC relied upon these exemptions from registration based in part on representations made by the Initial Purchaser.

The 2024 Notes Purchase Agreement also includes customary representations, warranties, and covenants by FBLC.

Under the terms of the 2024 Notes Purchase Agreement, FBLC has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act.

The 2024 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

The net proceeds from the sale of the 2024 Notes were approximately $98.4 million, after deducting the Initial Purchaser’s discounts and commissions of approximately $1.2 million and estimated offering expenses of approximately $0.4 million, each payable by FBLC.

FBLC used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes.

The 2024 Notes were issued pursuant to the Indenture dated as of December 19, 2017 (the “2017 Indenture”) between FBLC and U.S.

Bank Trust Company, National Association, and a Third Supplemental Indenture, dated as of December 5, 2019, between FBLC and U.S.

Bank Trust Company, National Association.

The 2024 Notes will mature on December 15, 2024, unless repurchased or redeemed in accordance with their terms prior to such date.

The 2024 Notes bear interest at a rate of 4.85% per year payable semi-annually on June 15 and December 15 of each year, commencing on June 15, 2020.

The 2024 Notes are general unsecured obligations of FBLC that rank senior in right of payment to all of FBLC’s existing and future indebtedness that is expressly subordinated in right of payment to the 2024 Notes.

The 2024 Notes will rank equally in right of payment with all of FBLC’s existing and future senior liabilities that are not so subordinated, effectively junior to any of FBLC’s secured indebtedness (including unsecured indebtedness that FBLC later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by FBLC’s subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by FBLC’s wholly owned, special purpose financing subsidiaries.

The 2017 Indenture contains certain covenants, including covenants requiring FBLC to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2024 Notes and U.S.

Bank Trust Company, National Association if FBLC is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended.

These covenants are subject to important limitations and exceptions that are described in the 2017 Indenture.

In addition, if a change of control repurchase event, as defined in the 2017 Indenture, occurs prior to maturity, holders of the 2024 Notes will have the right, at their option, to require FBLC to repurchase for cash some or all of the 2024 Notes at a repurchase price equal to 100% of the principal amount of the 2024 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

Following the Mergers, the 2024 Notes were assumed by the Company.

On March 24, 2021, FBLC entered into a Purchase Agreement (the “2026 Notes Purchase Agreement”) with the initial purchaser listed therein relating to FBLC’s sale of $300.0 million aggregate principal amount of its 3.25% fixed rate notes due 2026 (the “Restricted 2026 Notes”) to the Initial Purchaser in a private placement in reliance on Section 4(a)(2) of the Securities Act, and for initial resale by the Initial Purchaser to qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A promulgated under the Securities Act and to certain non-U.S.

persons outside the United States pursuant to Regulation S under the Securities Act.

FBLC relied upon these exemptions from registration based in part on representations made by the Initial Purchaser.

The 2026 Notes Purchase Agreement also includes customary representations, warranties, and covenants by FBLC.

Under the terms of the 2026 Notes Purchase Agreement, FBLC has agreed to indemnify the Initial Purchaser against certain liabilities under the Securities Act.

The Restricted 2026 Notes have not been registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration.

The net proceeds from the sale of the 2026 Notes were approximately $296.0 million, after deducting the Initial Purchaser’s discounts and commissions and estimated offering expenses.

FBLC used the net proceeds to repay outstanding indebtedness, to make investments in portfolio companies in accordance with its investment objectives, and for general corporate purposes.

The Restricted 2026 Notes were issued pursuant to the Indenture dated as of March 29, 2021 (the “2021 Indenture”), between FBLC and U.S.

Bank Trust Company, National Association, and a Supplemental Indenture, dated as of March 29, 2021 (the “First Supplemental Indenture”), between FBLC and U.S.

Bank Trust Company, National Association.

The 2026 Notes (as defined below) will mature on March 30, 2026, unless repurchased or redeemed in accordance with their terms prior to such date.

The 2026 Notes bear interest at a rate of 3.25% per year payable semi-annually on March 30 and September 30 of each year, commencing on September 30, 2021.

The 2026 Notes are general unsecured obligations of FBLC that rank senior in right of payment to all of FBLC’s existing and future indebtedness that is expressly subordinated in right of payment to the 2026 Notes.

The 2026 Notes will rank equally in right of payment with all of FBLC’s existing and future senior liabilities that are not so subordinated, effectively junior to any of FBLC’s secured indebtedness (including unsecured indebtedness that FBLC later secures) to the extent of the value of the assets securing such indebtedness, and structurally junior to all existing and future indebtedness incurred by FBLC’s subsidiaries, financing vehicles, or similar facilities, including credit facilities entered into by FBLC’s wholly owned, special purpose financing subsidiaries.

The 2021 Indenture contains certain covenants, including covenants requiring FBLC to (i) comply with the asset coverage requirements of the 1940 Act, whether or not it is subject to those requirements, and (ii) provide financial information to the holders of the 2026 Notes and U.S.

Bank Trust Company, National Association if FBLC is no longer subject to the reporting requirements under the Securities Exchange Act of 1934, as amended.

These covenants are subject to important limitations and exceptions that are described in the 2021 Indenture.

In addition, if a change of control repurchase event, as defined in the 2021 Indenture, occurs prior to maturity, holders of the 2026 Notes will have the right, at their option, to require FBLC to repurchase for cash some or all of the 2026 Notes at a repurchase price equal to 100% of the principal amount of the 2026 Notes being repurchased, plus accrued and unpaid interest to, but excluding, the repurchase date.

Pursuant to a Registration Statement on Form N-14 (File No.

333-257321), on September 22, 2021, FBLC closed an exchange offer in which holders of the Restricted 2026 Notes were offered the opportunity to exchange their Restricted 2026 Notes for new registered notes with substantially identical terms (the “Unrestricted 2026 Notes” and, together with the Restricted 2026 Notes, the “2026 Notes”), through which holders representing 99.88% of the outstanding principal of the then Restricted 2026 Notes obtained Unrestricted 2026 Notes.

Following the Mergers, the 2026 Notes were assumed by the Company.

Contractual Obligations

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Total Less than 1 year 1 - 3 years 3 - 5 years More than 5 years

MS Credit Facility (1)

$ 356,500 $ — $ 356,500 $ — $ —

MS Subscription Facility (2)

JPM Facility (1)

$ 322,000 $ — $ — $ 322,000 $ —

Short-term borrowings 20,792 20,792 — — —

Secured borrowings $ 33,344 — 33,344 — —

Total $ — $ 33,344 $ 322,000 $ —

(1) As of December 31, 2022, we had $43.5 million in unused borrowing capacity under the MS Credit Facility, subject to borrowing base limits.

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

(1) As of December 31, 2023, we had $78.0 million in unused borrowing capacity under the JPM Facility, subject to borrowing base limits.

Off-Balance Sheet Arrangements

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While our significant accounting policies are also described in Note 2 - Summary of Significant Accounting Policies of our notes to our consolidated financial statements appearing elsewhere in this report, we believe the following accounting policies require the most significant judgment in the preparation of our consolidated financial statements.

The critical accounting estimates should be read in conjunction with our risk factors as disclosed in “ Item 1A.

Risk Factors .”

Valuation of Portfolio Investments

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

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.

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, 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.

The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities (including a business).

The income approach uses valuation techniques to convert future amounts (for example, cash flows or earnings) to a single present amount (discounted).

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 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 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:

We are required to report our investments, including those for which current market values are not readily available, at fair value in accordance with ASC 820, Fair Value Measurements (“ASC 820”), which defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the applicable measurement date, and Rule 2a-5 under the 1940 Act.

Investments for which market quotations are readily available are typically valued at those market quotations.

All investments that are not publicly traded or whose market prices are not readily available, as is the case for substantially all of our investments, are valued at fair value as determined in good faith by our Valuation Designee, subject to oversight from our Board of Directors.

As part of the valuation process, our Valuation Designee takes into account relevant factors in determining the fair value of our investments, including and in combination of:

• the estimated enterprise value of a portfolio company;

• indicative dealer quotes;

• the nature and realizable value of any collateral;

• the portfolio company’s ability to make payments based on its earnings and cash flow;

• the markets in which the portfolio company does business;

• a comparison of the portfolio company’s securities to any similar publicly traded securities;

• overall changes in the interest rate environment and the credit markets that may affect the price at which similar investments may be made in the future.

Our Valuation Designee, subject to oversight from our Board of Directors, undertakes a multi-step valuation process each quarter in connection with determining the fair value of our investments for which reliable market quotations are not readily available, or are available but deemed not reflective of the fair value of an investment, which includes, among other procedures, the following:

• 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;

• 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.

Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize.

Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities.

If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

Revenue Recognition

Interest Income

Investment transactions are accounted for on the trade date.

Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis.

Discount and premium on investments purchased are accreted/amortized over the expected life of the respective investment using the effective yield method.

The amortized cost of investments represents the original cost adjusted for the accretion of discount and amortization of premium on investments.

Fee income, such as structuring fees, origination, closing, amendment fees, commitment, termination, and other upfront fees are generally non-recurring and are recognized as income when earned, either upon receipt or amortized into income.

Upon the re-payment of a loan or debt security, any prepayment penalties and unamortized loan origination, structuring, closing, commitment, and other upfront fees are recorded as income.

Payment-in-Kind Interest

The Company may hold debt investments in its portfolio that contain PIK interest and dividend provisions.

PIK interest, which represents contractually deferred interest that add to the investment balance that is generally due at maturity, is recorded on the accrual basis to the extent such amounts are expected to be collected.

Non-accrual Income

Investments may be placed on non-accrual status when principal or interest payments are past due and/or when there is reasonable doubt that principal or interest will be collected.

Accrued interest, which may include un-capitalized PIK interest is generally reversed when an investment is placed on non-accrual status.

Previously capitalized PIK interest is not reversed when an investment is placed on non-accrual status.

Interest payments received on non-accrual investments may be recognized as income or applied to principal depending upon management's judgment of the ultimate outcome.

Non-accrual investments are restored to accrual status when past due principal and interest is paid and, in management's judgment, are likely to remain current.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

Gains or losses on the sale of investments are calculated using the specific identification method.

We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized.

Net change in unrealized appreciation or depreciation will reflect the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.

• Our Valuation Designee, under the supervision of our 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 the Valuation Committee to assist our Valuation Designee in carrying out its designated responsibilities, subject to oversight of our Board of Directors.

Our Valuation Designee, subject to oversight from our Board of Directors, has and will continue to engage independent valuation firms to provide assistance regarding the determination of the fair value of our portfolio securities for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of the investment each quarter, and our Valuation Designee may reasonably rely on that assistance.

However, our Valuation Designee, subject to oversight from our Board of Directors, is responsible for the ultimate valuation of the portfolio investments at fair value as determined in good faith pursuant to our valuation policy and a consistently applied valuation process.

Our accounting policy on the fair value of our investments is critical because the determination of fair value involves subjective judgments and estimates.

Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of these valuations, and any change in these valuations, on the consolidated financial statements.

See Note 2 - Summary of Significant Accounting Policies for a description of other accounting policies and recently issued accounting pronouncements.

Organization and Offering Expenses

Organization costs consist of costs incurred to establish the Company and enable it legally to do business.

Organization costs are expensed as incurred.

Offering costs consist of costs incurred in connection with the offering of common shares of the Company.

Offering costs are capitalized as a deferred charge and amortized to expense on a straight-line basis over 12 months from the commencement of operations.

We will bear the organization and offering expenses incurred in connection with the formation of the Company and the offering of shares of our Common Stock, including the out-of-pocket expenses of the Adviser and its agents and affiliates.

In addition, we will reimburse the Adviser for the organizational and offering costs it incurs on our behalf.

If actual organization and offering costs incurred exceed the greater of $1 million or 0.10% of the Company’s total capital commitments, the Adviser or its affiliate will bear the excess costs.

To the extent the Company’s capital commitments later increase, the Adviser or its affiliates may be reimbursed for past payments of excess organization and offering costs made on the Company’s behalf provided that the total organization and offering costs borne by the Company do not exceed 0.10% of total capital commitments and provided further that the Adviser or its affiliates may not be reimbursed for payment of excess organization and offering expenses that were incurred more than three years prior to the proposed reimbursement.

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 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.

The costs are not subject to reimbursement from the Adviser.

Off-Balance Sheet Arrangements

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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