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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2022-02-28 compared with 2021-03-01 · 43 added, 37 removed, 47 unchanged (63% of the section changed)

1 unchanged sentence

Interest Rate Risk

We are subject to financial market risks, including

changes in interest rates.

As of December 31, 2020, 63.5% of our portfolio investments (based on fair value) were debt investments paying variable interest rates and 9.0% were debt investments paying fixed interest rates while 16.9%

were other income producing investments, 8.1% consisted of non-income producing

investments, and the remaining 2.5% consisted of investments on non-accrual status.

A rise in the general level of interest rates can be expected to lead

to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed rate investments we hold.

However, many of our variable rate investments provide for an interest rate floor, which may prevent our

interest income from increasing until benchmark interest rates increase beyond a threshold amount.

To the extent that a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold

would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income, and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to the Advisor

with respect to our increased pre-incentive fee net investment income.

In 2020, the U.S.

Federal Reserve and other central banks reduced certain interest rates in response to the

COVID-19 pandemic and market conditions.

We are subject to

financial market risks, including changes in interest rates.

As of December 31, 2021, 69.7% of our portfolio investments (based on fair value) were debt investments paying variable interest rates and 10.2% were debt investments paying fixed

interest rates while 13.1% were other income producing investments, 5.1% consisted of non-income producing investments, and the remaining 1.9% consisted of investments on

non-accrual status.

A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to any variable rate investments we hold and to declines in the value of any fixed

rate investments we hold.

However, many of our variable rate investments provide for an interest rate floor, which may prevent our interest income from increasing until benchmark interest rates increase beyond a threshold amount.

To the extent that

a substantial portion of our investments may be in variable rate investments, an increase in interest rates beyond this threshold would make it easier for us to meet or exceed the hurdle rate applicable to the subordinated incentive fee on income,

and may result in a substantial increase in our net investment income and to the amount of incentive fees payable to the Advisor with respect to our increased pre-incentive fee net investment income.

Previously, the U.S.

Federal Reserve and other central banks have reduced certain interest rates in response to the COVID-19 pandemic and market conditions.

A prolonged reduction in interest rates may reduce our net investment income.

Pursuant to the terms of the CCT Tokyo Funding Credit Facility, Senior Secured Revolving Credit Facility and the 2019-1 Notes, we borrow at a floating rate

based on a benchmark interest rate.

Under the indentures governing the 4.750% notes, the 5.000% notes, the 4.625% notes, the 4.125% notes, the 8.625% notes and the 3.400% notes we pay interest to the holders of such notes at a fixed rate.

extent that any present or future credit facilities or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates.

periods of rising interest rates when we or our subsidiaries have such debt outstanding, or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed

rate investments.

The following table shows the effect over a twelve month period of changes in interest rates on our interest

income, interest expense and net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of December 31, 2020 (dollar

amounts are presented in millions):

Pursuant to the terms of the Ambler Credit Facility, CCT Tokyo Funding Credit Facility, Darby Creek Credit Facility, Dunlap Credit Facility,

Meadowbrook Run Credit Facility, Senior Secured Revolving Credit Facility and the CLO-1 Notes, we borrow at a floating rate based on a benchmark interest rate.

Under the indentures governing the 4.750% notes,

the 5.000% notes, the 4.625% notes, the 4.125% notes, the 4.250% notes, the 8.625% notes, the 3.400% notes, the 2.625% notes, the 1.650% notes and the 3.125% note we pay interest to the holders of such notes at a fixed rate.

To the extent that any

present or future credit facilities or other financing arrangements that we or any of our subsidiaries enter into are based on a floating interest rate, we will be subject to risks relating to changes in market interest rates.

In periods of rising

interest rates when we or our subsidiaries have such debt outstanding, or financing arrangements in effect, our interest expense would increase, which could reduce our net investment income, especially to the extent we hold fixed rate investments.

The following table shows the effect over a twelve month period of changes in interest rates on our interest income, interest expense and

net interest income, assuming no changes in the composition of our investment portfolio, including the accrual status of our investments, and our financing arrangements in effect as of December 31, 2021 (dollar amounts are presented in

Basis Point Change in Interest Rates

10 unchanged sentences

management techniques in an effort to minimize our exposure to interest rate fluctuations.

These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act.

Adverse developments resulting from changes in

interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.

During the years ended December 31, 2020, 2019 and 2018 we did not engage in interest rate hedging

These techniques may

include various interest rate hedging activities to the extent permitted by the 1940 Act.

Adverse developments resulting from changes in interest rates or hedging transactions could have a

material adverse effect on our business, financial condition and results of operations.

During the years ended December 31, 2021, 2020 and 2019 we did not engage in interest rate hedging activities.

Foreign Currency Risk

From time to time, we may make investments that are denominated in a foreign currency that are subject to the effects of exchange rate movements between the foreign currency of each such investment and

dollar, which may affect future fair values and cash flows, as well as amounts translated into U.S.

From time to time,

we may make investments that are denominated in a foreign currency that are subject to the effects of exchange rate movements between the foreign currency of each such investment and the U.S.

dollar, which may affect future fair values and cash

flows, as well as amounts translated into U.S.

dollars for inclusion in our consolidated financial statements.

The table below presents the effect that a 10% immediate, unfavorable change in the

foreign currency exchange rates (i.e.

The table below presents

the effect that a 10% immediate, unfavorable change in the foreign currency exchange rates (i.e.

strengthening of the U.S.

dollar) would have on the fair value of our investments denominated in foreign currencies as of December 31, 2020, by foreign currency, all other valuation assumptions remaining

In addition, the table below presents the par value of our investments denominated in foreign currencies and the notional amount of foreign currency forward contracts in local currency in place as of December 31, 2020 to hedge against

foreign currency risks.

dollar) would have on the fair value of our investments denominated in foreign currencies as of December 31, 2021, by

foreign currency, all other valuation assumptions remaining constant.

In addition, the table below presents the par value of our investments denominated in foreign currencies and the notional amount of foreign currency forward contracts in local

currency in place as of December 31, 2021 to hedge against foreign currency risks.

Investments Denominated in Foreign Currencies

As of December 31, 2021

Economically Hedged

As of December 31, 2021

2 unchanged sentences

December 31, 2021

if 10% Adverse

Exchange Rate (1)

6 unchanged sentences

Canadian Dollars

Icelandic Krona

Norwegian Krone

9 unchanged sentences

dollar and are adversely affected by a stronger U.S.

As of December 31, 2020, the net contractual amount of our foreign currency forward contracts totaled $56.5, all of which related to

As of December 31, 2021, the net contractual amount of our foreign currency forward contracts totaled $261.2, $210.4 of which related to

hedging of our foreign currency denominated debt investments.

As of December 31, 2020, we had outstanding borrowings denominated in foreign currencies of 164, CAD $63, £111 and A$6 under our Senior Secured Revolving Credit Facility.

As of December 31, 2021, we had outstanding borrowings denominated in foreign currencies of 260, CAD40, £130 and AUD116 under our Senior Secured Revolving Credit

In addition, we may have risk regarding portfolio valuation.

2 unchanged sentences

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 7A. Quantitative and Qualitative Disclosures About Market Risk