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Item 7. Management’s Discussion and Analysis

2024-02-29 compared with 2023-03-13 · 363 added, 337 removed, 151 unchanged (82% of the section changed)

DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should

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in this Annual Report on Form 10-K.

Overview and Investment Framework

Except as otherwise specified, references to “we,” “us,” “our,”

or the “Company” refer to Kayne Anderson BDC, Inc.

Investment Objective, Principal Strategy

and Investment Structure

Kayne Anderson BDC, Inc.

was formed as a Delaware

corporation to make investments in middle-market companies and commenced operations on February 5, 2021.

We are an externally managed, closed-end, non-diversified management

investment company that has elected to be regulated as a BDC under the 1940 Act.

corporation that commenced operations on February 5, 2021.

We are an externally managed, closed-end, non-diversified management investment

company that has elected to be regulated as a BDC under the 1940 Act, as amended.

In addition, for U.S.

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intend to qualify, annually, as a RIC under Subchapter M of the Code.

We are managed by KA Credit Advisors, LLC (the “Advisor”)

which is an indirect subsidiary of Kayne Anderson Capital Advisors, L.P.

(“KACALP” or “Kayne Anderson”).

is registered with the Securities and Exchange Commission (“SEC”) as an investment advisor under the Investment Advisory Act

Subject to the overall supervision of the Company’s board of directors (the “Board”), the Advisor is responsible

Our investment activities are managed by KA Credit Advisors, LLC (the

“Advisor”), an indirect controlled subsidiary of Kayne Anderson Capital Advisors, L.P.

(“Kayne Anderson”), and

the Advisor operates within Kayne Anderson’s middle market private credit platform (“KAPC” or “Kayne Anderson

Private Credit”).

The Advisor is an investment advisor registered with the United States Securities and Exchange Commission (the

“SEC”) under the Investment Advisory Act of 1940, as amended.

In accordance with the Advisers Act, our Advisor is responsible

for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment

opportunities, negotiating and structuring investments, determining the value of the investments and monitoring its investments and portfolio

companies on an ongoing basis.

The Board consists of seven directors, four of whom are independent.

opportunities, negotiating and structuring investments, and monitoring our investments and portfolio companies on an ongoing basis.

Advisor benefits from the scale and resources of Kayne Anderson and specifically KAPC.

The Board consists of seven directors, four of

whom are independent.

Our investment objective is to generate current

income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies.

We define “middle-market

companies” as U.S.-based companies that, in general, generate between $10 million and $150 million of annual earnings

before interest, taxes, depreciation and amortization, or EBITDA.

We refer to companies that generate between $10 million and $50 million

of annual EBITDA as “core middle-market companies” and companies that generate between $50 million and $150 million

of annual EBITDA as “upper middle-market companies.”

income and, to a lesser extent, capital appreciation.

Nearly all of our debt investments are in middle market companies.

We define “middle

market companies” as companies that, in general, generate between $10 million and $150 million of annual earnings before interest,

taxes, depreciation and amortization, or EBITDA.

Further, we refer to companies that generate between $10 million and $50 million of annual

EBITDA as “core middle market companies” and companies that generate between $50 million and $150 million of annual EBITDA

as “upper middle market companies.” We typically adjust EBITDA for non-recurring and/or normalizing items to assess the financial

performance of our borrowers over time.

We intend to achieve our investment objective

by investing primarily in first lien senior secured, unitranche and split-lien loans (collectively, “secured middle market loans”)

to privately held middle-market companies.

Similar to first lien senior secured loans, unitranche loans typically have a first lien on

all assets of the borrower, but provide leverage at levels similar to a combination of first lien and second lien and/or subordinated

Split-lien loans are loans that otherwise satisfy the criteria of a first lien loan but which have been structured with a credit

facility that is senior in right of payment with respect to working capital assets of the borrower and a term loan that is collateralized

by all other assets of the borrower.

Depending on market conditions, we expect that at least 90% of our portfolio (including investments

purchased with proceeds from borrowings) will be invested in secured middle market loans.

It is anticipated that most of these investments

will be in core middle market companies, with the remainder in upper middle market companies.

The remaining 10% of our portfolio may be

invested in higher-returning investments, including, but not limited to, equity securities purchased in conjunction with secured middle

market loans and other opportunistic investments (collectively “Opportunistic Investments”), including junior debt, real estate

debt and infrastructure credit investments.

We expect that the secured middle market loans we invest in will generally have stated maturities

of no more than six years.

We intend to execute on our investment objective

by (1) accessing the established loan sourcing channels developed by Kayne Anderson’s middle market private credit team, which

includes an extensive network of private equity firms, other middle-market lenders, financial advisors and intermediaries, and management

teams, (2) selecting investments within our middle-market company focus, (3) implementing Kayne Anderson’s middle market

private credit team’s proven underwriting process, and (4) drawing upon the experience and resources of our Advisor’s

investment team and the broader Kayne Anderson network.

We believe our Advisor’s disciplined approach to origination,

credit analysis, portfolio construction and risk management should allow us to achieve attractive risk-adjusted returns while preserving

investor capital.

We anticipate the portfolio will be comprised of a broad mix of loans, with diversity among investment size, industry

focus and geography.

The Advisor’s team of professionals will conduct in-depth due diligence on prospective investments during the

underwriting process and will be heavily involved in structuring the credit terms of each investment.

Once an investment has been made,

our Advisor will closely monitor portfolio investments and take a proactive approach identifying and addressing sector or company specific

The Advisor maintains a regular dialogue with portfolio company management teams (as well as their financial sponsors, where applicable),

reviews detailed operating and financial results on a regular basis (typically monthly or quarterly) and monitors current and projected

liquidity needs, in addition to other portfolio management activities.

by investing primarily in first lien senior secured loans, with a secondary focus on unitranche and split-lien loans to middle market

Under normal market conditions, we expect at least 90% of our portfolio (including investments purchased with proceeds from

borrowings under credit facilities and issuance of senior unsecured notes) to be invested in first lien senior secured, unitranche and

split-lien loans.

Our investment decisions are made on a case-by-case basis.

We expect that a majority of these debt investments will

be made in core middle market companies and will generally have stated maturities of three to six years.

We expect that the loans in which

we principally invest will be to companies that have principal business activities in the United States.

The Advisor executes on our investment objective

by (1) accessing the established loan sourcing channels developed by KAPC, which includes an extensive network of private equity firms,

other middle market lenders, financial advisors, intermediaries and management teams, (2) selecting investments within our middle market

company focus, (3) implementing KAPC’s underwriting process and (4) drawing upon its experience and resources and the broader Kayne

Anderson network.

KAPC was established in 2011 and manages (directly and through affiliates) assets under management (“AUM”)

of approximately $6.5 billion related to middle market private credit as of December 31, 2023.

Recent Developments

On January 24, 2023, our

Board of Directors (the “Board”) elected James (“Jim”) Robo as the Chairman of the Board.

Robo will serve

as an interested director for us until he stands for re-election at our 2025 Annual Meeting of Stockholders.

On March 7, 2023, our Board declared a distribution of $0.47 per share

to each common stockholder of record as of March 31, 2023.

The distribution will be paid on April 14, 2023.

As of March 9, 2023, we have subscription agreements with investors

for an aggregate capital commitment of $832,342 to purchase shares of common stock ($264,612 of the commitments are undrawn).

On February 14, 2024, we sold

7,089,771 shares of common stock for a total aggregate offering price of $118.7 million.

As of the same date, we have subscription agreements

with investors for an aggregate capital commitment of $1,046.9 million to purchase shares of common stock ($269.9 million is undrawn).

Portfolio and Investment Activity

As of December 31, 2022, we had 164 debt investments and 13 equity

investments in 67 portfolio companies with an aggregate fair value of approximately $1,165 million and an amortized cost of $1,148 million

consisting of first lien senior secured debt ($1,158 million fair value) and equity ($7.1 million fair value) investments.

Listed below are our top ten portfolio companies and industries represented as a percentage of total long-term investments as of December

Our portfolio is currently comprised of a broad mix of loans, with

diversity among investment size and industry focus.

The Advisor’s team of professionals conducts due diligence on prospective investments

during the underwriting process and is involved in structuring the credit terms of substantially all of our investments.

Once an investment

has been made, our Advisor closely monitors portfolio investments and takes a proactive approach identifying and addressing sector or

company specific risks.

The Advisor seeks to maintain a regular dialogue with portfolio company management teams (as well as their owners,

the majority of whom are private equity firms, where applicable), reviews detailed operating and financial results on a regular basis

(typically monthly or quarterly) and monitors current and projected liquidity needs, in addition to other portfolio management activities.

There are no assurances that we will achieve our investment objectives.

As of December 31, 2023, we had investments in

76 portfolio companies with an aggregate fair value of approximately $1,363 million, and unfunded commitments to these portfolio companies

of $148 million, and our portfolio consisted of 97.1% first lien senior secured loans, 1.6% junior debt and 1.3% equity investments.

As of December 31, 2023, our weighted average

yield of debt and income producing securities at fair value, and amortized cost was 12.5% and 12.7%, respectively, and 100% of our debt

investments were at floating rates.

As of December 31, 2023, our portfolio was invested

across 26 different industries (Global Industry Classification “GICS”, Level 3 – Industry).

The largest industries in

our portfolio as of December 31, 2023 were Trading Companies & Distributors, Food Products and Commercial Services & Supplies,

which represented, as a percentage of our portfolio of long-term investments, 15.3%, 11.5% and 9.4%, respectively, based on fair value.

We are generalist investors and the industries in which our portfolio companies operate may change over time.

As of December 31, 2023, our average position

sized based on commitment (at the portfolio company level) was $20.1 million, and the weighted average and median last twelve months

(“LTM”) EBITDA of our portfolio companies was $51.3 million and $39.5 million, respectively, based on fair value.

As of December 31, 2023, the weighted average

loan-to-enterprise-value (“LTEV”) of our debt investments at the time of our initial investment was 44.0%, based on par.

represents the total par value of our debt investment relative to our estimate of the enterprise value of the underlying borrower.

As of December 31, 2023, we had one debt investment

on non-accrual status, which represented 0.4% and 0.4% of total debt investments at cost and fair value, respectively.

As of December 31, 2023, our portfolio companies

had an average leverage of 4.3x and average interest leverage of 2.7x, the calculations for which are based on the most recent quarter

end or latest available information from the portfolio companies.

As of December 31, 2023, 100% of our debt investments

included at least one financial maintenance covenant.

Listed below are our top ten portfolio companies

and industries represented as a percentage of total long-term investments as of December 31, 2023:

Portfolio Company

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Trading companies & distributors

American Soccer Company, Incorporated (SCORE)

Textiles, apparel & luxury goods

American Equipment Holdings LLC

Commercial services & supplies

CGI Automated Manufacturing, LLC

Trading companies & distributors

BR PJK Produce, LLC (Keany)

Food products

Guardian Dentistry Partners

Health care providers & services

IF&P Foods, LLC (FreshEdge)

Food products

Centerline Communications, LLC

Wireless telecommunication services

Light Wave Dental Management LLC

Health care providers & services

As of December 31, 2022, our weighted average

total yield to maturity of debt and income producing securities at fair value was 11.4%, and our weighted average total yield to

maturity of debt and income producing securities at amortized cost was 11.6%.

BR PJK Produce, LLC (Keany)

Food products

American Soccer Company, Incorporated (SCORE)

Textiles, apparel & luxury goods

Improving Acquisition LLC

Vitesse Systems Parent, LLC

Aerospace & defense

CGI Automated Manufacturing, LLC

Trading companies & distributors

Fastener Distribution Holdings, LLC

Aerospace & defense

Our investment activity for the years ended

December 31, 2023 and 2022 is presented below (information presented herein is at par value unless otherwise indicated).

For the year ended

For the years ended

($ in millions)

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Liquid credit investments

Preferred equity investments (2)

Common equity investments (2)

Preferred and common equity investments

Total principal amount of investments funded

Principal amount of investments sold:

Principal amount of investments sold / repaid (2) :

Private credit investments

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Weighted average interest rate of new investment commitments (4)

Weighted average spread over benchmark rate of new floating rate investment commitments (4)

Weighted average spread over SOFR of new floating rate investment commitments

Weighted average interest rate on investment sold or paid down (5)

Does not include repayments on revolving loans, which may be redrawn.

(2) As of December 31, 2022, preferred equity investments and common equity investments were reported as equity investments.

Does not include restructured activity.

For undrawn delayed draw term loans, the maturity date used is that of the associated term loan.

(4) Based on the rate in effect at December 31, 2022 per our Consolidated Schedule of Investments for new commitments entered into during the year.

(5) Based on the underlying rate if still held at December 31, 2022.

Based on the rate in effect at December 31 st of each year per our Consolidated Schedule of Investments for new commitments entered into during the year.

Based on the underlying rate if still held at December 31 st of each year.

For those investments sold or paid down in full during the year, based on the rate in effect at the time of sale or paid down.

with the three months ended March 31, 2022, we use Global Industry Classification Standards (GICS), Level 3 – Industry, for classifying

the industry groupings of its portfolio companies.

As of December 31, 2021, we used GICS, Level 2 – Industry Group.

The table below describes long-term investments

by industry composition based on fair value as of December 31, 2022 and 2021:

We use Global Industry Classification Standards

(GICS), Level 3 – Industry, for classifying the industry groupings of our portfolio companies.

The table below describes long-term

investments by industry composition based on fair value as of December 31, 2023 and 2022:

Trading companies & distributors

Commercial services & supplies

Food products

Commercial services & supplies

Health care providers & services

Professional services

Containers & packaging

Aerospace & defense

Professional services

Leisure products

Textiles, apparel & luxury goods

Building products

Diversified telecommunication services

Personal care products

Wireless telecommunication services

Leisure products

Auto components

Automobile components

Building products

Household durables

Healthcare equipment & supplies

Personal products

Health care equipment & supplies

Household products

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Specialty retail

Capital markets

Pharmaceuticals

Asset management & custody banks

Diversified telecommunication services

Electronic equipment, instruments & components

Commercial & professional services

Capital goods

Consumer durables & apparel

Telecommunication services

Health care equipment & services

Household & personal products

Automobiles & components

Food & beverage

Software & services

Pharmaceuticals, biotech & life sciences

Diversified financials

Asset management & custody banks

Results of Operations

For the years ended December 31, 2022 and

2021, our total investment income was derived from our portfolio of investments.

All debt investments were income producing, and there

were no loans on non-accrual status as of December 31, 2022 or 2021.

The comparison for the years ended December 31, 2022 and 2021 can

be found in “ Item 7:

Management’s Discussion and Analysis of Financial Condition and Results of Operations ”

in our Form 10-K for the fiscal year ended December 31, 2022.

For the years ended December 31, 2023 and 2022, our total investment

income was derived from our portfolio of investments.

The following table represents the operating

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Investment Income

Investment income for the years ended December

31, 2022 and 2021 totaled $74.8 million and $18.8 million, respectively, and consisted primarily of interest income on our debt investments.

Investment income for the years ended December 31, 2023 and 2022 totaled

$161.0 million and $74.8 million, respectively, and consisted primarily of interest income on our debt investments.

For the years ended

December 31, 2023 and 2022, we had $1.7 million and $0.2 million, respectively, of PIK interest included in interest income.

As of December

31, 2023, we had one debt investment on non-accrual status.

As of December 31, 2022, all debt investments were income producing, and there

were no loans on non-accrual status.

Operating expenses for the years ended December

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Directors fees

Initial organization

Deferred offering costs

Other operating expenses

Total expenses

Total expenses for the years ended December

31, 2022 and 2021 included zero and $0.2 million of initial organization expenses, respectively, and $0.03 million and $0.2 million of

deferred offering costs, respectively.

Net Realized Gains (Losses) on Investments

In November 2023, we completed a restructure of our investment in Arborworks

Acquisition LLC whereby the existing term loan and revolver were restructured to a new term loan and preferred and common equity.

Company recognized a $10.7 million realized loss due to the debt restructure.

Net Unrealized Gains (Losses) on Investments

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Net change in unrealized gains (losses) on investments

The change in unrealized appreciation for

the years ended December 31, 2022 and 2021 totaled $15.1 million and $11.8 million, respectively, which primarily related to our investments

in the following tables:

For these years ended December 31, 2023 and 2022,

the top five largest contributors to the change in unrealized gains and change in unrealized losses on investments are presented in the

following tables.

For the year ended

($ in millions)

Portfolio Company

Arborworks Acquisition LLC

BLP Buyer, Inc.

(Bishop Lifting Products)

Silk Holdings III Corp.

Engineered Fastener Company, LLC (EFC International)

Vitesse Systems Parent, LLC

Other portfolio companies unrealized gains

Other portfolio companies unrealized (losses)

Trademark Global LLC

LSL Industries, LLC (LSL Healthcare)

Siegel Egg Co., LLC

American Soccer Company, Incorporated (SCORE)

Centerline Communications, LLC

Total Change in Unrealized Gain (Loss), net

For the year ended

($ in millions)

Portfolio Company

AIDC Intermediate Co 2, LLC (Peak Technologies)

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CGI Automated Manufacturing, LLC

BR PJK Produce, LLC (Keany)

DISA Holdings Corp.

Genuine Cable Group, LLC

LSL Industries, LLC (LSL Healthcare)

Gulf Pacific Holdings, LLC

FCA, LLC (FCA Packaging)

Improving Acquisition LLC

Acquisition Co., Inc.

Domain Information Services Inc.

Allcat Claims Service, LLC

Universal Marine Medical Supply International, LLC (Unimed)

Fastener Distribution Holdings, LLC

BCDI Meteor Acquisition, LLC (Meteor)

Drew Foam Companies, Inc.

Alcami Corporation (Alcami)

PVI Holdings, Inc

BLP Buyer, Inc.

(Bishop Lifting Products)

Light Wave Dental Management LLC

Other portfolio companies

Total Unrealized Appreciation

($ in millions)

Portfolio Company

Eastern Wholesale Fence

Other portfolio companies unrealized gains

Other portfolio companies unrealized (losses)

4 Over International, LLC

Corbett Technology Solutions, Inc.

Arborworks Acquisition LLC

American Equipment Holdings LLC

Curio Brands, LLC

EIS Legacy, LLC

CGI Automated Manufacturing, LLC

Centerline Communications, LLC

Home Brands Group Holdings, Inc.

SGA Dental Partners Holdings, LLC

Guardian Dentistry Partners

Sundance Holdings Group, LLC

PH Beauty Holdings III, Inc.

Siegel Egg Co., LLC

Vehicle Accessories, Inc.

BCI Burke Holding Corp.

Broder Bros, Co.

United Safety & Survivability Corporation (USSC)

Other portfolio companies

Total Unrealized Appreciation

The change in unrealized depreciation for the year ended December 31,

2022 total $9.6 million, which primarily related to our investments in the following table.

There was no change in unrealized depreciation

for the year ended December 31, 2021.

($ in millions)

Portfolio Company

Arborworks Acquisition LLC

Trademark Global LLC

PH Beauty Holdings III, Inc.

Curio Brands, LLC

4 Over International, LLC

Pavion Corp., f/k/a Corbett Technology Solutions, Inc.

MacNeill Pride Group

DRS Holdings III, Inc.

Sundance Holdings Group, LLC

Other portfolio companies

Total Unrealized Depreciation

Financial Condition, Liquidity and Capital

Arborworks Acquisition LLC

Total Change in Unrealized Gain (Loss), net

Financial Condition, Liquidity and Capital Resources

Our liquidity and capital resources are generated

primarily from the net proceeds of any offering of our Shares, proceeds from borrowing on our credit facilities and from cash flows from

interest and fees earned from our investments and principal repayments and proceeds from sales of our investments.

Our primary use of

cash will be investments in portfolio companies, payments of our expenses, repayments of borrowed amounts and payment of cash distributions

to our stockholders.

In accordance with the 1940 Act, we are required to meet a coverage

ratio of total assets (less total liabilities other than indebtedness) to total borrowings and other senior securities (and any preferred

stock that we may issue in the future) of at least 150%.

If this ratio declines below 150%, we cannot incur additional leverage and could

be required to sell a portion of our investments to repay some leverage when it is disadvantageous to do so.

As of December 31, 2022 and

2021, our asset coverage ratios were 203% and 217%.

We currently intend to target asset coverage of 200% to 180% (which equates to a debt-to-equity ratio of

1.0x to 1.25x) but may alter this target based on market conditions.

Over the next twelve months, we expect that

cash and cash equivalents, taken together with our undrawn capital commitments and available capacity under our credit facilities, will

be sufficient to conduct anticipated investment activities.

primarily from the net proceeds of any offering of our shares of common stock, proceeds from borrowing under our credit facilities, proceeds

from the issuance of senior unsecured notes and from cash flows from interest and fees earned from our investments and principal repayments

and proceeds from sales of our investments.

Our primary use of cash will be investments in portfolio companies, payments of our expenses,

repayments of borrowings under credit facilities and senior unsecured notes, and payment of cash distributions to our stockholders.

We finance our investments with leverage in the

form of borrowings under credit facilities and issuances of senior unsecured notes.

We also intend to further borrow under credit facilities

and/or issue senior unsecured notes in the future in order to finance our investments.

In accordance with the 1940 Act, we are required

to meet a coverage ratio of total assets (less total liabilities other than indebtedness) to total borrowings and other senior securities

(and any preferred stock that we may issue in the future) of at least 150%.

If this ratio declines below 150%, we cannot incur additional

leverage and could be required to sell a portion of our investments to repay some leverage when it is disadvantageous to do so.

December 31, 2023 and 2022, our asset coverage ratios were 198% and 203%.

We currently intend to target asset coverage of 200% to 180%

(which equates to a debt-to-equity ratio of 1.0x to 1.25x) but may alter this target based on market conditions.

Over the next twelve months, we expect that cash

and cash equivalents, taken together with our undrawn capital commitments and available capacity under our credit facilities, will be

sufficient to conduct anticipated investment activities.

Beyond twelve months, we expect that our cash and liquidity needs will continue

to be met by cash generated from our ongoing operations as well as financing activities.

As of December 31, 2022, we had $577 million

borrowed under our credit facilities and cash and cash equivalents of $18.4 million (including short-term investments).

As of March 9,

2023, we had $644 million borrowed under our credit facilities and cash and cash equivalents of $11.6 million (including short-term investments).

As of December 31, 2023, we had $75 million Notes

outstanding, $620.8 million borrowed under our credit facilities and cash and cash equivalents of $46.9 million (including short-term

investments).

As of February 22, 2024, we had $75 million Notes outstanding, $600.0 million borrowed under our credit facilities and cash

and cash equivalents of $29.8 million (including short-term investments).

Capital Contributions

During the years ended December 31, 2023 and 2022,

2021, we issued and sold 16,305,034 and 19,132,622 shares of our common stock, respectively, related to capital called at an aggregate

purchase price of $268.2 million and $299.5 million, respectively.

As of March 9, 2023, we had aggregate capital commitments of $832.3

As of March 9, 2023, we had undrawn capital commitments of $264.6 million from investors ($567.7 million or 68.2% funded).

we issued and sold 5,422,524 and 16,305,034 shares of our common stock, respectively, related to capital called at an aggregate purchase

price of $90.6 million and $268.2 million, respectively.

On December 5, 2023, we completed our final close of subscription agreements

with investors.

As of February 22, 2024, we had aggregate capital commitments of $1,046.9 million, and we had undrawn capital commitments

of $269.9 million from investors ($777.0 million or 74.2% funded).

Senior Unsecured Notes

As of December 31, 2023, we have $75 million of

senior unsecured notes outstanding, with $25 million of 8.65% Series A Notes due June 2027 (the “Series A Notes”) and $50

million of 8.74% Series B Notes due June 2028 (the “Series B Notes”, and collectively with the Series A Notes, the “Notes”).

Credit Facilities

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As of December

31, 2022, we are party to a senior secured revolving credit facility (the “Corporate Credit Facility”), that has a total commitment

of $400 million.

31, 2023, we are party to a senior secured revolving credit facility (the “Corporate Credit Facility”), that has a total

commitment of $400 million.

The facility’s commitment termination date and the final maturity date are February 18, 2026 and February

18, 2027, respectively.

The Corporate Credit Facility also provides for a feature that allows us, under certain circumstances, to increase the overall

size of the Corporate Credit Facility to a maximum of $550 million.

The interest rate on the Corporate Credit Facility is equal to Term

SOFR (a forward-looking rate based on SOFR futures) plus an applicable spread of 2.35% per annum or an “alternate base rate”

(as defined in the agreements governing the Corporate Credit Facility) plus an applicable spread of 1.25%.

We are also required to pay

a commitment fee of 0.375% per annum on any unused portion of the Corporate Credit Facility.

The Corporate Credit Facility also provides for a feature that allows us, under certain circumstances, to increase

the overall size of the Corporate Credit Facility to a maximum of $550 million.

The interest rate on the Corporate Credit Facility is

equal to Term SOFR (a forward-looking rate based on SOFR futures) plus an applicable spread of 2.35% per annum or an “alternate

base rate” (as defined in the agreements governing the Corporate Credit Facility) plus an applicable spread of 1.25%.

required to pay a commitment fee of 0.375% per annum on any unused portion of the Corporate Credit Facility.

Revolving Funding Facility:

As of December 31, 2022, we and

our wholly owned, special purpose financing subsidiary, Kayne Anderson BDC Financing, LLC (“KABDCF”), are party to a senior

secured revolving funding facility (the “Revolving Funding Facility”), that has a total commitment of $350 million.

The Revolving

Funding Facility is secured by all of the assets held by, and the membership interest in, KABDCF.

The end of the reinvestment period

and the stated maturity date for the Revolving Funding Facility are February 18, 2025 and February 18, 2027, respectively.

rate on the Revolving Funding Facility is equal to daily SOFR plus 2.75% per annum.

KABDCF is also required to pay a commitment fee of

between 0.50% and 1.50% per annum depending on the size of the unused portion of the Revolving Funding Facility.

As of December

31, 2023, we and our wholly owned, special purpose financing subsidiary, Kayne Anderson BDC Financing, LLC (“KABDCF”), are

party to a senior secured revolving funding facility (the “Revolving Funding Facility”), that has a total commitment of $455

The Revolving Funding Facility is secured by all of the assets held by, and the membership interest in, KABDCF.

The end of the

reinvestment period and the stated maturity date for the Revolving Funding Facility are February 18, 2025 and February 18, 2027, respectively.

The interest rate on the Revolving Funding Facility is equal to daily SOFR plus 2.75% per annum.

KABDCF is also required to pay a commitment

fee of between 0.50% and 1.50% per annum depending on the size of the unused portion of the Revolving Funding Facility.

Revolving Funding

On December 22, 2023, we and our wholly owned, special purpose financing subsidiary, Kayne Anderson BDC Financing II,

LLC (“KABDCF II”), entered into a new senior secured revolving credit facility (the “Revolving Funding Facility II”).

The Revolving Funding Facility II has an initial commitment of $150 million which, under certain circumstances, can be increased up to

$500 million.

The Revolving Funding Facility II is secured by all of the assets held by KABDCF II and the Company has agreed that it will

not grant or allow a lien on the membership interest of KABDCF II.

The end of the reinvestment period and the stated maturity date for

the Revolving Funding Facility II are December 22, 2026, and December 22, 2028, respectively.

The interest rate on the Revolving Funding

Facility II is equal to 3-month term SOFR plus 2.70% per annum.

KABDCF II is also required to pay a commitment fee of 0.50% between December

22, 2023 and September 22, 2024 and 0.75% thereafter on the unused portion of the Revolving Funding Facility II.

Subscription Credit Agreement:

As of December 31, 2022, we

are party to a senior secured revolving credit agreement that includes a capital call facility (the “Subscription Credit Agreement”).

The Subscription Credit Agreement permits us to elect the commitment amount each quarter to borrow up to $125 million, subject to availability

under the borrowing base which is calculated based on the unused capital commitments of the investors meeting various eligibility requirements.

The Subscription Credit Agreement has a maximum commitment of $150 million and the interest rate under the facility is equal to Term

SOFR plus 1.975% (subject to a 0.275% floor).

We are also required to pay a commitment fee of 0.25% per annum on the unused portion of

the Subscription Credit Agreement.

We also pay an extension fee of 0.05% per quarter on the elected commitment amount on the first day

of each calendar quarter.

As of December

31, 2023, we are party to a senior secured revolving credit agreement that includes a capital call facility (the “Subscription Credit

The Subscription Credit Agreement permits us to elect the commitment amount each quarter to borrow up to $50 million,

subject to availability under the borrowing base which is calculated based on the unused capital commitments of the investors meeting

various eligibility requirements.

The Subscription Credit Agreement has a maximum commitment of $50 million and the interest rate under

the facility is equal to Term SOFR plus 2.25% (subject to a 0.275% floor).

We are also required to pay a commitment fee of 0.25% per annum

on the unused portion of the Subscription Credit Agreement.

We also pay an extension fee of 0.075% per quarter on the elected commitment

amount on the first day of each calendar quarter.

The Subscription Credit Agreement will expire on December 31, 2024.

Contractual Obligations

A summary of our significant contractual principal

payment obligations related to the repayment of our outstanding indebtedness at December 31, 2022 is as follows:

A summary of our significant contractual

principal payment obligations related to the repayment of our outstanding indebtedness at December 31, 2023 is as follows:

Payments Due by Period ($ in millions)

After 5 years

Senior Unsecured Notes

Corporate Credit Facility

Revolving Funding Facility

Revolving Funding Facility II

Subscription Credit Agreement

1 unchanged sentence

Off-Balance Sheet Arrangements

As of December 31, 2022 and 2021, we had an aggregate $149.3 million

and $97.8 million, respectively, of unfunded commitments to provide debt financing to our portfolio companies.

Such commitments are generally

subject to the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in

excess of the amount recognized in our financial statements.

Other than contractual commitments and other legal contingencies incurred

in the normal course of our business, we do not have any other off-balance sheet financings or liabilities.

As of December 31, 2023

and 2022, we had an aggregate $147.9 million and $149.3 million, respectively, of unfunded commitments to provide debt financing to our

portfolio companies.

Such commitments are generally subject to the satisfaction of certain financial and nonfinancial covenants and involve,

to varying degrees, elements of credit risk in excess of the amount recognized in our financial statements.

Other than contractual commitments

and other legal contingencies incurred in the normal course of our business, we do not have any other off-balance sheet financings or

Critical Accounting Estimates

The preparation of our consolidated financial statements requires us

to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

Changes in the economic

environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ.

critical accounting policies, including those relating to the valuation of our investment portfolio, are described below.

accounting policies should be read in conjunction with our risk factors in this Annual Report.

See Note 2 to our consolidated financial

statements for the years ended December 31, 2022 and 2021, for more information on our critical accounting policies.

The preparation of our consolidated financial

statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses.

Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual

results to differ.

Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described

The critical accounting policies should be read in conjunction with our risk factors in this Annual Report.

See Note 2 to

our consolidated financial statements for the years ended December 31, 2023 and 2022, for more information on our critical accounting

Investment Valuation

Traded Investments

(Level 1 or Level 2)

Investments for which market quotations are

readily available will typically be valued at those market quotations.

Traded investments such as corporate bonds, preferred stock, bank

notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker,

the agent bank, syndicate bank or principal market maker.

When price quotes for investments are not available, or such prices are stale

or do not represent fair value in the judgment of our Advisor, fair market value will be determined using our valuation process for investments

that are privately issued or otherwise restricted as to resale.

We may also invest, to a lesser extent, in

equity securities purchased in conjunction with debt investments.

While we anticipate these equity securities to be issued by privately

held companies, we may hold equity securities that are publicly traded.

Equity securities listed on any exchange other than the NASDAQ

Stock Market, Inc.

(“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which

such value is being determined.

If there has been no sale on such day, the securities are valued at the mean of the most recent bid and

ask prices on such day.

Traded Investments (Level 1 or Level 2)

Investments for which market quotations are readily

available will typically be valued at those market quotations.

Traded investments such as corporate bonds, preferred stock, bank notes,

broadly syndicated loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent

broker, the agent bank, syndicate bank or principal market maker.

When price quotes for investments are not available, or such prices

are stale or do not represent fair value in the judgment of our Advisor, fair market value will be determined using our Advisor’s

valuation process for investments that are privately issued or otherwise restricted as to resale.

We may also invest, to a lesser extent, in equity

securities purchased in conjunction with debt investments.

While we anticipate these equity securities to be issued by private companies,

we may hold equity securities that are publicly traded.

Equity securities listed on any exchange other than the NASDAQ Stock Market,

(“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which such value

is being determined.

If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices

Securities admitted to trade on the NASDAQ are valued at the NASDAQ official closing price.

Equity securities

traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined

at the close of the exchange representing the principal market for such securities.

Equity securities traded on

more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at

the close of the exchange representing the principal market for such securities.

Equity securities traded in the over-the-counter market,

but excluding securities admitted to trading on the NASDAQ, are valued at the closing bid prices.

Non-Traded Investments

Investments that are privately issued or otherwise restricted as to

resale, as well as any security for which (a) reliable market quotations are not available in the judgment of our Advisor, or (b) the

independent pricing service or independent broker does not provide prices or provides a price that in the judgment of our Advisor is stale

or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the security on the valuation

Non-Traded Investments (Level 3)

Investments that are privately issued or otherwise

restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment of our

Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment

of our Advisor is stale or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the

security on the valuation date.

We expect that a significant majority of our investments will be Level 3 investments.

Unless otherwise determined by the Advisor,

the following valuation process is used for our Level 3 investments:

Unless otherwise

determined by the Advisor, the following valuation process is used for our Level 3 investments:

Valuation Designee .

The applicable investments will be valued no less frequently than quarterly by the Advisor, with new investments valued at the time such investment was made.

The value of each Level 3 investment will be initially reviewed by the persons responsible for such portfolio company or investment.

The Advisor will use a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs to determine a preliminary value.

The Advisor will specify the titles of the persons responsible for determining the fair value of Company investments, including by specifying the particular functions for which they are responsible, and will reasonably segregate fair value determinations from the portfolio management of the Company such that the portfolio manager(s) may not determine, or effectively determine by exerting substantial influence on, the fair values ascribed to portfolio investments.

The applicable investments will be valued no less frequently than quarterly by the Advisor, with new investments valued at the time

such investment was made.

The value of each Level 3 investment will be initially reviewed by the persons responsible for such portfolio

company or investment.

The Advisor will use a standardized template designed to approximate fair market value based on observable

market inputs, updated credit statistics and unobservable inputs to determine a preliminary value.

The Advisor will specify the titles

of the persons responsible for determining the fair value of Company’s investments, including by specifying the particular

functions for which they are responsible, and will reasonably segregate fair value determinations from the portfolio management of

the Company such that the portfolio manager(s) may not determine, or effectively determine by exerting substantial influence on,

the fair values ascribed to portfolio investments.

Valuation Firm .

Quarterly, third-party valuation firms engaged by the Advisor review the valuation methodologies and calculations employed for each of our investments that the Advisor has placed on the “watch list” and approximately 25% of our remaining investments.

The third-party valuation firms will review and independently value all of the Level 3 investments at least once per year, on a rolling twelve-month basis.

The quarterly report issued by these third-party valuation firms will provide positive assurance on the fair values of the investments reviewed.

The Board has appointed the Advisor as the valuation designee for the Company for purposes of making determinations of fair value as

permitted by Rule 2a-5 under the 1940 Act.

The Audit Committee shall aid the Board in overseeing the Advisor’s fair valuation

of securities that are not publicly traded or for which current market values are not readily available.

The Audit Committee shall

meet quarterly to review the fair value determinations, processes and written reports of the Advisor and third-party valuation firms

as part of the Board’s oversight responsibilities.

Refer to Note 5 – Fair Value –

for more information on the Company’s valuation process.

Quarterly, a third-party valuation firm engaged by the Advisor reviews the valuation methodologies and calculations employed for

each of the Company’s investments that the Advisor has placed on the “watch list” and approximately 25% of the

Company’s remaining investments.

The third-party valuation firm will review and independently value all of the Level 3 investments

at least once per year, on a rolling twelve-month basis.

The quarterly report issued by the third-party valuation firm will provide

positive assurance on the fair values of the investments reviewed.

has appointed the Advisor as the valuation designee for the Company for purposes of making determinations of fair value as permitted

by Rule 2a-5 under the 1940 Act.

The Audit Committee shall aid the Board in overseeing the Advisor’s fair valuation of securities

that are not publicly traded or for which current market values are not readily available.

The Audit Committee shall meet quarterly

to review the fair value determinations, processes and written reports of the Advisor as part of the Board’s oversight responsibilities.

Refer to Note 5 – Fair Value – for

more information on the Company’s valuation process.

Revenue Recognition

11 unchanged sentences

Investment Advisory Agreement.

February 5, 2021, we entered into the Investment Advisory Agreement with our Advisor.

Our Advisor will agree to serve as our investment

advisor in accordance with the terms of our Investment Advisory Agreement.

Payments under our Investment Advisory Agreement in each reporting

period will consist of the base management fee equal to a percentage of the fair market value of investments, including, in each case,

assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S.

government securities and commercial paper

instruments maturing within one year of purchase as well as an incentive fee based on our performance.

For services rendered under the Investment

Advisory Agreement, we will pay a base management fee quarterly in arrears to our Advisor based on the of the fair market value of our

investments including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S.

5, 2021, we entered into the Investment Advisory Agreement with our Advisor.

On March 7, 2023, the Board approved a one-year renewal

of the Investment Advisory Agreement through March 15, 2024.

Our Advisor will agree to serve as our investment advisor in accordance

with the terms of our Investment Advisory Agreement.

Payments under our Investment Advisory Agreement in each reporting period will consist

of the base management fee equal to a percentage of the fair market value of investments, including, in each case, assets purchased with

borrowings under credit facilities and issuances of senior unsecured notes, but excluding cash, U.S.

government securities and commercial

paper instruments maturing within one year of purchase as well as an incentive fee based on our performance.

For services rendered under the Investment Advisory Agreement, we will

pay a base management fee quarterly in arrears to our Advisor based on the of the fair market value of our investments including, in each

case, assets purchased with borrowings under credit facilities and issuances of senior unsecured notes, but excluding cash, U.S.

securities and commercial paper instruments maturing within one year of purchase.

We will also pay an incentive fee on income and an

incentive fee on capital gains to our Advisor.

Prior to an Exchange Listing, any incentive

fees earned by the Advisor shall accrue as earned but only become payable in cash to the Advisor upon consummation of an Exchange Listing.

To the extent the Company does not complete an Exchange Listing, the incentive fees will be payable to the Advisor (a) upon consummation

of a sale of the Company or (b) once substantially all proceeds from a Company Liquidation payable to the Company’s common

stockholders have been distributed to such stockholders.

We will also pay an incentive fee on income and an incentive

fee on capital gains to our Advisor.

Prior to an initial public offering or listing

on an exchange of our common stock (an “exchange listing”), any incentive fees earned by the Advisor shall accrue as earned

but only become payable in cash to the Advisor upon consummation of an exchange listing.

To the extent the Company does not complete

an exchange listing, the incentive fees will be payable to the Advisor (a) upon consummation of a sale of the Company or (b) once

substantially all proceeds from a Company liquidation payable to the Company’s common stockholders have been distributed to such

stockholders.

Administration Agreement.

5, 2021, we entered into an Administration Agreement with our Advisor, which serves as our Administrator pursuant to which the Administrator

will furnish us with administrative services necessary to conduct our day-to-day operations.

The Administrator will be reimbursed for

administrative expenses it incurs on our behalf in performing its obligations.

Such reimbursement may be made for our allocable portion

(subject to the review and approval of our independent directors) of office facilities, overhead, and compensation paid to or compensatory

distributions received by our officers (including our Chief Compliance Officer and Chief Financial Officer) and their respective staff

who provide services to us.

As we reimburse the Administrator for its expenses, we will indirectly bear such cost.

The Administrator

Bank Global Fund Services under a sub-administration agreement to assist the Administrator in performing certain of its

administrative duties.

The Administrator may enter into additional sub-administration agreements with third-parties to perform other

administrative and professional services on behalf of the Administrator.

5, 2021, we entered into the Administration Agreement with our Advisor, which serves as our Administrator and will provide or oversee

the performance of its required administrative services and professional services rendered by others, which will include (but are not

limited to), accounting, payment of our expenses, legal, compliance, operations, technology and investor relations, preparation and filing

of its tax returns, and preparation of financial reports provided to its stockholders and filed with the SEC.

On March 7, 2023, the Board

approved a one-year renewal of the Administration Agreement through March 15, 2024.

We will reimburse the Administrator for its costs and expenses incurred

in performing its obligations under the Administration Agreement, which may include its allocable portion of office facilities, overhead,

and compensation paid to or compensatory distributions received by its officers (including our Chief Compliance Officer and Chief Financial

Officer) and its respective staff who provide services to the Company.

As the Company reimburses the Administrator for its expenses, such

costs (including the costs of sub-administrators) will be ultimately borne by common stockholders.

The Administrator does not receive

compensation from us other than reimbursement of its expenses.

The Administration Agreement may be terminated by either party with 60

days’ written notice.

Since the inception of the Company, the Administrator

has engaged sub-administrators to assist the Administrator in performing certain of its administrative duties.

During this period, the

Administrator has not sought reimbursement of its expenses other than expenses incurred by the sub-administrators.

On March 28, 2023,

the Administrator engaged Ultimus Fund Solutions, LLC under a sub-administration agreement.

Under the terms of the sub-administration

agreement, Ultimus Fund Solutions, LLC will provide fund administration and fund accounting services.

The Company pays fees to Ultimus

Fund Solutions, LLC, which constitute reimbursable expenses under the Administration Agreement.

The Administrator may enter into additional

sub-administration agreements with third-parties to perform other administrative and professional services on behalf of the Administrator.

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