What changed in this filing

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Item 1A. Risk Factors

2022-05-19 compared with 2021-05-20 · 91 added, 104 removed, 807 unchanged (19% of the section changed)

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Risks Relating to the Current Environment

Major public health issues, and specifically the novel coronavirus (COVID-19), could have an adverse impact on our financial condition and results of operations and other aspects of our business.

The outbreak of the novel coronavirus disease 2019 (“COVID-19”) in many countries continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets.

The global impact of the outbreak has been rapidly evolving, and as cases of the virus increased around the world, many governments have reacted by instituting quarantines, restrictions on travel, bans on public events and on public gatherings, closures of a variety of venues (e.g., restaurants, concert halls, museums, theaters, schools and stadiums, non-essential stores, malls and other entertainment facilities), shelter-in-place orders or other restrictions on operations and businesses.

On March 11, 2020, the World Health Organization publicly characterized COVID-19 as a pandemic.

On March 13, 2020, the President of the U.S.

declared the COVID-19 outbreak a national emergency.

federal government and U.S.

state governments are continuing to implement a variety of actions to mobilize efforts to mitigate the ongoing and expected impact and the Center for Disease Control is implementing its pandemic preparedness and response plans, working on multiple fronts, including providing specific guidance on measures to prepare communities to respond to the local spread of COVID-19 throughout the U.S.

Such actions have created disruption in global supply chains, and have adversely impacted a number of industries, such as transportation, hospitality and entertainment.

The outbreak has triggered a period of global economic slowdown and is expected to continue having an adverse impact on economic and market conditions.

We are closely monitoring developments related to the COVID-19 pandemic to assess its impact on our business;

while, due to the evolving and highly uncertain nature of this event, it currently is not possible to estimate its impact precisely, the COVID-19 pandemic has and continues to impact our business, financial condition, results of operations, liquidity or prospects in a number of ways.

For instance, our investment portfolio (and, specifically, the valuations of investment assets we hold) has been, and continues to be, adversely affected as a result of market developments from the COVID-19 pandemic and uncertainty regarding its outcome.

Moreover, changes in interest rates, reduced liquidity or a continued slowdown in U.S.

or global economic conditions may also adversely affect our business, financial condition, results of operations, liquidity or prospects.

Further, extreme market volatility may leave us unable to react to market events in a prudent manner consistent with our historical practices in dealing with more orderly markets.

Additionally, in recent months, the U.S.

Food and Drug Administration authorized various vaccines for emergency use.

However, it remains unclear how quickly the vaccines will be distributed nationwide and globally or when “herd immunity” will be achieved and the restrictions that were imposed to slow the spread of the virus will be lifted entirely.

The delay in distributing the vaccines could lead people to continue to self-isolate and not participate in the economy at pre-pandemic levels for a prolonged period of time.

Even after the COVID-19 pandemic subsides, the U.S.

economy and most other major global economies may continue to experience a recession, and our business and operations, as well as the business and operations of our portfolio companies, could be materially adversely affected by a prolonged recession in the United States and other major markets.

Although it is impossible to predict with certainty the potential full magnitude of the business and economic ramifications, COVID-19 has impacted, and may further impact, our business in various ways, including but not limited to:

• From an operational perspective, our Investment Adviser’s employees, as well as the workforces of our vendors, service providers and counterparties, may also be adversely affected by the COVID-19 pandemic or efforts to mitigate the pandemic, including government-mandated shutdowns, requests or orders for employees to work remotely, and other social distancing measures, in the U.S., which could result in an adverse impact on our ability to conduct our business;

• While the market dislocation caused by COVID-19 may present attractive investment opportunities, due to increased volatility in the financial markets, we may not be able to complete those investments;

• If the impact of COVID-19 continues, we may have more limited opportunities to successfully exit existing investments, due to, among other reasons, lower valuations, decreased revenues and earnings, or lack of potential buyers with financial resources to pursue an acquisition, resulting in a reduced ability to realize value from such investments;

• Our portfolio companies are facing or may face in the future increased credit and liquidity risk due to volatility in financial markets, reduced revenue streams, and limited or higher cost of access to preferred sources of funding, which may result in potential impairment of our investments.

Changes in the debt financing markets are impacting, or, if the volatility in financial market continues, may in the future impact, the ability of our portfolio companies to meet their respective financial obligations;

• Borrowers of loans, notes and other credit instruments in our portfolio may be unable to meet their principal or interest payment obligations or satisfy financial covenants, resulting in a decrease in value of our investments and a lower than expected return.

In addition, for variable interest instruments, lower reference rates resulting from government stimulus programs in response to COVID-19 could lead to lower interest income;

• Many of our portfolio companies operate in industries that are materially impacted by COVID-19, including but not limited to healthcare, travel, aviation, entertainment and hospitality.

Many of these companies are facing operational and financial hardships resulting from the spread of COVID-19 and related governmental measures, such as the closure of stores, restrictions on travel, quarantines or stay-at-home orders.

If the disruptions caused by COVID-19 continue and the restrictions put in place are not lifted, the businesses of these portfolio companies could suffer materially or become insolvent, which would decrease the value of our investments;

• The stimulus package provided by the U.S.

government and its various agencies to businesses in the U.S., including some of our portfolio companies, restricts the recipient business from taking certain actions, such as dividends and share buybacks.

Such limitations may reduce the value of our investments in such companies;

• An extended period of remote working by our Investment Adviser’s employees could strain its technology resources and introduce operational risks, including heightened cybersecurity risk.

Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that seek to exploit the COVID-19 pandemic;

• COVID-19 presents a significant threat to our Investment Adviser’s employees’ well-being and morale.

While our Advisor has implemented a business continuity plan to protect the health of its employees and has contingency plans in place for key employees or executive officers who may become sick or otherwise unable to perform their duties for an extended period of time, such plans cannot anticipate all scenarios, and our Advisor may experience potential loss of productivity or a delay in the roll out of certain strategic plans.

The impact of COVID-19 may also heighten the other risks discussed in this report.

The current outbreak of the novel coronavirus, or COVID-19, has caused severe disruptions in the U.S.

and global economy and is expected to have a materially adverse impact on our financial condition and results of operations.

There is an ongoing global outbreak of COVID-19, which has spread to over 200 countries and territories, including every state in the United States.

The global impact of the outbreak has been rapidly evolving, and as cases of COVID-19, including new variants, have continued to be identified in additional countries, many countries have reacted, and continue to react, by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading, and limiting operations of non-essential businesses.

Such actions have created disruption in global supply chains, and adversely impacted many industries.

Supply chain disruptions could significantly impact the businesses of our portfolio companies and lead to increased costs, inventory shortages, shipping delays and an inability to meet customer demands.

The outbreak has had a continued adverse impact on economic and market conditions and has triggered a period of global economic slowdown.

Although vaccines have been widely distributed in the U.S., certain U.S.

states are planning on reopening and we believe the economy is beginning to rebound in certain respects, the uncertainty surrounding the COVID-19 pandemic, including uncertainty regarding new variants of COVID-19, the efficacy of existing vaccines against new variants and acceptance of vaccines and other factors have and may continue to contribute to significant volatility in the global markets.

COVID-19 and the current financial, economic and capital markets environment, and future developments in these and other areas present uncertainty and risk with respect to our performance, financial condition, results of operations and ability to pay distributions.

Changes in interest rates may adversely affect the value of our portfolio investments which could have an adverse effect on our business, financial condition and results of operations.

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We cannot assure you that these market conditions will not continue or worsen in the future.

Furthermore, we cannot assure you that market disruptions in Europe, including the increased cost of funding for certain governments and financial institutions, will not impact the global economy, and we cannot assure you that assistance packages will be available, or if available, be sufficient to stabilize countries and markets in Europe or elsewhere affected by a financial crisis.

and markets in Europe or elsewhere affected by a financial crisis.

To the extent uncertainty regarding any economic recovery in Europe negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected.

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and worldwide.

On January 31, 2020, the United Kingdom technically withdrew from the EU (“Brexit”), triggering a negotiated transition period during which the United Kingdom remains in the EU single market and customs union and remains subject to EU laws and regulations.

The transition period expired on December 31, 2020.

On December 24, 2020, negotiators representing the United Kingdom and the EU came to a preliminary trade agreement, the EU-UK Trade and Cooperation Agreement (“TCA”), which is an agreement on the terms governing certain aspects of the EU’s and United Kingdom’s relationship following the end of the transition period.

On December 30, 2020, the United Kingdom and the EU signed the TCA, which was ratified by the British Parliament on the same day.

The TCA has been provisionally applied since January 1, 2021 but cannot formally enter into force until ratified by the European Parliament.

It is expected the TCA will be ratified by European Parliament in 2021.

However, even under the TCA, many aspects of the United Kingdom-EU trade relationship remain subject to further negotiation.

Due to political uncertainty, it is not possible to anticipate the form or nature of the future trading relationship between the United Kingdom and the EU.

While certain measures have been proposed and/or implemented within the United Kingdom and at the EU level or at the member state level, which are designed to minimize disruption in the financial markets, it is not currently possible to determine whether such measures would achieve their intended effects.

Notwithstanding the foregoing, the extent of the impact of the withdrawal and the resulting economic arrangements in the United Kingdom and in global markets as well as any associated adverse consequences remain unclear and may lead to ongoing political and economic uncertainty and periods of exacerbated volatility in both the United Kingdom and in wider European markets for some time.

The mid-to-long term uncertainty may have a negative effect on the performance of any investments in issuers that are economically tied to the United Kingdom or Europe.

Additionally, the decision made in the United Kingdom referendum may lead to a call for similar referenda in other European jurisdictions which may cause increased economic volatility and uncertainty in the European and global markets.

This volatility and uncertainty may have an adverse effect on the economy generally and on the ability of us and our portfolio companies to execute our respective strategies and to receive attractive returns.

On January 31, 2020, the United Kingdom (the “UK”) ended its membership in the European Union (“Brexit”).

On May 1, 2021, the E.U.-U.K.

Trade and Cooperation Agreement, or the TCA, became effective.

The TCA provides the United Kingdom and EU members with preferential access to each other’s markets, without tariffs or quotas on imported products between the jurisdictions, provided that certain rules of origin requirements are complied with.

However, economic relations between the United Kingdom and the EU will now be on more restricted terms than existed prior to Brexit.

The long-term effects of Brexit are expected to depend on, among other things, any agreements the UK has made, or makes to retain access to EU markets.

Brexit could adversely affect European or worldwide economic or market conditions and could contribute to instability in global financial and real estate markets.

In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the UK determines which EU laws to replace or replicate.

Any of these effects of Brexit, and others we cannot anticipate, could adversely affect our business, business opportunities, results of operations, financial condition and cash flows.

Likewise, similar actions taken by other European and other countries in which we operate could have a similar or even more profound impact.

The occurrence of any of these above event(s) could have a significant adverse impact on the value and risk profile of the Company’s portfolio.

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Uncertainty with respect to the financial stability of the United States and several countries in the EU could have a significant adverse effect on our business, financial condition, and results of operations.

debt ceiling and budget deficit concerns, have increased the possibility of a downgrade of the U.S.

long-term sovereign debt credit rating or a recession or economic slowdown in the U.S.

In the future, the U.S.

Government may not be able to meet its debt payments unless the federal debt ceiling is raised.

On August 2, 2019, the federal debt limit was suspended until July 2021.

If, prior to such date, legislation increasing the debt ceiling is not enacted and the debt ceiling is reached, the U.S.

federal government may stop or delay making payments on its obligations, which could negatively impact the U.S.

economy and our portfolio companies.

debt ceiling and budget deficit concerns have increased the possibility of additional credit-rating downgrades and economic slowdowns, or a recession in the United States.

Although U.S.

lawmakers passed legislation to raise the federal debt ceiling on multiple occasions, including a suspension of the federal debt ceiling in August 2019 and December 2021, ratings agencies have lowered or threatened to lower the long-term sovereign credit rating on the United States.

The December 2021 legislation suspends the debt ceiling through early 2023, unless Congress takes legislative action to further extend or defer it.

The impact of this or any further downgrades to the U.S.

government's sovereign credit rating or its perceived creditworthiness could adversely affect the U.S.

and global financial markets and economic conditions.

Absent further quantitative easing by the Federal Reserve, these developments could cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms.

In addition, disagreement over the federal budget has caused the U.S.

federal government to shut down for periods of time.

Continued adverse political and economic conditions, further downgrades or warnings by The Standard & Poor Financial Services LLC's Rating Service or other rating agencies, and the U.S.

Government’s credit and deficit concerns in general, including issues around the federal debt ceiling, could cause interest rates and borrowing costs to rise, which may negatively impact both the perception of credit risk associated with our debt portfolio and our ability to access the debt markets on favorable terms.

Continued adverse political and economic conditions could have a material adverse effect on our business, financial condition and results of operations.

Changes in existing laws or regulations, the interpretations thereof or newly enacted laws or regulations may negatively impact our business.

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As a result, we may be adversely affected because of our unwillingness to enter into transactions that violate any such laws or regulations.

The interest rates of some of our floating-rate loans to our portfolio companies may be priced using a spread over LIBOR, which may be phased out in the future.

On July 27, 2017, the United Kingdom Financial Conduct Authority (“FCA”) announced that it would phase out the London Interbank Offered Rate (“LIBOR”) as a benchmark by the end of 2021.

On November 30, 2020, the FCA announced that subject to confirmation following its consultation with the administrator of LIBOR, it would cease publication of the one-week and two-month USD LIBOR immediately after December 31, 2021 and cease publication of the remaining tenors immediately after June 30, 2023.

Additionally, the Federal Reserve Board has advised banks to stop entering into new USD LIBOR based contracts.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021 and has indicated that market participants should not rely on LIBOR being available after 2023.

As an alternative to LIBOR, for example, the U.S.

Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S.

financial institutions, is considering replacing U.S.-dollar LIBOR with the Secured Overnight Financing Rate (“SOFR”), a new index calculated by short-term repurchase agreements, backed by Treasury securities.

Abandonment of or modifications to LIBOR could have adverse impacts on newly issued financial instruments and our existing financial instruments which reference LIBOR.

While some instruments may contemplate a scenario where LIBOR is no longer available by providing for an alternative rate setting methodology, not all instruments may have such provisions and there is significant uncertainty regarding the effectiveness of any such alternative methodologies.

Abandonment of or modifications to LIBOR could lead to significant short-term and long-term uncertainty and market instability.

If LIBOR ceases to exist, we and our portfolio companies may need to amend or restructure our existing LIBOR-based debt instruments and any related hedging arrangements that extend beyond 2023, which may be difficult, costly and time consuming.

In addition, from time to time we invest in floating rate loans and investment securities whose interest rates are indexed to LIBOR.

Uncertainty as to the nature of alternative reference rates and as to potential changes or other reforms to LIBOR, or any changes announced with respect to such reforms, may result in a sudden or prolonged increase or decrease in the reported LIBOR rates and the value of LIBOR-based loans and securities, including those of other issuers we or our funds currently own or may in the future own.

It remains uncertain how such changes would be implemented and the effects such changes would have on us, issuers of instruments in which we invest and financial markets generally.

The expected discontinuation of LIBOR could have a significant impact on our business.

The dollar amount of our outstanding debt investments and borrowings that are linked to LIBOR with maturity dates after the anticipated discontinuation date of 2023 is material.

The interest rates of some of our floating-rate loans to our portfolio companies may be priced using a spread over LIBOR, which is being phased out.

On July 27, 2017, the U.K Financial Conduct Authority (“FCA”) announced that it would phase out LIBOR as a benchmark by the end of 2021.

As of December 31, 2021, all non-U.S.

dollar LIBOR publications have been phased out.

The phase out of a majority of the U.S.

dollar publications is delayed until June 30, 2023.

The Alternative Reference Rates Committee (“ARRC”) of the Federal Reserve Bank of New York previously confirm that this constitutes a “benchmark transition event” and established “benchmark replacement dates” in ARRC standard LIBOR transition provisions that exist in many U.S.

law contracts using LIBOR.

The publication of all EUR and CHF LIBOR settings, the Spot Next/Overnight, 1 week, 2 month and 12 month JPY and GBP LIBOR settings, and the 1 week and 2 months USD LIBOR settings has ceased.

The publication of the overnight, 1 month, 3 month, 6 month, and 12 months USD LIBOR settings will cease after June 30, 2023.

The FCA plans to consult the market on creating “synthetic” 1 month, 3 month and 6 month rates for GBP and JPY LIBOR, to be published for a limited time.

The New York State legislation was signed into law to aid “tough legacy” LIBOR contracts.

Other legislative solutions are being pursued at the Federal level, in the U.K.

and in Europe.

Federal banking agencies have also issued guidance encouraging banking and global organizations to cease reference to USD LIBOR as soon as practicable and, in any event, by December 31, 2021.

Benchmarks Regulation imposed conditions under which only compliant benchmarks may be used in new contracts after 2021.

The ARRC has identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR.

SOFR is a measure of the cost of borrowing cash overnight, collateralized by the U.S.

Treasury securities, and is based on directly observable U.S.

Treasury-backed repurchase transactions.

However, the COVID-19 pandemic may adversely impact the timing of many firms’ transition planning, and we continue to assess the potential impact of the COVID-19 pandemic on our transition plans.

Although SOFR appears to be the preferred replacement rate for U.S.

dollar LIBOR, it is not possible at this time to predict the effect of any such changes, any establishment of alternative reference rates, whether the COVID-19 pandemic will have further effect on LIBOR transition timelines or plans, or other reforms to LIBOR that may be enacted in the United States, United Kingdom or elsewhere.

The discontinuation of LIBOR could have a significant impact on our business.

We anticipate significant operational challenges for the transition away from LIBOR, including, but not limited to, amending existing loan agreements with borrowers on investments that may have not been modified with fallback language and adding effective fallback language to new agreements in the event that LIBOR is discontinued before maturity.

Beyond these challenges, we anticipate there may be additional risks to our current processes and information systems that will need to be identified and evaluated by us.

Beyond these challenges, we anticipate there may be additional risks to our current processes and information systems that we will need to identify and evaluate.

Due to the uncertainty of the replacement for LIBOR, the potential effect of any such event on our cost of capital and net investment income cannot yet be determined.

In addition, the cessation of LIBOR could:

• Adversely impact the pricing, liquidity, value of, return on and trading for a broad array of financial products, including any LIBOR-linked securities, loans and derivatives that are included in our assets and liabilities;

• Require extensive changes to documentation that governs or references LIBOR or LIBOR-based products, including, for example, pursuant to time-consuming renegotiations of existing documentation to modify the terms of outstanding investments;

• Result in inquiries or other actions from regulators in respect of our preparation and readiness for the replacement of LIBOR with one or more alternative reference rates;

• Result in disputes, litigation or other actions with portfolio companies, or other counterparties, regarding the interpretation and enforceability of provisions in our LIBOR-based investments, such as fallback language or other related provisions, including, in the case of fallbacks to the alternative reference rates, any economic, legal, operational or other impact resulting from the fundamental differences between LIBOR and the various alternative reference rates;

• Require the transition and/or development of appropriate systems and analytics to effectively transition our risk management processes from LIBOR-based products to those based on one or more alternative reference rates, which may prove challenging given the limited history of the proposed alternative reference rates;

• Cause us to incur additional costs in relation to any of the above factors.

There is no guarantee that a transition from LIBOR to an alternative will not result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could have a material adverse effect on our business, results of operations, financial condition, and NAV price.

In addition, any further changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market value of any LIBOR-linked securities, loans and other financial obligations or extensions of credit held by or due to us and could have a material adverse effect on our business, financial condition and results of operations.

If AIC can no longer claim exemption from being deemed a “commodity pool operator” pursuant to Commodity Futures Trading Commission (the “CFTC”) rules, AIC and AIM could be subject to additional regulatory requirements.

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federal income tax laws, including a possible increase in the corporate tax rate.

The Russian invasion of Ukraine may have a material adverse impact on us and our portfolio companies.

Commencing in 2021, Russian President Vladimir Putin ordered the Russian military to begin massing thousands of military personnel and equipment near its border with Ukraine and in Crimea, representing the largest mobilization since the illegal annexation of Crimea in 2014.

President Putin has initiated troop movements into the eastern portion of Ukraine and continues to threaten an all-out invasion of Ukraine.

On February 22, 2022, the United States and several European nations announced sanctions against Russia in response to Russia’s actions.

On February 24, 2022, President Putin commenced a full-scale invasion of Russia’s pre-positioned forces into Ukraine, which could have a negative impact on the economy and business activity globally (including in the countries in which the Fund invests), and therefore could adversely affect the performance of the Fund’s investments.

Furthermore, the conflict between the two nations and the varying involvement of the United States and other NATO countries could preclude prediction as to their ultimate adverse impact on global economic and market conditions, and, as a result, presents material uncertainty and risk with respect to the Fund and the performance of its investments or operations, even though the Fund does not hold any investments with material operations in Russia or the Ukraine, and the ability of the Fund to achieve its investment objectives.

Inflation may adversely affect our business and operations and those of our portfolio companies.

Economic activity has continued to accelerate across sectors and regions.

Nevertheless, due to global supply chain issues, a rise in energy prices and strong consumer demand as economies continue to reopen, inflation is showing signs of acceleration in the U.S.

and globally.

Inflation is likely to continue in the near to medium-term, particularly in the U.S., with the possibility that monetary policy may tighten in response.

Certain of our portfolio companies may be impacted by inflation and persistent inflationary pressures could negatively affect our portfolio companies profit margins.

Disruptions to the global supply chain may have adverse impact on our portfolio companies and, in turn, harm us.

Recent supply chain disruptions, including the global microchip shortage, may have an adverse impact on the business of our portfolio companies.

Potential adverse impacts to certain of our portfolio companies may include, among others, increased costs, inventory shortages, shipping and project completion delays, and inability to meet customer demand.

Risks Relating to our Business and Structure

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Accordingly, our interest expense as a percentage of our total assets will be higher if we use increased leverage as permitted under our modified asset coverage requirement.

As of March 31, 2021, we had approximately $1,119 million of outstanding borrowings under our senior secured credit facility and $350 million in aggregate amount outstanding of the 2025 Notes.

As of March 31, 2022, we had approximately $1,080 million of outstanding borrowings under our senior secured credit facility, $350 million in aggregate amount outstanding of the 2025 Notes and $125.0 million aggregate principal amount of our 2026 Notes.

In order for us to cover our annual interest payments on our outstanding indebtedness at March 31, 2022, we must achieve annual returns on our March 31, 2022 total assets of at least 1.94%.

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The amount of leverage that we employ at any particular time will depend on our Investment Adviser’s and our board of directors’ assessments of market and other factors at the time of any proposed borrowing.

Our senior secured credit facility and the 2025 Notes impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC.

Our senior secured credit facility, the 2025 Notes and the 2026 Notes impose financial and operating covenants that restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC.

A failure to renew our senior secured credit facility or to add new or replacement debt facilities or to issue additional debt securities or other evidences of indebtedness could have a material adverse effect on our business, financial condition and results of operations.

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We have analyzed the potential impact of changes in interest rates on interest income net of interest expense.

Assuming no changes to our balance sheet as of March 31, 2021, a hypothetical one percent increase in LIBOR on our floating rate assets and liabilities would decrease our earnings by seven cents per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2021, a hypothetical two percent increase in LIBOR on our floating rate assets and liabilities would increase our earnings by one cent per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2021, a hypothetical three percent increase in LIBOR on our floating rate assets and liabilities would increase our earnings by eleven cents per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2021, a hypothetical four percent increase in LIBOR on our floating rate assets and liabilities would increase our earnings by twenty-one cents per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2021, a hypothetical one percent decrease in LIBOR on our floating rate assets and liabilities would decrease our earnings by less than one cent per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2022, a hypothetical one percent increase in LIBOR on our floating rate assets and liabilities would Increase our earnings by seven cents per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2022, a hypothetical two percent increase in LIBOR on our floating rate assets and liabilities would increase our earnings by nineteen cents per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2022, a hypothetical three percent increase in LIBOR on our floating rate assets and liabilities would increase our earnings by thirty two cents per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2022, a hypothetical four percent increase in LIBOR on our floating rate assets and liabilities would increase our earnings by forty five cents per average share over the next twelve months.

Assuming no changes to our balance sheet as of March 31, 2022, a hypothetical one percent decrease in LIBOR on our floating rate assets and liabilities would decrease our earnings by four cents per average share over the next twelve months.

In addition, we believe that our interest rate matching strategy and our ability to hedge mitigates the effects any changes in interest rates may have on our investment income.

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Accordingly, a change in interest rates could make it easier for us to meet or exceed the performance threshold and may result in a substantial increase in the amount of incentive fees payable to our Investment Adviser with respect to pre-incentive fee net investment income.

In July 2017, the head of the United Kingdom Financial Conduct Authority announced the desire to phase out the use of LIBOR by the end of 2021.

See “ The interest rates of some of our floating-rate loans to our portfolio companies may be priced using a spread over LIBOR, which may be phased out in the future .”

As of December 31, 2021, all non-U.S.

dollar LIBOR publications have been phased out.

The phase out of a majority of the U.S.

dollar publications is delayed until June 30, 2023.

SOFR appears to be the preferred alternative replacement rate for U.S.

dollar LIBOR, but there is no guarantee SOFR will become the dominant alternative.

See “The interest rates of some of our floating-rate loans to our portfolio companies may be priced using a spread over LIBOR, which is being phased out.”

Our business requires a substantial amount of capital to grow because we must distribute most of our income.

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In the event that we are not able to renew, extend or replace the senior secured credit facility at the time of the termination of the lenders’ obligations to make new loans or the senior secured credit facility’s final maturity, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC.

Our unsecured notes mature in 2025, and any inability to replace or repay our unsecured notes could adversely impact our liquidity and ability to fund new investments or maintain distributions to our stockholders.

Our unsecured notes mature in 2025 and in 2026, and any inability to replace or repay our unsecured notes could adversely impact our liquidity and ability to fund new investments or maintain distributions to our stockholders.

On March 3, 2015, we issued $350 million aggregate principal amount of 5.250% senior unsecured notes due March 3, 2025 (the “2025 Notes”).

There can be no assurance that we will be able to replace the 2025 Notes upon their maturity on terms that are favorable to us, if at all.

Our ability to replace the 2025 Notes will be constrained by then-current economic conditions affecting the credit markets.

In the event that we are not able to replace or repay the 2025 Notes at the time of their maturity, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC.

On July 16, 2021, we issued $125 million aggregate principal amount of 4.500% senior unsecured notes due July 16, 2026 (the “2026 Notes”).

There can be no assurance that we will be able to replace the 2025 Notes or the 2026 Notes upon their maturity on terms that are favorable to us, if at all.

Our ability to replace the 2025 Notes or the 2026 Notes will be constrained by then-current economic conditions affecting the credit markets.

In the event that we are not able to replace or repay the 2025 Notes or the 2026 Notes at the time of their maturity, this could have a material adverse effect on our liquidity and ability to fund new investments, our ability to make distributions to our stockholders and our ability to qualify as a RIC.

The trading market or market value of our debt securities may fluctuate.

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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 1A. Risk Factors