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Risks Relating to Our Business and Structure
−Removed: We have a limited operating history.
−Removed: We were formed on May 30, 2019 and commenced investment operations in January 2020.
−Removed: We are subject to all of the business risks and uncertainties associated with any business with a limited operating history, including the risk that we will not achieve our investment objective, that we will not maintain our qualification to be treated as a RIC, and that the value of your investment could decline substantially.
−Removed: We anticipate, based on the amount of proceeds raised in the initial or subsequent closings, that it could take some time to invest substantially all of the capital we expect to raise due to market conditions generally and the time necessary to identify, evaluate, structure, negotiate and close suitable investments in private middle-market companies.
−Removed: In order to comply with the RIC diversification requirements during the startup period, we may invest proceeds in temporary investments, such as cash, cash equivalents, U.S.
−Removed: government securities and other high-quality debt Investments that mature in one year or less from the time of investment, which we expect will earn yields substantially lower than the interest, dividend or other income that we seek to receive in respect of suitable portfolio investments.
−Removed: We may not be able to pay any significant distributions during this period, and any such distributions may be substantially lower than the distributions we expect to pay when our portfolio is fully invested.
−Removed: We will pay a base management fee to our Adviser throughout this interim period irrespective of our performance.
−Removed: If the base management fee and our other expenses exceed the return on the temporary investments, our equity capital will be eroded.
Operating as a BDC imposes numerous constraints on us and significantly reduces our operating flexibility.
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government securities and other high-quality debt instruments that mature in one year or less from the date of investment.
−Removed: These constraints and our Adviser's limited operating history under these constraints may hinder our ability to take advantage of attractive investment opportunities and to achieve our investment objective.
+Added: These constraints may hinder our ability to take advantage of attractive investment opportunities and to achieve our investment objective.
Furthermore, any failure to comply with the requirements imposed on BDCs by the 1940 Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants.
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We are subject to risks associated with the current interest rate environment and to the extent we use debt to finance our investments, changes in interest rates will affect our cost of capital and net investment income.
−Removed: To the extent we borrow money or issue debt securities or preferred stock to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds or pay interest or distributions on such debt securities or preferred stock and the rate at which we invest these funds.
+Added: To the extent we borrow money or issue debt securities or any preferred stock to make investments, our net investment income will depend, in part, upon the difference between the rate at which we borrow funds or pay interest or distributions on such debt securities or preferred stock and the rate at which we invest these funds.
In addition, we anticipate that many of our debt investments and borrowings will have floating interest rates that reset on a periodic basis, and many of our investments will be subject to interest rate floors.
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Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Changes in LIBOR, or its discontinuation, may adversely affect our business and results of operations.
−Removed: Many financial instruments use or may use a floating rate based on LIBOR, which is the offered rate for short-term Eurodollar deposits between major international banks.
+Added: The discontinuation of LIBOR may adversely affect our business and results of operations.
+Added: Many financial instruments have historically used and continue to use a floating rate based on LIBOR, which is the offered rate for short-term Eurodollar deposits between major international banks.
For several years, LIBOR has been the subject of national and international regulatory scrutiny.
−Removed: Among other things, there is concern with the integrity of LIBOR due in part to the limited number of transactions in the interbank lending market underlying LIBOR.
−Removed: As a result, central banks around the world, including the Federal Reserve, have commissioned working groups of market participants and official sector representatives with the goal of finding suitable replacements for LIBOR and replacements or reforms of other interest rate benchmarks.
−Removed: Other interbank offered rates, as well as select other interest rate benchmarks besides LIBOR (such as EURIBOR and EONIA in Europe), are also being evaluated in their respective jurisdictions for potential reform.
−Removed: It is expected that a transition away from the widespread use of LIBOR and such other reference rates to alternative rates based on observable market transactions and other potential interest rate benchmark reforms will occur over the course of the next few years.
−Removed: For example, on July 27, 2017, the head of the United Kingdom's Financial Conduct Authority (“FCA”) announced a desire to phase out the use of LIBOR by the end of 2021;
−Removed: in fact, the FCA has indicated it will not compel panel banks to continue to contribute to LIBOR after the end of 2021.
−Removed: On November 30, 2020, the ICE Benchmark Administration Limited (the “IBA”), the administrator of LIBOR, announced that it will consult in early December 2020 to consider extending the LIBOR transition deadline to the end of June 2023.
−Removed: Following consultations in December 2020 and January 2021, the IBA announced that (i) it intends to cease publication of 1-week and 2-month U.S.
−Removed: dollar LIBOR at the end of 2021 and (ii) subject to compliance with applicable regulations, it intends to continue publication of the remaining U.S.
−Removed: dollar LIBOR tenors until June 30, 2023, effectively extending the LIBOR transition period to June 30, 2023.
−Removed: There is currently no definitive information regarding the future utilization of LIBOR or of any particular replacement rate.
−Removed: The committee established by the Federal Reserve, the Alternative Reference Rates Committee, announced the replacement of LIBOR with a new index, based on overnight repurchase agreements collateralized by U.S.
−Removed: Treasury securities, called the Secured Overnight Financing Rate (“SOFR”).
−Removed: The Federal Reserve Bank of New York began publishing SOFR in April 2018.
−Removed: Other jurisdictions have also proposed their own alternative to LIBOR, including the Sterling Overnight Index Average for Sterling markets, the Euro Short Term Rate for Euros and Tokyo Overnight Average Rate for Japanese Yens.
−Removed: Although SOFR appears to be the preferred replacement rate for U.S.
−Removed: dollar LIBOR, at this time, it is not possible to predict whether SOFR will attain market traction as a LIBOR replacement tool, and the future of LIBOR is still uncertain.
−Removed: The effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR or other reference rates that may be enacted in the United Kingdom or elsewhere cannot be predicted at this time, and it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may have on the financial markets for financial instruments based on LIBOR.
−Removed: To date, certain of the loan agreements with our portfolio companies have already been amended to include fallback language providing a mechanism for the parties to negotiate a new reference interest rate in the event that LIBOR ceases to exist.
+Added: On March 5, 2021, the U.K.’s Financial Conduct Authority (“FCA”) publicly announced that all U.S.
+Added: Dollar LIBOR settings will either cease to be provided by any administrator or no longer be representative (i) immediately after
+Added: December 31, 2021 for one-week and two-month U.S.
+Added: Dollar LIBOR settings and (ii) immediately after June 30, 2023 for the remaining U.S.
+Added: Dollar LIBOR settings.
+Added: In addition, as a result of supervisory guidance from U.S.
+Added: regulators, some U.S.
+Added: regulated entities will cease to enter into new LIBOR contracts after December 31, 2021.
+Added: In accordance with announcements by the FCA and the ICE Benchmark Administration, which administers LIBOR publication, the publication of most non-U.S.
+Added: dollar LIBOR rates ceased as of the end of December 2021.
+Added: While publication of the 1, 3 and 6 month Sterling and Japanese yen LIBOR settings will continue at least for one year on the basis of a synthetic methodology (known as “synthetic LIBOR”), these rates have been designated unrepresentative by the FCA and are solely available for use in legacy transactions.
+Added: Furthermore, while certain U.S.
+Added: dollar LIBOR tenors are expected to continue to be published until June 30, 2023, the U.S.
+Added: banking agencies and the FCA have issued guidance instructing banks to cease entering into new contracts referencing LIBOR no later than December 31, 2021, with certain exceptions.
+Added: The Federal Reserve Bank of New York now publishes the Secured Overnight Financing Rate based on overnight U.S.
+Added: Treasury repurchase agreement transactions, which has been recommended as the alternative to U.S.
+Added: dollar LIBOR by the Alternative Reference Rates Committee convened by the Federal Reserve and the Federal Reserve Bank of New York.
+Added: Further, the Bank of England publishes a reformed Sterling Overnight Index Average, comprised of a broader set of overnight Sterling money market transactions, which has been selected by the Working Group on Sterling Risk-Free Reference Rates as the alternative rate to Sterling LIBOR.
+Added: Certain bank-sponsored committees in other jurisdictions, including Europe, Japan and Switzerland, have selected alternative reference rates denominated in other currencies.
+Added: Certain of the loan agreements with our portfolio companies include fallback language providing a mechanism for the parties to negotiate a new reference interest rate in the event that LIBOR ceases to exist.
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 for or 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, tax position and results of operations.
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• 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;
−Removed: • 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 and hedging transactions;
−Removed: • Result in a population of products with documentation that governs or references LIBOR or LIBOR-based products but that cannot be amended due to an inability to obtain sufficient consent from counterparties or product owners;
−Removed: • 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;
+Added: • Require further 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 transactions;
+Added: • Result in a population of products with documentation that governs or references LIBOR or LIBOR-based products but that cannot be amended due to an inability to obtain sufficient consent from counterparties;
+Added: • Result in inquiries, reviews or other actions from regulators in respect of our (or the market’s) preparation, readiness, transition plans and actions regarding the replacement of a LIBOR with one or more alternative reference rates, including regulatory guidance regarding constraints on the entry into new U.S.
+Added: dollar LIBOR-linked contracts after December 31, 2021;
• 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;
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• Cause us to incur additional costs in relation to any of the above factors.
−Removed: Alteration of the terms of a debt instrument or a modification of the terms of other types of contracts to replace an interbank offered rate with a new reference rate could result in a taxable exchange and the realization of income and gain/loss for U.S.
−Removed: federal income tax purposes.
−Removed: The IRS has issued proposed regulations regarding the tax consequences of the transition from interbank offered rates to new reference rates in debt instruments and non-debt contracts.
−Removed: Under the proposed regulations, to avoid such alteration or modification of the terms of a debt instrument being treated as a taxable exchange, among other requirements, the fair market value of the modified instrument or contract must be substantially equivalent to its fair market value before the qualifying change was made.
−Removed: The IRS may withdraw, amend or finalize, in whole or part, these proposed regulations and/or provide additional guidance, with potential retroactive effect.
+Added: In addition, the failure of any alternative benchmark rate to gain or maintain market acceptance could adversely affect the return on, value of and market for securities, variable rate debt and derivative financial instruments linked to such rates.
Depending on several factors, including those set forth above, our business, financial condition and results of operations could be materially adversely impacted by the market transition or reform of certain reference rates and benchmarks.
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We can offer no assurance, however, that the senior investment professionals of the Adviser will continue to provide investment advice to us.
−Removed: The loss of any member of the Adviser's Investment Committee or of other senior investment professionals of the Adviser and its affiliates would limit our ability to achieve our investment objective and operate as we anticipate.
+Added: The loss of any member of the Investment Committee or of other senior investment professionals of the Adviser and its affiliates could limit our ability to achieve our investment objective and operate as we anticipate.
In addition, we can offer no assurance that the resources, relationships and expertise of Morgan Stanley will be available for every transaction or generally during the term of the Company.
This could have a material adverse effect on our financial condition, results of operations and cash flows.
+Added: For the avoidance of doubt, we are not a subsidiary of or consolidated with Morgan Stanley.
+Added: Furthermore, Morgan Stanley has no obligation, contractual or otherwise, to financially support us beyond the equity commitment to purchase our common stock pursuant to a subscription agreement entered into by MS Credit Partners Holdings described above.
+Added: Morgan Stanley has no history of financially supporting any of the MS BDCs, even during periods of financial distress.
We depend on the diligence, skill and network of business contacts of the professionals available to our Administrator to carry out the administrative functions necessary for us to operate, including the ability to select and engage sub-administrators and third-party service providers.
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We depend upon the Adviser’s and its affiliates relationships with sponsors, and we intend to rely to a significant extent upon these relationships to provide us with potential investment opportunities.
−Removed: If the Adviser fails to maintain such relationships, or to
−Removed: develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio.
+Added: If the Adviser fails to maintain such relationships, or to develop new relationships with other sponsors or sources of investment opportunities, we will not be able to grow our investment portfolio.
In addition, individuals with whom the principals of the Adviser and its affiliates have relationships are not obligated to provide us with investment opportunities, and, therefore, we can offer no assurance that these relationships will generate investment opportunities for us in the future.
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The diversion of time by, or departure of, any of these individuals could have a material adverse effect on our ability to achieve our investment objectives.
−Removed: We may not replicate the historical results achieved by other entities managed or sponsored by members of the Adviser ’ s Investment Committee, or by the Adviser or its affiliates.
−Removed: Our investments may differ from those of existing accounts that are or have been sponsored or managed by members of the Adviser's Investment Committee, the Adviser or affiliates of the Adviser.
−Removed: Investors in our securities are not acquiring an interest in any accounts that are or have been sponsored or managed by members of the Adviser's Investment Committee, the Adviser or affiliates of the Adviser.
−Removed: Subject to the requirements of the 1940 Act and the provisions of the co-investment exemptive order applicable to us, we may consider co-investing in portfolio investments with Affiliated Investment Accounts (as defined below) or other accounts sponsored or managed by members of the Adviser's Investment Committee, the Adviser or its affiliates.
−Removed: Any such investments are subject to regulatory limitations and approvals by directors who are not "interested persons," as defined in the 1940 Act.
+Added: We may not replicate the historical results achieved by other entities managed or sponsored by members of the Investment Committee, or by the Adviser or its affiliates.
+Added: Our investments may differ from those of existing accounts that are or have been sponsored or managed by members of the Investment Committee, the Adviser or affiliates of the Adviser.
+Added: Investors in our securities are not acquiring an interest in any accounts that are or have been sponsored or managed by members of the Investment Committee, the Adviser or affiliates of the Adviser.
+Added: Subject to the requirements of the 1940 Act and the provisions of the co-investment exemptive order applicable to us, we may consider co-investing in portfolio investments with other alternative investment funds, regulated funds and investment programs, accounts and businesses (collectively, together with any new or successor funds, program, accounts or business, the “Affiliated Investment Accounts”) or other accounts sponsored or managed by members of the Investment Committee, the Adviser or its affiliates.
+Added: Any such investments are subject to regulatory limitations and approvals by our Independent Directors.
We can offer no assurance, however, that we will obtain such approvals or develop opportunities that comply with such limitations.
−Removed: We also cannot assure you that we will replicate the historical results achieved for other Morgan Stanley funds by members of the Investment Committee, and we caution you that our investment returns could be substantially lower than the returns achieved by them in prior periods.
+Added: We also cannot assure you that we will replicate the historical results achieved for other Morgan Stanley funds by members of the Investment Committee (including the Affiliated Investment Accounts), and we caution you that our investment returns could be substantially
+Added: lower than the returns achieved by them in prior periods.
Additionally, all or a portion of the prior results may have been achieved in particular market conditions which may never be repeated.
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Accomplishing this result on a cost-effective basis is largely a function of the Adviser’s structuring of the investment process, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms.
−Removed: The management team of the Adviser has substantial responsibilities under our Investment Advisory Agreement.
We can offer no assurance that any current or future employees of the Adviser will contribute effectively to the work of, or remain associated with, the Adviser.
−Removed: We caution you that the principals of our Adviser or Administrator may also be called upon to provide managerial assistance to our portfolio companies and those of other investment vehicles, including other BDCs, such as SLIC, which are managed by the Adviser.
+Added: We caution you that the principals of our Adviser or Administrator may also be called upon to provide managerial assistance to our portfolio companies and those of other investment vehicles, including the MS BDCs, which are managed by the Adviser.
Such demands on their time may distract them or slow our rate of investment.
Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
−Removed: The Adviser may frequently be required to make investment analyses and decisions on an expedited basis in order to take advantage of investment opportunities, and our Adviser may not have knowledge of all circumstances that could impact an investment by the Company.
+Added: The Adviser may frequently be required to make investment analyses and decisions on an expedited basis in order to take advantage of investment opportunities, and our Adviser may not have knowledge of all circumstances that could impact our investments.
Investment analyses and decisions by the Adviser may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities.
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There are significant potential conflicts of interest that could affect our investment returns.
−Removed: As a result of our arrangements with the Adviser and its affiliates and the Adviser’s Investment Committee, there may be times when the Adviser or such persons have interests that differ from those of our stockholders, giving rise to a conflict of interest.
−Removed: Conflicts related to obligations the Adviser ’ s Investment Committee, the Adviser or its affiliates have to other clients and conflicts related to fees and expenses of such other clients.
−Removed: Morgan Stanley, the parent company of the Adviser, has advised clients and has sponsored, managed or advised other alternative investment funds, regulated funds and investment programs, accounts and businesses (collectively, together with any new or successor funds, program, accounts or business, the “Affiliated Investment Accounts”) with a wide variety of investment objectives that in some instances may overlap or conflict with our investment objectives and present conflicts of interest.
+Added: As a result of our arrangements with the Adviser and its affiliates and the Investment Committee, there may be times when the Adviser or such persons have interests that differ from those of our stockholders, giving rise to a conflict of interest.
+Added: Conflicts related to obligations the Investment Committee, the Adviser or its affiliates have to other clients and conflicts related to fees and expenses of such other clients.
+Added: Morgan Stanley, the parent company of the Adviser, has advised clients and has sponsored, managed or advised other Affiliated Investment Accounts with a wide variety of investment objectives that in some instances may overlap or conflict with our investment objectives and present conflicts of interest.
In addition, Morgan Stanley may also from time to time create new or successor Affiliated Investment Accounts that may compete with us and present similar conflicts of interest.
In serving in these multiple capacities, Morgan Stanley, including the Adviser, the Investment Committee and the Investment Team, may have obligations to other clients or investors in Affiliated Investment Accounts, the fulfillment of which may not be in the best interests of us or our stockholders.
+Added: For example, in connection with the management of investments for other Affiliated Investment Accounts, members of Morgan Stanley and its affiliates may serve on the boards of directors of or advise companies which may compete with our portfolio investments.
Our investment objective may overlap with the investment objectives of certain Affiliated Investment Accounts.
−Removed: For example, the Adviser currently serves as the investment adviser to SLIC, a BDC which is pursuing an investment objective and investment strategy similar to ours.
+Added: For example, the Adviser currently serves as the investment adviser to the MS BDCs, each of which is pursuing an investment objective and investment strategy similar to ours.
As a result, the members of the Investment Committee may face conflicts in the allocation of investment opportunities among us and other investment funds, programs, accounts and businesses advised by or affiliated with the Adviser.
−Removed: Certain Affiliated Investment Accounts, including SLIC, may provide for higher management fees, incentive fees, greater expense reimbursements or overhead allocations, or permit the Adviser and its affiliates to receive higher origination and other transaction fees, all of which may contribute to this conflict of interest and create an incentive for the Adviser to favor such other accounts.
+Added: Certain Affiliated Investment Accounts, including the MS BDCs, may provide for higher management fees, incentive fees, greater expense reimbursements or overhead allocations, or permit the Adviser and its affiliates to receive higher origination and other transaction fees, all of which may contribute to this conflict of interest and create an incentive for the Adviser to favor such other accounts.
For example, the 1940 Act restricts the Adviser from receiving more than a 1% fee in connection with loans that we acquire, or originate, a limitation that does not exist for certain other accounts.
Morgan Stanley currently invests and plans to continue to invest on its own behalf and on behalf of its Affiliated Investment Accounts in a wide variety of investment opportunities in North America, Europe and elsewhere.
−Removed: Morgan Stanley and, to extent consistent with applicable law and/or the exemptive relief applicable to us and the Adviser's allocation policies and procedures, its Affiliated Investment Accounts will be permitted to invest in investment opportunities without making such opportunities available to us beforehand.
−Removed: Subject to the requirements of the exemptive relief applicable to us, Morgan Stanley may offer investments that fall into the investment objectives of an Affiliated Investment Account to such account or make such investment on its own behalf, even though such investment also falls within our investment objectives.
+Added: Morgan Stanley and, to the extent consistent with applicable law and/or the exemptive relief applicable to us and the Adviser’s allocation policies and procedures, its Affiliated Investment Accounts will be permitted to invest in investment opportunities without making such opportunities available to us beforehand.
+Added: Subject to the requirements of the exemptive relief applicable to us, Morgan Stanley may offer investments that fall
+Added: into the investment objectives of an Affiliated Investment Account to such account or make such investment on its own behalf, even though such investment also falls within our investment objectives.
We may invest in opportunities that Morgan Stanley and/or one or more Affiliated Investment Accounts has declined, and vice versa.
+Added: In addition, to the extent permitted by applicable law, investment opportunities in companies in which certain Affiliated Investment Accounts have already invested may be available to the Company notwithstanding that the Company has no existing investments in such portfolio company, resulting in assets of the Company potentially providing value to, or otherwise supporting the investments of, other Affiliated Investment Accounts.
All of the foregoing may reduce the number of investment opportunities available to us and may create conflicts of interest in allocating investment opportunities among the Company, itself and the Affiliated Investment Accounts.
−Removed: Morgan Stanley will allocate opportunities among one or more of the Company, itself and such Affiliated Investment Accounts in accordance with the terms of its allocation policies and procedures.
−Removed: Investors should note that the conflicts inherent in making such allocation decisions may not always be resolved to our advantage.
+Added: Our Adviser has established allocation policies and procedures and will allocate opportunities among one or more of the Company and such Affiliated Investment Accounts in accordance with the terms of such policies and procedures.
+Added: Investors should note that such allocation decisions may not be resolved to our advantage.
There can be no assurance that we will have an opportunity to participate in certain opportunities that fall within our investment objectives.
−Removed: It is possible that Morgan Stanley or an Affiliated Investment Account will invest in a company that is or becomes a competitor of a portfolio company of the Company.
−Removed: Such investment could create a conflict between the Company, on the one hand, and Morgan Stanley or the Affiliated Investment Account, on the other hand.
−Removed: In such a situation, Morgan Stanley may also have a conflict in the allocation of its own resources to the portfolio company.
+Added: It is possible that Morgan Stanley or an Affiliated Investment Account will invest in a company that is or becomes a competitor of one of our portfolio companies.
+Added: Such investment could create conflicts of interest among the Company, Morgan Stanley and/or the Affiliated Investment Account.
+Added: Morgan Stanley may also have conflicts of interest in the allocation of Morgan Stanley resources to the portfolio company.
In addition, certain Affiliated Investment Accounts will be focused primarily on investing in other funds which may have strategies that overlap and/or directly conflict and compete with us.
−Removed: To the extent permitted by law, it should be noted that Morgan Stanley has, directly or indirectly, made large investments in certain of its Affiliated Investment Accounts, and accordingly Morgan Stanley's investment in us may not be a determining factor in the outcome of any of the foregoing conflicts.
−Removed: In the course of our investing activities, we pay management fees to the Adviser and reimburse certain expenses of the Administrator.
+Added: We do not expect to invest in, or hold securities of, companies that are controlled by an affiliate’s other clients.
+Added: However, our Adviser or an affiliate’s other clients may invest in, and gain control over, one of our portfolio companies.
+Added: If our Adviser or an affiliate’s other client, or clients, gains control over one of our portfolio companies, it may create conflicts of interest and may subject us to certain restrictions under the 1940 Act.
+Added: As a result of these conflicts and restrictions our Adviser may be unable to implement our investment strategies as effectively as they could have in the absence of such conflicts or restrictions.
+Added: For example, as a result of a conflict or restriction, our Adviser may be unable to engage in certain transactions that it would otherwise pursue.
+Added: In order to avoid these conflicts and restrictions, our Adviser may choose to exit such investments prematurely and, as a result, we may forego any positive returns associated with such investments.
+Added: In addition, to the extent that an affiliate’s other client holds a different class of securities than us as a result of such transactions, our interests may not be aligned.
+Added: It should be noted that Morgan Stanley has, directly or indirectly, made investments in certain of its Affiliated Investment Accounts, and accordingly Morgan Stanley’s investment in us in itself may not determine the outcome in the resolution of any of the foregoing conflicts.
+Added: In the course of our investing activities, we pay management and incentive fees to the Adviser and reimburse certain expenses of the Administrator.
As a result, investors in shares of our Common Stock will invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than one might achieve through direct investments.
As a result of this arrangement, there may be times when the Adviser has interests that differ from those of our common stockholders, giving rise to a conflict.
−Removed: The Adviser ’ s investment professionals are engaged in other investment activity on behalf of other clients.
−Removed: Certain investment professionals who are involved in our activities remain responsible for the investment activities of other Affiliated Investment Accounts managed by the Adviser and its affiliates, and they will devote time to the management of such investments and other newly created Affiliated Investment Accounts (whether in the form of funds, separate accounts or other
−Removed: vehicles), as well as their own investments.
−Removed: For example, our directors and officers also serve as directors and officers of SLIC, a BDC that is advised by the Adviser and is pursuing an investment objective and investment strategy similar to ours.
−Removed: In addition, in connection with the management of investments for other Affiliated Investment Accounts, members of Morgan Stanley and its affiliates may serve on the boards of directors of or advise companies which may compete with our portfolio investments.
−Removed: Moreover, these Affiliated Investment Accounts managed by Morgan Stanley and its affiliates may pursue investment opportunities that may also be suitable for us.
−Removed: The Adviser ’ s Investment Committee, the Adviser or its affiliates may, from time to time, possess material non-public information, limiting our investment discretion.
−Removed: Principals of the Adviser and its affiliates and members of the Adviser’s Investment Committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities of which are purchased or sold on our behalf.
+Added: The Investment Committee, the Adviser or its affiliates may, from time to time, possess material non-public information, or may not have access to certain information held by Morgan Stanley, each of which would limit our investment discretion.
+Added: Principals of the Adviser and its affiliates and members of the Investment Committee may serve as directors of, or in a similar capacity with, companies in which we invest, the securities of which are purchased or sold on our behalf.
In the event that material nonpublic information is obtained with respect to such companies, or we become subject to trading restrictions under the internal trading policies of those companies or as a result of applicable law or regulations, we could be prohibited for a period of time from purchasing or selling the securities of such companies, and this prohibition may have an adverse effect on us.
−Removed: Our management and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.
−Removed: In the course of our investing activities, we pay management and incentive fees to the Adviser.
+Added: The Adviser may also from time to time be subject to contractual “stand-still” obligations and/or confidentiality obligations that may restrict its ability to trade in certain investments on behalf of the Company.
+Added: In addition, Morgan Stanley may be precluded from disclosing such information to the Investment Team, even in circumstances in which the information would benefit the Company if disclosed.
+Added: Therefore, the Adviser may not be provided access to material nonpublic information in the possession of Morgan Stanley that might be relevant to an investment decision to be made by the Company, and the Company may initiate a transaction or sell an investment that, if such information had been known to it, may not have been undertaken.
+Added: In addition, certain members of the Investment Team and of the Investment Committee may be recused from certain investment-related discussions, including investment committee meetings, so that such members do not receive information that would limit their ability to perform functions of their employment with Morgan Stanley unrelated to the Company.
+Added: Furthermore, access to certain parts of Morgan Stanley may be subject to third party confidentiality obligations and to information barriers established by Morgan Stanley in order to manage potential conflicts of interest and regulatory restrictions, including without limitation joint transaction restrictions pursuant to the 1940 Act.
+Added: Accordingly, the Company’s ability to source investments from other business units within Morgan Stanley may be limited and there can be no assurance that the Company will be able to source any investments from any one or more parts of the Morgan Stanley network.
+Added: Our management fee and incentive fee structure may create incentives for the Adviser that are not fully aligned with the interests of our stockholders and may induce the Adviser to make speculative investments.
+Added: In the course of our investing activities, we pay a management fee and incentive fees to the Adviser.
The base management fee is based on our average gross assets and the incentive fee is computed and paid on income, both of which include leverage.
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Our Board of Directors is charged with protecting our stockholders’ interests by monitoring how the Adviser addresses these and other conflicts of interest associated with its management services and compensation.
−Removed: The part of the management and incentive fees payable to Adviser that relates to our net investment income is computed and paid on income that may include interest income that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends, zero coupon securities, and other deferred interest instruments and may create an incentive for the Adviser to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement.
+Added: The Investment Advisory Agreement entitles our Adviser to receive an incentive fee based on our pre-incentive fee net investment income regardless of any capital losses.
+Added: In such case, we may be required to pay our Adviser an incentive fee for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
+Added: Additionally, the part of the incentive fees payable to our Adviser that relates to our net investment income is computed and paid on income that may include interest income that has been accrued but not yet received in cash, such as market discount, debt instruments with PIK interest, preferred stock with PIK dividends, zero coupon securities, and other deferred interest instruments and may create an incentive for the Adviser to make investments on our behalf that are riskier or more speculative than would be the case in the absence of such compensation arrangement.
This fee structure may be considered to give rise to a conflict of interest for the Adviser to the extent that it may encourage the Adviser to favor debt financings that provide for deferred interest, rather than current cash payments of interest.
3 unchanged sentences
This risk could be increased because the Adviser is not obligated to reimburse us for any fees received even if we subsequently incur losses or never receive in cash the deferred income that was previously accrued.
−Removed: Conflicts related to other arrangements with the Adviser or its affiliates.
+Added: For federal income tax purposes, we may be required to recognize taxable income in some circumstances in which we do not receive a corresponding payment in cash and to make distributions with respect to such income to maintain our tax treatment as a RIC and/or minimize corporate-level U.S.
+Added: federal income or excise tax.
+Added: Under such circumstances, we may have difficulty meeting the Annual Distribution Requirement (as defined below) necessary to maintain RIC tax treatment under the Code.
+Added: This difficulty in making the required distribution may be amplified to the extent that we are required to pay the incentive fee on income with respect to such accrued income.
+Added: As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose.
+Added: If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S.
+Added: federal income tax.
+Added: Conflicts related to other arrangements with the Adviser and its affiliates.
We have entered into a license agreement with the Adviser under which the Adviser has granted us a non-exclusive, royalty-free license to use the name “Morgan Stanley.” In addition, we pay to the Administrator our allocable portion of certain expenses incurred by the Administrator in performing its obligations under the Administration Agreement, such as our allocable portion of the cost of our chief financial officer and chief compliance officer.
4 unchanged sentences
The 1940 Act also prohibits certain “joint” transactions with certain of our affiliates, which in certain circumstances could include investments in the same portfolio company (whether at the same or different times to the extent the transaction involves a joint investment), without prior approval of our Board of Directors and, in some cases, the SEC.
−Removed: If a person acquires more than 25% of our voting securities, we are prohibited from buying or selling any security from or to such person or certain of that person's affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC.
+Added: acquires more than 25% of our voting securities, we will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC.
Similar restrictions limit our ability to transact business with our officers or directors or their affiliates.
The SEC has interpreted the BDC regulations governing transactions with affiliates to prohibit certain joint transactions involving entities that share a common investment adviser.
−Removed: As a result of these restrictions, we may be prohibited from buying or selling any security from or to any portfolio company that is controlled by a fund managed by the Adviser or their respective affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
+Added: As a result of these restrictions, we are prohibited from buying or selling any security from or to any portfolio company that is controlled by a fund managed by the Adviser or their respective affiliates without the prior approval of the SEC, which may limit the scope of investment opportunities that would otherwise be available to us.
We may, however, invest alongside our Adviser’s and/or its affiliates’ other clients, in certain circumstances where doing so is consistent with applicable law and SEC staff interpretations, guidance and exemptive relief orders.
2 unchanged sentences
Pursuant to the Order, we are permitted to co-invest with our affiliates if a “required majority” (as defined in Section 57(o) of the 1940 Act) of our eligible directors make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to us and our stockholders and do not involve overreaching in respect of us or our stockholders on the part of any person concerned, and (2) the transaction is consistent with the interests of our stockholders and is consistent with our investment objective and strategies.
−Removed: In situations when co-investment with affiliates' other clients is not permitted under the 1940 Act and related rules, existing or future staff guidance, or the terms and conditions of the exemptive relief granted to us by the SEC (as discussed above), our Adviser will need to decide which client or clients will proceed with the investment.
+Added: In situations where co-investment with affiliates’ other clients is not permitted under the 1940 Act and related rules, existing or future staff guidance, or the terms and conditions of the exemptive relief granted to us by the SEC (as discussed above), our Adviser will need to decide which client or clients will proceed with the investment.
Generally, we will not have an entitlement to make a co-investment in these circumstances and, to the extent that another client elects to proceed with the investment, we will not be permitted to participate.
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The business of identifying and structuring investments of the types contemplated by us is competitive and involves a high degree of uncertainty.
−Removed: We are competing for investments with other investment funds, including SLIC, as well as more traditional lending institutions and private credit-focused competitors.
+Added: We are competing for investments with other investment funds, including the MS BDCs, as well as more traditional lending institutions and private credit-focused competitors.
Over the past several years, an increasing number of funds have been formed, with investment objectives similar to, or overlapping with, our investment objectives (and many such existing funds have grown substantially in size).
20 unchanged sentences
Federal Income Tax Considerations—Taxation as a RIC .”
−Removed: We will need to raise additional capital to grow because we must distribute most of our income.
−Removed: We will need additional capital to fund new investments and grow our portfolio of investments.
−Removed: We intend to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital.
−Removed: Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
−Removed: A reduction in the availability of new capital could limit our ability to grow.
−Removed: In addition, we will be required to distribute each taxable year an amount at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, or ICTI, determined without regard to any deduction for dividends paid as dividends for U.S.
−Removed: federal income tax purposes, to our stockholders to maintain our ability to be subject to tax as a RIC.
−Removed: As a result, these earnings are not available to fund new investments.
−Removed: An inability to access the capital markets successfully could limit our ability to grow our business and execute our business strategy fully and could decrease our earnings, if any.
−Removed: This would have an
−Removed: adverse effect on the value of our securities.
−Removed: If we are not able to raise capital and are at or near our targeted leverage ratios, we may receive smaller allocations, if any, on new investment opportunities under the Adviser's allocation policies and procedures.
We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.
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In such a case, we may have to sell some of our investments at times we would not consider advantageous, raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements.
−Removed: If we are not able to obtain such cash from other sources, we may fail to qualify as a RIC and thus be subject to corporate-level income tax.
+Added: If we are not able to obtain such cash from other sources, we may fail to qualify
+Added: as a RIC and thus be subject to corporate-level income tax.
See “ Item 1.
1 unchanged sentence
Federal Income Tax Considerations—Taxation as a RIC .”
+Added: We will need to raise additional capital to grow because we must distribute most of our income.
+Added: We will need additional capital to fund new investments and grow our portfolio of investments.
+Added: We intend to access the capital markets periodically to issue debt or equity securities or borrow from financial institutions in order to obtain such additional capital.
+Added: Unfavorable economic conditions could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us.
+Added: A reduction in the availability of new capital could limit our ability to grow.
+Added: In addition, we will be required to distribute each taxable year an amount at least equal to 90% of the sum of our net ordinary income and net short-term capital gains in excess of net long-term capital losses, or ICTI, determined without regard to any deduction for dividends paid as dividends for U.S.
+Added: federal income tax purposes, to our stockholders to maintain our ability to be subject to tax as a RIC.
+Added: As a result, these earnings are not available to fund new investments.
+Added: An inability to access the capital markets successfully could limit our ability to grow our business and execute our business strategy fully and could decrease our earnings, if any.
+Added: This would have an adverse effect on the value of our securities.
+Added: If we are not able to raise capital and are at or near our targeted leverage ratios, we may receive smaller allocations, if any, on new investment opportunities under the Adviser’s allocation policies and procedures.
If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, U.S.
stockholders that are individuals, trusts or estates will be taxed as though they received a distribution of some of our expenses.
−Removed: While we expect to be treated as a “publicly offered regulated investment company,” if we are not so treated as a result of either (1) shares of our Common Stock and our preferred stock collectively being held by at least 500 persons at all times during a taxable year, (2) shares of our Common Stock are continuously offered pursuant to a public offering (within the meaning of Section 4 of the Securities Act) or (3) shares of our Common Stock being treated as regularly traded on an established securities market, each U.S.
+Added: For any taxable year that we are not so treated as a “publicly offered regulated investment company,” each U.S.
stockholder that is an individual, trust or estate will be treated as having received a dividend for U.S.
federal income tax purposes from us in the amount of such U.S.
−Removed: stockholder’s allocable share of the management and incentive fees paid to our investment adviser and certain of our other expenses for the calendar year, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S.
+Added: stockholder’s allocable share of the management fee and incentive fees paid to our investment adviser and certain of our other expenses for the calendar year, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S.
For taxable years beginning before 2026, miscellaneous itemized deductions generally are not deductible by a U.S.
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We are not generally able to issue and sell our Common Stock at a price below net asset value per share.
−Removed: We may, however, sell our Common Stock, or warrants, options or rights to acquire our Common Stock, at a price below the then-current net asset value per share of our Common Stock if our Board of Directors determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale.
+Added: We may, however, sell our Common Stock, or warrants, options or rights to acquire our Common Stock, at a price below the then-current net asset value
+Added: per share of our Common Stock if our Board of Directors determines that such sale is in the best interests of us and our stockholders, and if our stockholders approve such sale.
In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board of Directors, closely approximates the market value of such securities (less any distributing commission or discount).
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(1) Assumes $2,493.3 million in total assets, $1,249.9 million in debt outstanding and $1,188.6 million in net assets as of December 31, 2021, and an average cost of funds of 2.12%, which is our weighted average interest rate as of December 31, 2021, excluding unused fees and financing costs.
−Removed: Based on our outstanding indebtedness of $333.9 million as of December 31, 2020 and the effective annual interest rate of 1.93% as of that date, our investment portfolio would have been required to experience an annual return of at least 0.98% to cover annual interest payments on the outstanding debt.
−Removed: We are subject to risks associated with the CIBC Subscription Facility, the BNP Funding Facility and any other Credit Facility.
−Removed: We originally entered into the CIBC Subscription Facility with CIBC Bank USA as administrative agent and arranger on December 31, 2019, and most recently amended such facility on November 17, 2020.
−Removed: Additionally, DLF Financing SPV, LLC, our wholly owned subsidiary and a Delaware limited liability company (“DLF LLC”), entered into the BNP Funding Facility on October 14, 2020, and subsequently amended such facility on December 11, 2020.
−Removed: We anticipate that we or a direct subsidiary of ours may enter into one or more additional senior secured revolving credit facilities (each, a “Credit Facility”).
−Removed: As a result of the CIBC Subscription Facility, the BNP Funding Facility and any future Credit Facility, we are subject to a variety of risks, including those set forth below.
−Removed: Any inability to renew, extend or replace the CIBC Subscription Facility, the BNP Funding Facility or any other Credit Facility could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.
−Removed: There can be no assurance that we would be able to renew, extend or replace the CIBC Credit Facility, the BNP Funding Facility or any other Credit Facility upon its maturity on terms that are favorable to us, if at all.
+Added: Based on our outstanding indebtedness of $1,249.9 million as of December 31, 2021 and the effective weighted average annual interest rate of 2.12% as of that date (excluding unused fees and financing costs), our investment portfolio would have been required to experience an annual return of at least 1.06% to cover annual interest payments on the outstanding debt.
+Added: We are subject to risks associated with our Credit Facilities.
+Added: We entered into a credit agreement with CIBC Bank USA as administrative agent and arranger and the various financial institutions party thereto on December 31, 2019, and most recently amended such facility on February 3, 2022 (as amended, the “CIBC Subscription Facility”).
+Added: DLF Financing SPV, LLC, our wholly owned subsidiary and a Delaware limited liability company (“DLF LLC”), entered into a revolving credit and security agreement with BNP Paribas, as the administrative agent and lender, the Company, as the equity holder and as the servicer, and U.S.
+Added: Bank National Association, as collateral agent, on October 14, 2020, and most recently amended such facility on March 2, 2021 (the “BNP Funding Facility”).
+Added: Additionally, on July 16, 2021, we entered into a senior secured revolving credit agreement with Truist Bank, as administrative agent, and Truist Securities, Inc., as joint lead arranger and sole book runner (the “Truist Credit Facility”).
+Added: We anticipate that we or a direct subsidiary of ours may enter into one or more additional senior secured revolving credit facilities.
+Added: As a result of our current Credit Facilities and any future Credit Facility, we are subject to a variety of risks, including those set forth below.
+Added: Any inability to renew, extend or replace any of our Credit Facilities could adversely impact our liquidity and ability to find new investments or maintain distributions to our stockholders.
+Added: There can be no assurance that we would be able to renew, extend or replace any of our Credit Facilities upon its maturity on terms that are favorable to us, if at all.
Our ability to renew, extend or replace such credit facilities would be constrained by then-current economic conditions affecting the credit markets.
−Removed: In the event that we were not able to renew, extend or replace the CIBC Subscription Facility, the BNP Funding Facility or any other Credit Facility at the time of its 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.
−Removed: In addition to regulatory limitations on our ability to raise capital, each of the CIBC Subscription Facility and the BNP Funding Facility contains various covenants, which, if not complied with, could accelerate our repayment obligations under such facilities, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
−Removed: We have entered into the CIBC Subscription Facility, and DLF LLC has entered into the BNP Funding Facility, and as a result, we are subject to certain risks.
+Added: In the event that we were not able to renew, extend or replace any of our Credit Facilities at the time of its 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.
+Added: In addition to regulatory limitations on our ability to raise capital, each of our Credit Facilities contains various covenants, which, if not complied with, could accelerate our repayment obligations under such facilities, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
+Added: We have entered into the CIBC Subscription Facility and the Truist Credit Facility, and DLF LLC has entered into the BNP Funding Facility, and as a result, we are subject to certain risks.
The CIBC Subscription Facility is secured by the unfunded commitments of certain investors of the Company.
+Added: The Truist Credit Facility is guaranteed by certain domestic subsidiaries of the Company, and the Truist Credit Facility is secured by a first priority security interest in substantially all of the assets of the Company and each such guarantor, subject to certain exceptions.
We have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
−Removed: Our continued compliance with the covenants contained in each of the CIBC Subscription Agreement and the BNP Funding Facility depends on many factors, some of which are beyond our control.
+Added: Our continued compliance with the covenants contained in each of the Credit Facilities depends on many factors, some of which are beyond our control.
We can offer no assurances that we will continue to comply with these covenants.
−Removed: In the event of a default under the CIBC Subscription Agreement and/or the BNP Funding Facility documents, CIBC Bank USA and/or BNP, as applicable, in each of their respective capacities as administrative agent under the applicable loan documents, would have the right to call the capital commitments of our investors collateralizing the CIBC Subscription Agreement and/or the BNP Funding Facility documents in order to repay amounts outstanding under such facilities, which would reduce the amount of capital commitments available to us for investment purposes and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.
+Added: In the event of a default under the any of the Credit Facilities, the administrative agent under the applicable loan documents would have the right to call the capital commitments of our investors collateralizing such Credit Facilities in order to repay amounts outstanding under such Credit Facilities, which would reduce the amount of capital commitments available to us for investment purposes and thereby have a material adverse effect on our business, liquidity, financial condition, results of operations and ability to pay distributions to our stockholders.
Our interests in any subsidiary that enters into a Credit Facility would be subordinated, and we may not receive cash on our equity interests from any such subsidiary.
1 unchanged sentence
Our interests in any wholly owned direct or indirect subsidiary of ours would be subordinated in priority of payment to every other obligation of any such subsidiary and would be subject to certain payment restrictions set forth in the Credit Facility.
−Removed: We would receive cash distributions on our equity interests in any such subsidiary only if
−Removed: such subsidiary had made all required cash interest payments to the lenders and no default exists under the Credit Facility.
+Added: We would receive cash distributions on our equity interests in any such subsidiary only if such subsidiary had made all required cash interest payments to the lenders and no default exists under the Credit Facility.
We cannot assure you that distributions on the assets held by any such subsidiary would be sufficient to make any distributions to us or that such distributions would meet our expectations.
10 unchanged sentences
Our ability to sell investments held by any subsidiary that enters into a Credit Facility would be limited.
−Removed: We expect that a Credit Facility would place significant restrictions on our ability, as servicer, to sell investments.
+Added: Our existing Credit Facilities place significant restrictions on our ability, as servicer, to sell investments, and we expect that any Credit Facility we enter into in the future would include similar restrictions.
As a result, there may be times or circumstances during which we would be unable to sell investments or take other actions that might be in our best interests.
11 unchanged sentences
We may not call an investor’s entire capital commitment prior to the end of our Investment Period.
−Removed: Although the Adviser will seek to manage our cash balances so that they are appropriate for our investments and other obligations, the Adviser’s ability to manage cash balances may be affected by changes in the timing of investment closings, our access to leverage, defaults by investors in shares of our Common Stock, late payments of drawdown purchases and other factors.
+Added: Although the Adviser seeks to manage our cash balances so that they are appropriate for our investments and other obligations, the Adviser’s ability to manage cash balances may be affected by changes in the timing of investment closings, our access to leverage, defaults by investors in shares of our Common Stock, late payments of drawdown purchases and other factors.
In addition, we can offer no assurance that all investors will satisfy their respective capital commitments.
3 unchanged sentences
We may enter into reverse repurchase agreements, which are another form of leverage.
−Removed: We may enter into reverse repurchase agreements as part of our management of our temporary investment portfolio.
+Added: We may enter into reverse repurchase agreements.
Under a reverse repurchase agreement, we will effectively pledge our assets as collateral to secure a short-term loan.
6 unchanged sentences
If a buyer of securities under a reverse repurchase agreement were to file for bankruptcy or experience insolvency, we may be adversely affected.
−Removed: Also, in entering into reverse repurchase agreements, we would bear the risk of loss to the extent that the proceeds of such agreements at settlement are less than the fair value of the underlying securities being pledged.
+Added: Also, in entering into reverse repurchase agreements, we would bear the risk of loss to the extent that the proceeds of such agreements
+Added: at settlement are less than the fair value of the underlying securities being pledged.
In addition, due to the interest costs associated with reverse repurchase agreements, our net asset value will decline, and, in some cases, we may be worse off than if we had not used such agreements.
17 unchanged sentences
As discussed in more detail under “ Part II.
−Removed: Management's Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies ”, most, if not all, of our investments (other than cash and cash equivalents) are classified as Level 3 under ASC 820.
+Added: Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates ”, most, if not all, of our investments (other than cash and cash equivalents) are classified as Level 3 under ASC 820.
This means that our portfolio valuations are based on unobservable inputs and our own assumptions about how market participants would price the asset or liability in question.
5 unchanged sentences
We have retained the services of an independent service provider to review the valuation of these securities.
−Removed: At least once on a rolling twelve-month basis, the valuation for each portfolio investment for which a market quote is not readily available will be reviewed by an independent valuation firm.
+Added: The valuation of all or portion of our portfolio investments for which a market quote is not readily available will be reviewed by an independent valuation firm each quarter and month-end .
The types of factors that our Board of Directors may take into account in determining the fair value of our investments generally include, as appropriate, comparison to publicly traded securities, including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business and other relevant factors.
−Removed: Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed.
+Added: Because such valuations, and in particular, the valuations of private securities and private companies, are inherently uncertain, they may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed.
Our net asset value could be adversely affected if our determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such securities.
1 unchanged sentence
Any changes in fair value are recorded in the aggregate in our consolidated statement of operations as a net change in unrealized appreciation or depreciation.
−Removed: Our activities may be limited as a result of potentially being deemed to be controlled by a BHC.
−Removed: As a BHC that has elected FHC status under the BHCA, Morgan Stanley and its affiliates are subject to comprehensive, consolidated supervision and regulation by the Federal Reserve.
−Removed: Since the Adviser is a subsidiary of Morgan Stanley, the Federal Reserve will treat the Adviser as an affiliate of Morgan Stanley.
−Removed: As a result, the Adviser will be subject to the BHCA and the Federal Reserve's implementing regulations and interpretations, which are subject to change.
−Removed: A significant focus of the regulatory framework that applies to Morgan Stanley is to ensure that Morgan Stanley and its subsidiaries operate in a safe and sound manner, with sufficient capital, earnings and liquidity to allow Morgan Stanley to serve as a source of financial and managerial strength to the Banks.
−Removed: These Banks must remain well capitalized and well managed if Morgan Stanley is to maintain its FHC status and continue to engage in the widest range of permissible financial activities.
−Removed: In addition, the general exercise by the Federal Reserve of its regulatory, supervisory and enforcement authority with respect to Morgan Stanley and certain provisions of Dodd-Frank could result in the need for Morgan Stanley to change its business practices or the scope of its current lines of business, including certain limited divestitures.
−Removed: Although such changes could have an impact on and consequences for Morgan Stanley and the Adviser, any limited divestiture should not directly involve the Adviser.
−Removed: New or modified laws or regulations governing our operations may adversely affect our business.
−Removed: We and our portfolio companies are subject to regulation by laws at the U.S.
−Removed: federal, state and local levels.
−Removed: These laws and regulations, as well as their interpretation, may change from time to time, including as the result of interpretive guidance or other directives from the U.S.
−Removed: President and others in the executive branch, and new laws, regulations and interpretations may also come into effect.
−Removed: Any such new or changed laws or regulations could have a material adverse effect on our business.
−Removed: In particular, Dodd-Frank impacts many aspects of the financial services industry and BHCs such as Morgan Stanley, and it requires the development and adoption of many implementing regulations over the next several years.
−Removed: The effects of Dodd-Frank on the financial services industry will depend, in large part, upon the extent to which regulators exercise the authority granted to them and the approaches taken in implementing regulations.
−Removed: Any statements from the U.S.
−Removed: President or members of Congress regarding amendments, expansion or repeal of Dodd-Frank, among other federal laws, may create regulatory uncertainty in the near term.
−Removed: While the impact of this legislation on us and our portfolio companies may not be known for some time, Dodd-Frank, including future rules implementing its provisions and the interpretation of those rules, along with other legislative and regulatory proposals directed at the financial services industry that are proposed or pending in the U.S.
−Removed: Congress, may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.
−Removed: Laws that apply to us, either now or in the future, are often highly complex and may include licensing requirements.
−Removed: The licensing process can be lengthy and can be expected to subject us to increased regulatory oversight.
−Removed: Failure, even if unintentional, to comply fully with applicable laws may result in sanctions, fines or limitations on the ability of the Company or the Adviser to do business in the relevant jurisdiction or to procure required licenses in other jurisdictions, all of which could have a material adverse effect on us.
−Removed: In addition, if we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.
−Removed: Additionally, changes to the laws and regulations governing our operations, including those associated with RICs, may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities or result in the imposition of corporate-level taxes on us.
−Removed: Such changes could result in material differences to our strategies and plans and may shift our investment focus from
−Removed: the areas of expertise of the Adviser to other types of investments in which the Adviser may have little or no expertise or experience.
−Removed: Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.
−Removed: If we invest in commodity interests in the future, the Adviser may determine not to use investment strategies that trigger additional regulation by the CFTC or may determine to operate subject to CFTC regulation, if applicable.
−Removed: If we or the Adviser were to operate subject to CFTC regulation, we may incur additional expenses and would be subject to additional regulation.
−Removed: In addition, certain regulations applicable to debt securitizations implementing credit risk retention requirements that have taken effect or will take effect in both the United States and in Europe may adversely affect or prevent us from entering into any future securitization transaction.
−Removed: These risk retention rules may cause an increase in our cost of funds under or may prevent us from completing any future securitization transactions.
−Removed: On October 21, 2014, U.S.
−Removed: risk retention rules adopted pursuant to Section 941 of Dodd-Frank, or the U.S.
−Removed: Risk Retention Rules, were issued.
−Removed: Risk Retention Rules require the sponsor (directly or through a majority-owned affiliate) of a debt securitization subject to such rules, such as CLOs, in the absence of an exemption, to retain an economic interest in the credit risk of the assets being securitized in the form of an eligible horizontal residual interest, an eligible vertical interest, or a combination thereof, in accordance with the requirements of the U.S.
−Removed: Risk Retention Rules.
−Removed: Risk Retention Rules became effective December 24, 2016.
−Removed: Given the more attractive financing costs associated with these types of debt securitization as opposed to other types of financing available (such as traditional senior secured facilities), this would, in turn, increase our financing costs.
−Removed: Any associated increase in financing costs would ultimately be borne by our common stockholders.
−Removed: On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Reform Act”) was enacted into law, which leaves the architecture and core features of Dodd-Frank intact but significantly recalibrates applicability thresholds, revises various post-crisis regulatory requirements, and provides targeted regulatory relief to certain financial institutions.
−Removed: Among the most significant of its amendments to Dodd-Frank are a substantial increase in the $50 billion asset threshold for automatic regulation of BHCs as “systemically important financial institutions” an exemption from the Volcker Rule for insured depository institutions with less than $10 billion in consolidated assets and lower levels of trading assets and liabilities, as well as amendments to the liquidity leverage ratio and supplementary leverage ratio requirements.
−Removed: On May 30, 2018, the Federal Reserve Board voted to consider changes to the Volcker Rule that would loosen compliance requirements for all banks.
−Removed: The effect of this change and any further rules or regulations are and could be complex and far-reaching, and the change and any future laws or regulations or changes thereto could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.
−Removed: In July 2019, U.S.
−Removed: federal regulatory agencies adopted amendments to the Volcker Rule regulations to implement the Reform Act.
−Removed: In addition, in 2019 such U.S.
−Removed: federal regulatory agencies adopted targeted amendments to the Volcker Rule regulations to simplify and tailor certain compliance requirements relating to the Volcker Rule.
−Removed: In June 2020, U.S.
−Removed: federal regulatory agencies adopted additional revisions to the Volcker Rule’s current restrictions on banking entities sponsoring and investing in certain covered hedge funds and private equity funds, including by adopting new exemptions allowing banking entities to sponsor and invest without limit in credit funds, venture capital funds, customer facilitation funds and family wealth management vehicles.
−Removed: The ultimate consequences of the Reform Act and such regulatory developments remain uncertain, and it remains unclear whether any other legislative or regulatory proposals will be enacted or adopted.
−Removed: Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation.
−Removed: While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or stockholder approval, and we may temporarily deviate from our regular investment strategy .
5 unchanged sentences
The DGCL contains provisions that may discourage, delay or make more difficult a change in control of us or the removal of our directors.
−Removed: Our certificate of incorporation and bylaws contain provisions that limit liability and provide for indemnification of our
−Removed: directors and officers.
+Added: Our certificate of incorporation and bylaws contain provisions that limit liability and provide for indemnification of our directors and officers.
These provisions and others which we may adopt also may have the effect of deterring hostile takeovers or delaying changes in control or management.
13 unchanged sentences
If the Administrator resigns, we may not be able to find a new administrator or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms, or at all.
−Removed: If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the value of our shares may decline.
+Added: we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected and the value of our shares may decline.
In addition, the coordination of our internal management and administrative activities is likely to suffer if we are unable to identify and reach an agreement with a service provider or individuals with the expertise possessed by the Administrator.
Even if we are able to retain a comparable service provider or individuals to perform such services, whether internal or external, their integration into our business and lack of familiarity with our investment objective may result in additional costs and time delays that may adversely affect our business, financial condition, results of operations and cash flows.
−Removed: We are an “emerging growth company,” and we do not know if such status will make our shares less attractive to investors.
−Removed: We are an “emerging growth company,” as defined in the JOBS Act, until the earliest of:
−Removed: • the last day of the fiscal year ending after the fifth anniversary of any initial public offering of shares of Common Stock;
−Removed: • the year in which our total annual gross revenues first exceed $1.07 billion;
−Removed: • the date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt;
−Removed: • the last day of a fiscal year in which we (1) have an aggregate worldwide market value of shares of our Common Stock held by non-affiliates of $700 million or more, computed at the end of the last business day of the second fiscal quarter in such
−Removed: fiscal year and (2) have been a reporting company under the Exchange Act for at least one year (and filed at least one annual report under the Exchange Act).
−Removed: Although we are still evaluating the JOBS Act, we may take advantage of some or all of the reduced regulatory and disclosure requirements permitted by the JOBS Act and, as a result, some investors may consider shares of our Common Stock less attractive.
−Removed: For example, while we are an emerging growth company and/or a non-accelerated filer within the meaning of the Exchange Act, we may take advantage of exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.
−Removed: This may increase the risk that material weaknesses or other deficiencies in our internal control over financial reporting go undetected.
−Removed: Efforts to comply with the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act would adversely affect us and the value of shares of our Common Stock.
−Removed: We are required to comply with certain requirements of the Sarbanes-Oxley Act and the related rules and regulations promulgated by the SEC but will not have to comply with certain requirements until we have been registered under the Exchange Act for a specified period of time or cease to be an "emerging growth company." Because shares of our Common Stock are registered under the Exchange Act, we are subject to the Sarbanes-Oxley Act and the related rules and regulations promulgated by the SEC, and our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.
−Removed: We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting.
−Removed: As a result, we expect to incur significant additional expenses that may negatively impact our financial performance and our ability to make distributions.
−Removed: This process will also result in a diversion of management's time and attention.
−Removed: We do not know when our evaluation, testing and remediation actions will be completed or its impact on our operations.
−Removed: In addition, we may be unable to ensure that the process is effective or that our internal control over financial reporting is or will be effective.
−Removed: In the event that we are unable to come into and maintain compliance with the Sarbanes-Oxley Act and related rules, we and the value of our securities would be adversely affected.
−Removed: We do not currently have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and the value of our common stock.
−Removed: We have not previously been required to maintain proper and effective internal control over financial reporting, including the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act.
−Removed: We will not be required to comply with all of the requirements under Section 404 of the Sarbanes-Oxley Act until we have been subject to the reporting requirements of the Exchange Act for a specified period of time or the date we are no longer an emerging growth company under the JOBS Act.
−Removed: Accordingly, our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be required to meet.
−Removed: Notwithstanding the foregoing, as further described in Item 9A.
−Removed: Control and Procedures, Management conducted an evaluation of the effectiveness of the company's internal control over financial reporting as of December 31, 2020 based on the framework established in Internal Control - Integrated Framework (2013) issued by the committee of Sponsoring Organizations of the Treadway Commission.
−Removed: Based on this assessment, management concluded that the Company’s internal control over financial reporting as of December 31, 2020 was effective.
−Removed: Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company under the JOBS Act.
−Removed: Because we do not currently have comprehensive documentation of our internal control and have not yet tested our internal control in accordance with Section 404 of the Sarbanes-Oxley Act, we cannot conclude, as required by Section 404, that we do not have a material weakness in our internal control or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal control.
−Removed: As a public entity, we will be required to complete our initial assessment in a timely manner.
−Removed: If we are not able to implement the applicable requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our operations, financial reporting or financial results could be adversely affected.
−Removed: Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC, and result in a breach of the covenants under the agreements governing any of our financing arrangements.
−Removed: There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.
−Removed: Confidence in the reliability of our financial statements could also suffer if we or our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting.
−Removed: This could materially adversely affect us.
−Removed: Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.
−Removed: Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
−Removed: If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed, and we could fail to meet our financial reporting obligations.
−Removed: We are highly dependent on information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect the value of shares of our Common Stock and our ability to pay distributions.
−Removed: The operations of the Company, the Adviser, the Administrator and any third-party service provider to any of the foregoing are susceptible to risks from cybersecurity attacks and incidents due to reliance on the secure processing, storage and transmission of confidential and other information in the relevant computer systems and networks.
−Removed: In particular, cyber security incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future.
−Removed: These attacks could involve gaining unauthorized access to information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption and result in disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: We, the Adviser and the Administrator must each continuously monitor and innovate our cybersecurity to protect our technology and data from corruption or unauthorized access.
−Removed: In addition, due to the use of third-party vendors, agents, exchanges, clearing houses and other financial institutions and service providers, we, the Adviser and the Administrator could be adversely impacted if any of us are subject to a successful cyber-attack or other breach of our information.
−Removed: Although we, the Adviser and the Administrator have developed protocols, processes, internal controls and other protective measures to help mitigate cybersecurity risks and cyber intrusions, these measures, as well as our increased awareness of the nature and extent of the risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
−Removed: If any of the foregoing events occur, the confidential and other information of the Company, the Adviser, and the Administrator could be compromised.
−Removed: Such events could also cause interruptions or malfunctions in the operations of the Company, the Adviser or the Administrator, and in particular the Adviser’s investment activities on our behalf and the provision of administrative services to us by the Administrator.
−Removed: The increased use of mobile and cloud technologies can heighten these and other operational risks.
−Removed: We, the Adviser and the Administrator currently or in the future are expected to routinely transmit and receive personal, confidential and proprietary information by email and other electronic means.
−Removed: We, the Adviser and the Administrator have discussed and worked with clients, vendors, service providers, counterparties and other third parties to develop secure transmission capabilities and protect against cyber-attacks.
−Removed: However, we, the Adviser and the Administrator may not be able to ensure secure capabilities with all of our clients, vendors, service providers, counterparties and other third parties to protect the confidentiality of the information.
−Removed: In addition, the systems and technology resources used by us, our Adviser, our Administrator and our and their respective affiliates could be strained by extended periods of remote working by our Adviser, our Administrator and their affiliate’s employees and such extended remote working could introduce operational risks, including heightened cybersecurity risk.
−Removed: Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.
−Removed: Terrorist attacks, acts of war, natural disasters, outbreaks or pandemics, such as the Coronavirus pandemic, may impact our portfolio companies and our Adviser and harm our business, operating results and financial condition.
−Removed: Terrorist acts, acts of war, natural disasters, disease outbreaks, pandemics or other similar events may disrupt our operations, as well as the operations of our portfolio companies and our Adviser.
−Removed: Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability.
−Removed: For example, many countries have experienced outbreaks of infectious illnesses in recent decades, including swine flu, avian influenza, SARS and Coronavirus.
−Removed: The ongoing spread of the Coronavirus has had, and will continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment are increasingly impacted by the outbreak and government and other measures seeking to contain its spread.
−Removed: In addition to these developments potentially having adverse consequences for certain portfolio companies and other issuers in or through which the Company invests and the value of the Company’s investments therein, the operations of the Adviser (including those relating to the Company) have been, and could continue to be, adversely impacted, including through quarantine measures and travel restrictions imposed on Morgan Stanley personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers.
−Removed: Any of the foregoing events could materially and adversely affect the Company’s ability to source, manage and divest its investments and its ability to fulfill its investment objectives.
−Removed: Similar consequences could arise with respect to other comparable infectious diseases.
−Removed: As the potential impact of the Coronavirus is difficult to predict, the extent to which the Coronavirus
−Removed: and/or other disease outbreaks or health pandemics may negatively affect our and our portfolio companies' operating results, or the duration of any potential business or supply-chain disruption, is uncertain.
−Removed: While the Adviser believes that we will be able to pursue our investment strategy during this pandemic, there is an increased risk that our investment objectives may not be achieved.
−Removed: Any potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the Coronavirus and the actions taken by authorities and other entities to contain the Coronavirus or treat its impact, all of which are beyond our control.
−Removed: These potential impacts, while uncertain, could adversely affect our operating results and the operating results of the portfolio companies in which we invest.
−Removed: Further, if a future pandemic occurs (including a recurrence of the Coronavirus) during a period when our investments are maturing, we may not be able to realize our investments within the Company’s term, or at all.
−Removed: In addition, future terrorist activities, military or security operations, natural disasters, disease outbreaks, pandemics or other similar events could weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies and, in turn, could have a material adverse impact on our business, operating results and financial condition.
−Removed: Uncertainties resulting from the United Kingdom’s decision to leave the European Union could adversely affect our business.
−Removed: It is difficult to predict the future of the U.K.’s relationship with the E.U., the uncertainty of which may increase the volatility in the global financial markets in the short- and medium-term and may negatively disrupt regional and global financial markets.
−Removed: Additionally, depending on the outcome, such uncertainty may adversely affect the manner in which Morgan Stanley operate certain of its businesses in Europe.
−Removed: On January 31, 2020, the U.K.
−Removed: withdrew from the E.U.
−Removed: under the terms of a withdrawal agreement between the U.K.
−Removed: The withdrawal agreement provided for a transition period to the end of December 2020, during which time the U.K.
−Removed: would continue to apply E.U.
−Removed: law as if it were a member state, and U.K.
−Removed: firms' passporting rights to provide financial services in E.U.
−Removed: jurisdictions continued.
−Removed: On December 24, 2020 the U.K.
−Removed: announced they had reached agreement on the terms of a trade and cooperation agreement to govern the future relationship between the parties.
−Removed: The agreement consists of three main pillars including trade, citizens’ security and governance, covering a variety of arrangements in several areas.
−Removed: The agreement is provisionally applicable with effect from January 1, 2021 pending formal ratification by the E.U.
−Removed: With respect to financial services, although the U.K.
−Removed: chose to grant the E.U.
−Removed: equivalence in a number of key areas under European financial regulations, the E.U.
−Removed: only made certain more limited equivalence decisions, leaving decisions on equivalence and adequacy to be determined by each of the U.K.
−Removed: unilaterally in due course.
−Removed: As a result, U.K.
−Removed: licensed entities are unable to provide regulated services in a number of E.U.
−Removed: jurisdictions from the end of December 2020, absent regulatory relief or other measures implemented by individual countries.
−Removed: Such agreement is untested and may lead to ongoing political and economic uncertainty and periods of exacerbated volatility in both the United Kingdom and in wider European and global markets for some time.
−Removed: As such, it is difficult to predict the precise impact of Brexit on us.
−Removed: This uncertainty is likely to continue to adversely affect the global economic climate and may affect companies or assets, including with respect to opportunity, pricing, regulation, value or exit, especially companies based in, doing business in, or having service or other significant relationships in or with the United Kingdom or the European Union.
−Removed: In addition, the long-term stability of certain European financial markets remains uncertain and the possibility of defaults and/or bankruptcies by sovereign states in Europe in respect of their obligations remains a concern, which could have an impact on economic conditions and market activity in the European Union.
−Removed: Given current market conditions of relatively weak growth in many European Union member states, there is a risk that default of certain participating member states of the European Union may lead to the collapse of the Eurozone as it is constituted today, that certain member states of the European Union may cease to use the Euro as their national currency or that one or more member states may seek to withdraw from EU membership, which would likely have an adverse impact on the Company.
−Removed: Moreover, financial and economic developments in one European Union member state may impact economic and financial conditions among other European Union member states.
−Removed: A Euro collapse would likely have negative implications for the European financial industry and the global economy as a whole because of counterparty risks, exposures and other “systemic” risks.
−Removed: A potential effect would be an immediate reduction of liquidity for particular investments in economically connected countries, thereby impairing the value of such investments.
−Removed: We cannot predict for how long uncertain economic conditions will continue to impact markets adversely, or to what degree economic conditions will deteriorate further.
−Removed: Volatility in the global credit markets (and in particular, the recent uncertainty of the credit markets in Europe) may make it more difficult for issuers and borrowers to obtain favorable financing or refinancing arrangements that may be needed to execute our investment strategy.
−Removed: A Euro collapse could have an adverse effect on us by affecting the performance of our investments and our ability to fulfill our investment objectives.
−Removed: Moreover, this could have a detrimental effect on the performance of investments both in those countries that may experience a default on liabilities and other countries which are economically connected with the European Union.
We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer.
−Removed: To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than
−Removed: that of a diversified investment company as a result of changes in the financial condition or the market's assessment of the issuer.
+Added: To the extent that we assume large positions in the securities of a small number of issuers, our net asset value may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer.
We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company.
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Under the Investment Advisory Agreement, the Adviser does not assume any responsibility to us other than to render the services called for under that agreement, and it is not responsible for any action of our Board of Directors in following or declining to follow the Adviser’s advice or recommendations.
−Removed: Under the terms of the Investment Advisory Agreement, the Adviser, its officers, members, personnel and any person controlling or controlled by the Adviser are not liable to us, any subsidiary of ours, our directors, our stockholders or any subsidiary's stockholders or partners for acts or omissions performed in accordance with and pursuant to the Investment Advisory Agreement, except those resulting from acts constituting gross negligence, willful misconduct, bad faith or reckless disregard of the Adviser’s duties under the Investment Advisory Agreement.
−Removed: In addition, we have agreed to indemnify the Adviser and each of its officers, directors, members, managers and employees from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement, except where attributable to gross negligence, willful misconduct, bad faith or reckless disregard of such person's duties under the Investment Advisory Agreement.
−Removed: Under the Administration Agreement, the Administrator and certain specified parties providing administrative services pursuant to that agreement are not liable to us or our stockholders for, and we have agreed to indemnify them for, any claims or losses arising out of the good faith performance of their duties or obligations under the Administration Agreement, except those liabilities resulting primarily attributable to gross negligence, willful misconduct, bad faith or reckless disregard of the Administrator's duties under the Administration Agreement.
+Added: Under the terms of the Investment Advisory Agreement, the Adviser, its officers, members, personnel and any person controlling or controlled by the Adviser are not liable to us, any subsidiary of ours, our directors, our stockholders or any subsidiary’s stockholders or partners for acts or omissions performed in accordance with and pursuant to the Investment Advisory Agreement, except where primarily attributable to the willful misfeasance, bad faith or gross negligence in the performance of such person’s duties or by reason of reckless disregard of the Adviser’s duties under the Investment Advisory Agreement.
+Added: In addition, we have agreed to indemnify the Adviser and each of its officers, directors, members, managers and employees from and against any claims or liabilities, including reasonable legal fees and other expenses reasonably incurred, arising out of or in connection with our business and operations or any action taken or omitted on our behalf pursuant to authority granted by the Investment Advisory Agreement, except where primarily attributable to the willful misfeasance, bad faith or gross negligence or by reason of reckless disregard of such person’s duties under the Investment Advisory Agreement.
+Added: Under the Administration Agreement, the Administrator and certain specified parties providing administrative services pursuant to that agreement are not liable to us or our stockholders for, and we have agreed to indemnify them for, any claims or losses arising out of the good faith performance of their duties or obligations under the Administration Agreement, except where primarily attributable to the willful misfeasance, bad faith or gross negligence or by reason of reckless disregard of the Administrator’s duties under the Administration Agreement.
These protections may lead the Adviser or the Administrator to act in a riskier manner when acting on our behalf than it would when acting for its own account.
−Removed: Risks relating to compliance with the AIFMD
−Removed: The European Union Directive on Alternative Investment Fund Managers (the “AIFMD” or the “Directive”) regulates, and imposes regulatory obligations in respect of, the marketing in the European Economic Area (the “EEA”) by alternative investment fund managers (each an “AIFM”) (whether established in the EEA or elsewhere) of alternative investment funds (each an “AIF”) (whether established in the EEA or elsewhere).
−Removed: For these purposes, the Adviser is a non-EEA AIFM and we are a non-EEA AIF.
−Removed: Each European jurisdiction that has implemented the Directive has implemented a new and, in most cases, more restrictive private placement regime in connection with the implementation of the Directive.
−Removed: The AIFMD could have an adverse effect on the Adviser and us by, among other things, increasing the regulatory burden and costs of doing business in EEA member states.
−Removed: Except in limited circumstances, a non-EEA AIFM marketing its AIF to prospective EEA investors will be required to satisfy extensive disclosure obligations, including periodic disclosures to EEA regulators.
−Removed: The AIFMD could also limit the Adviser’s operating flexibility and our investment opportunities.
−Removed: The Directive imposes extensive disclosure obligations on the Adviser in respect of companies located in EEA member states, if any, in which we invest and potentially disadvantages us as an investor in private companies located in EEA member states when compared to non-AIF/AIFM competitors which may not be subject to the requirements of the AIFMD, thereby potentially restricting our ability to make investments in such companies.
−Removed: Further, the AIFMD may restrict certain of our activities in relation to EEA portfolio companies, including, in certain circumstances, our ability to recapitalize, refinance or potentially restructure an EEA portfolio company for the two year period following acquisition.
−Removed: The AIFMD may expose the Adviser or us to conflicting regulatory requirements in the United States and Europe and may require the restructuring of the Company and the Adviser and/or the relations among them.
−Removed: EEA AIFMs are regulated in a different way to non-EEA AIFMs as a consequence of the AIFMD.
−Removed: Broadly, an EEA AIFM is subject to extensive regulatory obligations and has access to a pan-European 'marketing passport' in respect of its AIFs (i.e., the marketing passport is utilized in lieu of relying on the various private placement regimes in the European jurisdictions).
−Removed: The full scope of the AIFMD ultimately may be extended to non-EEA AIFMs who wish to market an AIF within the EEA pursuant to the pan-European marketing passport regime.
−Removed: In addition to satisfying the obligations described above, a non-EEA AIFM that obtains a pan-European marketing passport will have to satisfy additional obligations including, among other things, in respect of rules relating to the remuneration of certain personnel (potentially requiring the Adviser to change its compensation structures for key personnel, such
−Removed: that the Adviser's ability to recruit and retain these personnel may be affected), minimum regulatory capital requirements and independent valuation of an AIF's assets.
−Removed: There is little guidance, and limited market practice, that has developed in respect of the AIFMD.
−Removed: Many of the provisions of the AIFMD require the adoption of delegated acts and regulatory technical standards, as well as the establishment of guidelines.
−Removed: Some, but not all, EEA member states have published the relevant acts, standards and guidelines.
−Removed: Where these acts, standards and guidelines have been implemented, their practical application is still uncertain.
−Removed: As such, it is difficult to predict the precise impact of the AIFMD on us and the Adviser.
−Removed: Any regulatory changes, arising from the transposition of the AIFMD into national law that impair the ability of the Adviser to manage us or our investments or limit the Adviser’s ability to market the Common Stock in the future, may materially adversely affect our ability to carry out our investment approach and achieve our investment objectives.
−Removed: The Adviser is not subject to the requirements of the Directive to have additional own funds and/or professional indemnity insurance to cover potential liability risks arising from the professional negligence of the Adviser.
−Removed: Investors will not have any redemption rights in respect of the Common Stock and there is no meaningful liquidity risk to manage.
−Removed: To the extent required by laws implementing the Directive in any relevant EEA member state, the information in respect of the Company required to be disclosed pursuant to Article 23(4) and (5) of the Directive will be made available to each investor as follows:
−Removed: (a) Any new arrangements for managing our liquidity, without undue delay in a disclosure notice delivered to each investor.
−Removed: (b) Our current risk profile and the risk management systems employed by the Adviser to manage those risks, in each annual report.
−Removed: (c) Any changes to the maximum level of leverage which the Adviser may employ on our behalf as well as any right of the reuse of collateral or any guarantee granted under the leveraging arrangement, without undue delay in a disclosure notice delivered to each investor.
−Removed: Please note, we do not intend to employ collateral and asset reuse arrangements.
−Removed: (d) The total amount of leverage employed by us, in each annual report.
+Added: Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.
+Added: In November 2020, the SEC adopted a rulemaking regarding the ability of a BDC (or a registered investment company) to use derivatives and other transactions that create future payment or delivery obligations.
+Added: Under the newly adopted rules, BDCs that use derivatives will be subject to a value-at-risk leverage limit, a derivatives risk management program and testing requirements and requirements related to board reporting.
+Added: These new requirements will apply unless the BDC qualifies as a “limited derivatives user,” as defined under the adopted rules.
+Added: Under the new rule, a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has, among other things, a reasonable belief, at the time it enters into such an agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements, in each case as it becomes due.
+Added: Collectively, these requirements may limit our ability to use derivatives and/or enter into certain other financial contracts.
Risks Relating to Our Investments
10 unchanged sentences
Our debt investments may be risky and we could lose all or part of our investments.
−Removed: The debt instruments in which we invest are typically not initially rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB–” by Fitch Ratings or lower than “BBB–” by Standard & Poor's Ratings Services), which under the guidelines established by these entities is an indication of having predominantly speculative characteristics with respect to the issuer's capacity to pay interest
−Removed: and repay principal.
+Added: The debt instruments in which we invest are typically not initially rated by any rating agency, but we believe that if such investments were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, lower than “BBB–” by Fitch Ratings or lower than “BBB–” by Standard & Poor’s Ratings Services), which under the guidelines established by these entities is an indication of having predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
Bonds that are rated below investment grade are sometimes referred to as “high yield bonds” or “junk bonds.” Therefore, our investments may result in an above average amount of risk and volatility or loss of principal.
19 unchanged sentences
If the proceeding is converted to a liquidation, the value of the issuer may not equal the liquidation value that was believed to exist at the time of the investment.
−Removed: The duration of a bankruptcy proceeding is also difficult to predict, and a creditor's return on investment can be adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective.
+Added: The duration of a bankruptcy proceeding is also difficult to predict, and a creditor’s return on investment can
+Added: be adversely affected by delays until the plan of reorganization or liquidation ultimately becomes effective.
The administrative costs of a bankruptcy proceeding are frequently high and would be paid out of the debtor’s estate prior to any return to creditors.
7 unchanged sentences
Generally, little public information exists about these companies, and we rely on the ability of the Adviser’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies.
+Added: Further, these companies may not have third-party debt ratings or audited financial statements.
+Added: We must therefore rely solely on the ability of the Adviser to obtain adequate information through due diligence to evaluate the creditworthiness and potential returns from investing in these companies, which information may not include all information or resources which may be available from other areas of Morgan Stanley.
If the Adviser is unable to uncover all material information about these companies, it may not make a fully informed investment decision, and we may lose money on our investments.
1 unchanged sentence
Middle-market companies may have limited financial resources, may have difficulty accessing the capital markets to meet future capital needs and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of our realizing any guarantees we may have obtained in connection with our investment.
−Removed: In addition, such
−Removed: companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors' actions and market conditions, as well as general economic downturns.
+Added: In addition, such companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns.
Additionally, middle-market companies are more likely to depend on the management talents and efforts of a small group of persons.
15 unchanged sentences
In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors.
−Removed: We can offer no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured debt obligations after payment in full of all secured debt obligations.
+Added: We can offer no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured
+Added: debt obligations after payment in full of all secured debt obligations.
If such proceeds were not sufficient to repay the outstanding secured debt obligations, then our unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company's remaining assets, if any.
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We may not have the ability to control or direct such actions, even if our rights are adversely affected.
+Added: Covenant-lite loans may expose us to different risks, including with respect to liquidity, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.
+Added: Certain loans in our portfolio may consist of “covenant-lite” loans.
+Added: Such loans may not require the borrower to maintain debt service or other financial ratios and do not include terms which allow the lender to monitor the performance of the borrower and declare a default if certain criteria are breached.
+Added: Ownership of covenant-lite loans may expose us to different risks, including with respect to liquidity, ability to restructure loans, credit risks and less protective loan documentation, than is the case with loans that contain financial maintenance covenants.
+Added: As of December 31, 2021, 16.6% of our portfolio, measured as percent of gross commitments, is in loans that are considered “covenant-lite.”
The lack of liquidity in our investments may adversely affect our business.
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In particular, this risk could arise from changes in the financial condition or prospects of the portfolio company in which the investment is made, changes in national or international economic conditions, changes in debt and equity capital markets and changes in laws, regulations, fiscal policies or political conditions of countries in which investments are made.
−Removed: In connection with the disposition of an investment in a portfolio company, we may be required to make representations about the business and financial affairs of the portfolio company, or may be responsible for the contents of disclosure documents under applicable securities laws.
+Added: In connection with the disposition of an investment in a portfolio company, we may be required to make representations about the business and financial affairs of the portfolio company, or may be responsible for the contents of disclosure documents
+Added: under applicable securities laws.
We may also be required to indemnify the purchasers of such investment or underwriters to the extent that any such representations or disclosure documents turn out to be incorrect, inaccurate or misleading.
10 unchanged sentences
• the markets in which the portfolio company does business;
−Removed: • changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors.
+Added: • the changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be made in the future and other relevant factors.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation.
2 unchanged sentences
The effect of all of these factors on our portfolio may reduce our net asset value by increasing net unrealized depreciation in our portfolio.
−Removed: Depending on market conditions, we could incur substantial realized losses and may suffer additional unrealized losses in future periods, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
+Added: Any unrealized losses in our portfolio could be an indication of a portfolio company’s inability to meet its repayment obligations to us with respect to the affected loans.
+Added: Depending on market conditions, we could incur substantial realized losses and ultimately experience reductions of our income available for distribution in future periods.
+Added: We may also suffer additional unrealized losses in future periods, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.
+Added: In addition, decreases in the market value or fair value of our investments will reduce our net asset value.
Our prospective portfolio companies may be unable to repay or refinance outstanding principal on their loans at or prior to maturity, and rising interest rates may make it more difficult for portfolio companies to make periodic payments on their loans.
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Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults.
+Added: Investments with a deferred interest feature, such as original issue discount income and payment-in-kind interest, could represent a higher credit risk than investments that must pay interest in full in cash on a regular basis.
Any failure of one or more portfolio companies to repay or refinance its debt at or prior to maturity or the inability of one or more portfolio companies to make ongoing payments following an increase in contractual interest rates could have a material adverse effect on our business, financial condition, results of operations and cash flows.
2 unchanged sentences
Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that allow such company the ability to replace existing financing with less expensive capital.
−Removed: As market conditions change, we do not know when, and if, prepayment may be possible for each portfolio company.
+Added: As market conditions
+Added: change, we do not know when, and if, prepayment may be possible for each portfolio company.
In some cases, the prepayment of a loan may reduce our achievable yield if the capital returned cannot be invested in transactions with equal or greater expected yields, which could have a material adverse effect on our business, financial condition and results of operations.
7 unchanged sentences
Moreover, failure to comply with any such requirements could have a material adverse effect on an investment, and we can offer no assurance that the portfolio investments will at all times comply with all applicable environmental laws, regulations and permit requirements.
−Removed: Sustainability Risk
−Removed: Sustainability Risk means an environmental, social or governance event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the Company.
+Added: We may be exposed to sustainability risks in connection with our investments.
+Added: “Sustainability Risk” means an ESG event or condition that, if it occurs, could cause an actual or a potential material negative impact on the value of the Company.
Such Sustainability Risks are integrated into investment decision making and risk monitoring to the extent that they represent potential or actual material risks and/or opportunities to maximizing the long-term risk-adjusted returns of the Company.
14 unchanged sentences
The utility and value of assets held by an investment to which the Company is exposed may also be adversely impacted by a Sustainability Risk event.
−Removed: The occurrence of any such event could result in a reduction in the value of an investment, a negative impact on the ability of the investment to satisfy payment or repayment obligations to the Company in respect of an investment and/or could prejudice the ability of the Company to enforce on collateral underlying an investment.
+Added: The occurrence of any such event could result in a reduction in the value of an investment, a negative impact on the ability
+Added: of the investment to satisfy payment or repayment obligations to us in respect of an investment and/or could prejudice our ability to enforce on collateral underlying an investment.
All of these factors could reduce the investment returns of the Company.
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As a result, any distributions we make during this period may be substantially smaller than the distributions that we expect to pay when our portfolio is fully invested.
−Removed: Our portfolio may initially be concentrated in a limited number of portfolio companies and industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
−Removed: During the period of time in which we are deploying our initial capital, our portfolio may be concentrated in a limited number of portfolio companies and industries.
−Removed: As a result, the aggregate returns we realize may be significantly and adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment.
−Removed: Additionally, while we are not targeting any specific industries, our investments may be concentrated in relatively few industries.
−Removed: For example, although we may classify the industries of our portfolio companies by end-market (such as health market or business services) and not by the products or services (such as software) directed to those end-markets, some of our portfolio companies may principally provide software products or services, which exposes us to downturns in that sector.
−Removed: As a result, a downturn in any particular industry in which we are invested could also significantly impact the aggregate returns we realize.
Our failure to make follow-on investments in our portfolio companies could impair the value of our portfolio.
32 unchanged sentences
Similarly, investments in “last out” pieces of tranched first lien loans will be similar to second lien loans in that such investments will be junior in priority to the “first out” piece of the same tranched first lien loan with respect to payment of principal, interest and other amounts.
−Removed: We can offer no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens or the “last out” pieces of the
−Removed: tranched first lien loans after payment in full of all obligations secured by the first priority liens on the collateral.
+Added: We can offer no assurance that the proceeds, if any, from sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens or the “last out” pieces of the tranched first lien loans after payment in full of all obligations secured by the first priority liens on the collateral.
If such proceeds were not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens or the "last out" pieces of unitranche loans, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company's remaining assets, if any.
13 unchanged sentences
We may not have the ability to control or direct such actions, even if our rights as junior lenders are adversely affected.
+Added: We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient.
+Added: In the event of a default by a portfolio company on a secured loan, we will only have recourse to the assets collateralizing the loan.
+Added: If the underlying collateral value is less than the loan amount, we will suffer a loss.
+Added: In addition, we may make loans that are unsecured, which are subject to the risk that other lenders may be directly secured by the assets of the portfolio company.
+Added: In the event of a default, those collateralized lenders would have priority over us with respect to the proceeds of a sale of the underlying assets.
+Added: In cases described above, we may lack control over the underlying asset collateralizing our loan or the underlying assets of the portfolio company prior to a default, and as a result the value of the collateral may be reduced by acts or omissions by owners or managers of the assets.
+Added: In the event of bankruptcy of a portfolio company, we may not have full recourse to its assets in order to satisfy our loan, or our loan may be subject to “equitable subordination.” This means that depending on the facts and circumstances, including the extent to which we actually provided significant “managerial assistance,” if any, to that portfolio company, a bankruptcy court might re-characterize our debt holding and subordinate all or a portion of our claim to that of other creditors.
+Added: In addition, certain of our loans are subordinate to other debt of the portfolio company.
+Added: If a portfolio company defaults on our loan or on debt senior to our loan, or in the event of a portfolio company bankruptcy, our loan will be satisfied only after the senior debt receives payment.
+Added: Where debt senior to our loan exists, the presence of inter-creditor arrangements may limit our ability to amend our loan documents, assign our loans, accept prepayments, exercise our remedies (through “standstill” periods) and control decisions made in bankruptcy proceedings relating to the portfolio company.
+Added: Bankruptcy and portfolio company litigation can significantly increase collection losses and the time needed for us to acquire the underlying collateral in the event of a default, during which time the collateral may decline in value, causing us to suffer losses.
+Added: If the value of collateral underlying our loan declines or interest rates increase during the term of our loan, a portfolio company may not be able to obtain the necessary funds to repay our loan at maturity through refinancing.
+Added: Decreasing collateral value and/or increasing interest rates may hinder a portfolio company’s ability to refinance our loan because the underlying collateral cannot satisfy the debt service coverage requirements necessary to obtain new financing.
+Added: If a borrower is unable to repay our loan at maturity, we could suffer a loss which may adversely impact our financial performance.
We may be subject to risks under hedging transactions and may become subject to risks if we invest in foreign securities.
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The success of any hedging transactions we may enter into will depend on our ability to correctly predict movements in currencies and interest rates.
−Removed: Therefore, while we may enter into hedging transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates could result in poorer overall investment performance than if we had not engaged in any such hedging transactions.
+Added: Therefore, while we may enter into hedging transactions to seek to reduce currency exchange rate and interest rate risks, unanticipated changes in currency exchange rates or interest rates could result in poorer overall investment
+Added: performance than if we had not engaged in any such hedging transactions.
In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged could vary.
13 unchanged sentences
These measures also could result in certain liabilities in the event of the bankruptcy or reorganization of a portfolio company, could result in claims against us if a designated director violates their fiduciary or other duties to a portfolio company or fail to exercise appropriate levels of care under applicable corporate or securities laws, environmental laws or other legal principles, and could expose us to claims that we have interfered in management to the detriment of a portfolio company.
−Removed: Risks Relating to Our Common Stock
−Removed: There is no public market for shares of our Common Stock, and we do not expect there to be a market for our shares.
−Removed: There is no existing trading market for shares of our Common Stock, and no market for our shares may develop in the future.
+Added: Risks Relating to Investment in our Common Stock
+Added: There is no public market for shares of our Common Stock, and there is no assurance that a public market of shares of our Common Stock will develop.
+Added: There is no existing trading market for shares of our Common Stock, and although we may pursue a Liquidity Event, including an Exchange Listing, in the future, there is no assurance that a public market for shares of our Common Stock will develop.
If developed, any such market may not be sustained.
7 unchanged sentences
We intend to make periodic distributions to our stockholders out of assets legally available for distribution.
+Added: We may fund our cash distributions to stockholders from any sources of funds available to us, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to us on account of preferred and common equity investments in portfolio companies and fee and expense
+Added: reimbursement waivers from the Adviser or the Administrator, if any.
We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions.
−Removed: Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors
−Removed: described in this report.
+Added: Our ability to pay distributions might be adversely affected by the impact of one or more of the risk factors described in this report.
Due to the asset coverage test applicable to us under the 1940 Act as a BDC, we may be limited in our ability to make distributions.
6 unchanged sentences
In addition, our Common Stock is intended for long-term investors who can accept the risks of investing primarily in illiquid loans and other debt or debt-like instruments and should not be treated as a trading vehicle.
+Added: We have not established any limit on the amount of funds we may use from available sources, such as borrowings, if any, or proceeds from any offering of securities, to fund dividends (which may reduce the amount of capital we ultimately invest in assets).
+Added: Stockholders should understand that any distributions made from sources other than cash flow from operations or relying on fee or expense reimbursement waivers, if any, from the Adviser of the Administrator are not based on our investment performance and can only be sustained if we achieve positive investment performance in future periods and/or the Adviser or the Administrator continues to make such expense reimbursements, if any.
+Added: The extent to which we pay distributions from sources other than cash flow from operations will depend on various factors, including the level of participation in our distribution reinvestment plan, how quickly we invest the proceeds from any securities offerings and the performance of our investments.
+Added: There can be no assurance that we will achieve such performance in order to sustain these distributions or be able to pay distributions at all.
+Added: The Adviser and the Administrator have no obligation to waive fees or receipt of expense reimbursements, if any.
+Added: The net asset value of our Common Stock may fluctuate significantly.
+Added: The net asset value and liquidity, if any, of the market for our Common Stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance.
+Added: These factors include:
+Added: Changes in the value of our portfolio of investments and derivative instruments as a result of changes in market factors, such as interest rate shifts, and also portfolio specific performance, such as portfolio company defaults, among other reasons;
+Added: Changes in regulatory policies or tax guidelines, particularly with respect to RICs or BDCs;
+Added: Loss of RIC tax treatment or BDC status;
+Added: Distributions that exceed our net investment income and net income as reported according to U.S.
+Added: Changes in earnings or variations in operating results;
+Added: Changes in accounting guidelines governing valuation of our investments;
+Added: Any shortfall in revenue or net income or any increase in losses from levels expected by investors;
+Added: Departure of our Adviser or certain of its key personnel;
+Added: General economic trends and other external factors;
+Added: Loss of a major funding source;
+Added: The length and duration of the COVID-19 pandemic in the United States as well as worldwide and the magnitude of the resulting economic impact.
Our stockholders may experience dilution in their ownership percentage.
12 unchanged sentences
As a result, each subsequent closing after the Initial Closing will result in existing stockholders in the Company experiencing dilution as a result of Catch-up Purchases.
−Removed: Our stockholders will experience dilution in their ownership percentage if they do not opt in to our dividend reinvestment plan.
+Added: Our stockholders will experience dilution in their ownership percentage if they do not opt in to our dividend reinvestment plan (“DRIP”).
We have an “opt in” DRIP pursuant to which all distributions declared will be payable in cash unless stockholders elect to receive their distributions in shares of our Common Stock.
−Removed: As a result, our stockholders that did not "opt in" to our DRIP will experience dilution in their ownership percentage of our Common Stock over time.
+Added: As a result, our stockholders that do not “opt in” to our DRIP will experience dilution in their ownership percentage of our Common Stock over time.
See “ Item 5.
20 unchanged sentences
Disposition of shares of our Common Stock by MS Credit Partners Holdings may negatively impact our performance and the price of our Common Stock.
−Removed: MS Credit Partners Holdings, an affiliate of our Investment Adviser, has entered into a subscription agreement to provide 20% of total capital commitments up to $200 million in capital commitments to the Company.
+Added: MS Credit Partners Holdings, a wholly owned subsidiary of Morgan Stanley and an affiliate of our Adviser, has made an aggregate capital commitment of $200 million to the Company.
However, MS Credit Partners Holdings is not obligated to maintain its investment in the Company and, to the extent MS Credit Partners Holdings determines to dispose of its shares of our Common Stock and to the extent such disposition is permissible, the disposition of a large number of shares of our Common Stock may negatively impact our performance and, if there is a market for shares of our Common Stock, the share price of such Common Stock.
+Added: Morgan Stanley has no obligation, contractual or otherwise, to financially support us beyond this equity commitment to purchase our common stock.
+Added: Risks Relating to the Notes
+Added: The Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we may incur.
+Added: Additionally, the Notes are not guaranteed by Morgan Stanley.
+Added: On February 11, 2022, we issued $425,000,000 in aggregate principal amount of 4.500% notes due 2028 (the “Notes”).
+Added: The Notes are not secured by any of our assets or any of the assets of our subsidiaries.
+Added: As a result, the Notes are effectively subordinated to any secured indebtedness we or our subsidiaries have outstanding or that we or our subsidiaries may incur in the future (or any indebtedness that is initially unsecured in respect of which we subsequently grant security) to the extent of the value of the assets securing such indebtedness.
+Added: In any liquidation, dissolution, bankruptcy or other similar proceeding, the holders of any of our existing or future secured indebtedness and the secured indebtedness of our subsidiaries may assert rights against the assets pledged to secure that indebtedness in order to receive full payment of their indebtedness before the assets may be used to pay other creditors, including the holders of the Notes.
+Added: As of December 31, 2021, our total consolidated indebtedness was approximately $1.2 billion, all of which was secured by our assets or the undrawn capital commitments of our investors.
+Added: The Notes are not obligations of Morgan Stanley nor are they guaranteed by Morgan Stanley and Morgan Stanley has no obligation to pay any amounts due on the Notes.
+Added: The Company is not a subsidiary of or consolidated with Morgan Stanley.
+Added: Furthermore, Morgan Stanley has no obligation, contractual or otherwise, to financially support us beyond the equity commitment to purchase our common stock pursuant to a subscription agreement entered into by MS Credit Partners Holdings.
+Added: Morgan Stanley has no history of financially supporting any of the MS BDCs, even during periods of financial distress.
+Added: The Notes are subordinated structurally to the indebtedness and other liabilities of our subsidiaries.
+Added: The Notes are obligations exclusively of Morgan Stanley Direct Lending Fund and not of any of our subsidiaries.
+Added: None of our subsidiaries is a guarantor of the Notes and the Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future.
+Added: As of December 31, 2021, approximately $939.5 million of the indebtedness required to be consolidated on our balance sheet was held through subsidiary financing vehicles and/or secured by assets of the Company and its subsidiaries.
+Added: Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors, including trade creditors, and holders of preferred stock, if any, of our subsidiaries will have priority over our claims (and therefore the claims of our creditors, including holders of the Notes) with respect to the assets of such subsidiaries.
+Added: Even if we were recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims.
+Added: Consequently, the Notes are subordinated structurally to all indebtedness and other liabilities of any of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise.
+Added: All of the existing indebtedness of our subsidiaries is structurally senior to the Notes.
+Added: In addition, our subsidiaries may incur substantial additional indebtedness in the future, all of which would be structurally senior to the Notes.
+Added: A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly.
+Added: Our credit ratings are an internal assessment by rating agencies of our ability to pay our debts when due.
+Added: Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the Notes or other debt securities we may issue.
+Added: Our credit ratings, however, may not reflect the potential impact of risks related to market conditions generally or other factors discussed above on the market value of or trading market of our debt securities, if any.
+Added: These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the Notes or an investment in other debt securities we may issue.
+Added: Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion.
+Added: None of the initial purchasers, us, or Morgan Stanley undertakes any obligation to maintain our credit ratings or to advise holders of the Notes of any changes in our credit ratings.
+Added: The Notes are rated by Moody’s Investors Service and Fitch Ratings, Inc.
+Added: There can be no assurance that their respective credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by the applicable ratings agency if in its judgment future circumstances relating to the basis of the credit rating, such as adverse changes in our business, financial condition and results of operations, so warrant.
+Added: An increase in market interest rates could result in a decrease in the market value of the Notes.
+Added: The condition of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the Notes.
+Added: In general, as market interest rates rise, debt securities bearing interest at fixed rates of interest decline in value.
+Added: Consequently, if an investor purchases Notes bearing interest at fixed rates and market interest rates increase, the market values of those Notes may decline.
+Added: We cannot predict the future level of market interest rates.
+Added: The indenture governing the Notes contains limited protection for holders of the Notes.
+Added: The indenture governing the Notes offers limited protection to holders of the Notes.
+Added: The terms of the indenture and the Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on a holder’s investment in the Notes.
+Added: In particular, the terms of the indenture and the Notes do not place any restrictions on our or our subsidiaries’ ability to:
+Added: issue securities or otherwise incur additional indebtedness or other obligations, including (1) any indebtedness or other obligations that would be equal in right of payment to the Notes, (2) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (3) indebtedness of ours that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (4) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in our subsidiaries and therefore rank structurally senior to the Notes with respect to the assets of our subsidiaries, in each case other than an incurrence of indebtedness or other obligation that would cause a violation of Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a)(1) and (2) of the 1940 Act or any successor provisions, as such obligations may be amended or superseded, giving effect to any exemptive relief granted to us by the SEC;
+Added: pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes;
+Added: sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets);
+Added: enter into transactions with affiliates;
+Added: create liens (including liens on the shares of our subsidiaries) or enter into sale and leaseback transactions;
+Added: make investments;
+Added: create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
+Added: In addition, the terms of the indenture and the Notes do not protect holders of the Notes in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity other than certain events of default under the indenture governing the Notes.
+Added: Our ability to recapitalize, incur additional debt and take a number of other actions are not limited by the terms of the Notes and may have important consequences for holders of the Notes, including making it more difficult for us to satisfy our obligations with respect to the Notes or negatively affecting the trading value of the Notes.
+Added: Other debt we issue or incur in the future could contain more protections for its holders than the indenture and the Notes, including additional covenants and events of default.
+Added: The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the Notes.
+Added: The indenture governing the Notes does not place any restrictions on the operations of Morgan Stanley or its subsidiaries.
+Added: The optional redemption provision for the Notes may materially adversely affect the return on the Notes.
+Added: The Notes are redeemable in whole or in part upon certain conditions at any time or from time to time at our option.
+Added: We may choose to redeem the Notes at times when prevailing interest rates are lower than the interest rate paid on the Notes.
+Added: In this circumstance, a holder of the Notes may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the Notes being redeemed.
+Added: There is currently no public market for the Notes.
+Added: If an active trading market for the Notes does not develop or is not maintained, a noteholder may not be able to sell its Notes.
+Added: The Notes have not been registered under the Securities Act.
+Added: Accordingly, the Notes may only be offered or sold in transactions that are not subject to, or that are otherwise exempt from, the registration requirements of the Securities Act and applicable state securities laws or pursuant to an effective registration statement.
+Added: The Notes are a new issue of debt securities for which there currently is no trading market.
+Added: We do not currently intend to apply for listing of the Notes on any securities exchange or for quotation of the Notes on any automated dealer quotation system.
+Added: If no active trading market develops, a noteholder may not be able to resell its Notes at their fair market value or at all.
+Added: If the Notes are traded after their initial issuance, they may trade at a discount from their initial offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors.
+Added: The initial purchasers may discontinue any market-making in the Notes at any time at their sole discretion.
+Added: Accordingly, there is no assurance that an active and liquid trading market will develop or continue for the Notes, that a noteholder will be able to sell its Notes at a particular time or that the price a noteholder receives when it sells will be favorable.
+Added: To the extent an active trading market does not develop, the liquidity and trading price for the Notes may be harmed.
+Added: Accordingly, a noteholder may be required to bear the financial risk of an investment in the Notes for an indefinite period of time.
+Added: There are significant restrictions on the ability to transfer or resell the Notes.
+Added: The Notes have not been registered under the Securities Act.
+Added: Accordingly, the Notes may only be offered or sold in transactions that are not subject to, or that are otherwise exempt from, the registration requirements of the Securities Act and applicable state securities laws or pursuant to an effective registration statement.
+Added: Therefore, a noteholder may transfer or resell the Notes in the U.S.
+Added: only in a transaction exempt from the registration requirements of Securities Act and applicable state securities laws or pursuant to an effective registration statement, and a noteholder may be required to bear the risk of its investment until the maturity of the Notes.
+Added: We relied on exemptions from the registration and/or prospectus qualification requirements under the laws of other jurisdictions where the Notes are being offered and sold, and, therefore, the Notes may be transferred and resold by purchasers that are resident in or otherwise subject to the laws of those jurisdictions, to the extent applicable.
+Added: Although under the registration rights agreement we are required to consummate an offer to exchange the Notes for substantially equivalent registered securities or to register the resale of the Notes, until the exchange offer is consummated or such a registration statement has been declared effective, as the case may be, holders of the Notes may not offer or sell the Notes except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws or pursuant to an effective registration statement.
+Added: The SEC, however, has broad discretion to determine whether any registration statement will be declared effective and may delay or deny effectiveness of any such registration statement filed by us for a variety of reasons.
+Added: Our ability to have declared effective by the SEC a registration statement pertaining to the registered exchange offer on a timely basis will depend upon our ability to resolve any issues that may be raised by the SEC.
+Added: No assurance can be given as to when a registration statement with respect to the Notes will become effective.
+Added: Failure to have the registration statement become effective could adversely affect the liquidity and price of the Notes.
+Added: We may not be able to repurchase the Notes upon a Change of Control Repurchase Event.
+Added: We may not be able to repurchase the Notes upon a Change of Control Repurchase Event (as defined in the indenture governing the Notes) because we may not have sufficient funds.
+Added: Upon a Change of Control Repurchase Event, holders of the Notes may require us to repurchase for cash some or all of the Notes at a repurchase price equal to 100% of the aggregate principal amount of the Notes being repurchased, plus accrued and unpaid interest to, but not including, the repurchase date.
+Added: Our failure to purchase such tendered Notes upon the occurrence of such Change of Control Repurchase Event would cause an event of default under the indenture governing the Notes and a cross-default under the agreements governing certain of our other indebtedness, which may result in the acceleration of such indebtedness requiring us to repay that indebtedness immediately.
+Added: If a Change of Control Repurchase Event were to occur, we may not have sufficient funds to repay any such accelerated indebtedness and/or to make the required repurchase of the Notes.
+Added: For the avoidance of doubt, except with respect to the subscription agreement entered into by MS Credit Partners Holdings to purchase our common stock described above, Morgan Stanley does not have any obligation to provide us with funding to repurchase the Notes upon a Change of Control Repurchase Event or otherwise.
+Added: FATCA withholding may apply to payments to certain foreign entities.
+Added: Payments made under the Notes to a foreign financial institution or non-financial foreign entity (including such an institution or entity acting as an intermediary) may be subject to a U.S.
+Added: withholding tax of 30% under U.S.
+Added: Foreign Account Tax Compliance Act provisions of the Code (commonly referred to as “FATCA”).
+Added: This withholding tax may apply to certain payments of interest on the Notes unless the foreign financial institution or non-financial foreign entity complies with certain information reporting, withholding, identification, certification and related requirements imposed by FATCA.
General Risk Factors
12 unchanged sentences
(vii) reduction in certain interest rates by the U.S.
−Removed: Federal Reserve and other central banks and decreased LIBOR;
−Removed: (viii) unfavorable economic conditions that would be expected to increase borrowers’ funding costs, limit borrowers’ access to the capital markets or result in a decision by lenders not to extend credit
−Removed: to borrowers;
+Added: Federal Reserve and other central banks and decreased LIBOR , SOFR and other benchmark rates;
+Added: (viii) unfavorable economic conditions that would be expected to increase borrowers’ funding costs, limit borrowers’ access to the capital markets or result in a decision by lenders not to extend credit to borrowers;
and (ix) rapidly evolving proposals and/or actions by local, state and federal governments to address problems being experienced by the markets and by businesses and the economy in general which will not necessarily adequately address the problems facing the loan market and middle-market companies.
23 unchanged sentences
An inability to raise or access capital could have a material adverse impact on our business, financial condition or results of operations.
+Added: New or modified laws or regulations governing our or Morgan Stanley’s operations may adversely affect our business.
+Added: We and certain of our portfolio companies are subject to regulation by laws at the U.S.
+Added: federal, state and local levels.
+Added: These laws and regulations, as well as their interpretation, may change from time to time, including as the result of interpretive guidance or other directives from the relevant government agencies charged with implementing those laws and regulations, and new laws, regulations and interpretations may also come into effect.
+Added: For example, because a Morgan Stanley affiliate is acting as the Investment Adviser and Morgan Stanley has a 5% or greater voting investment in us, we are subject to the certain federal banking and financial requirements, including the BHCA, regulations of the Federal Reserve, and certain provisions of the Dodd-Frank Act.
+Added: See Item 1 - “ Regulation as a Business Development Company – Bank Holding Company Act and Dodd Frank and Volcker Rule Disclosure.
+Added: Because we are controlled by Morgan Stanley for purposes of the BHCA, we must generally comply with the investment and activity restrictions applicable to Morgan Stanley under the BHCA.
+Added: Such restrictions may place certain limitations on our ability to engage in activities or make investments in companies.
+Added: For instance, the BHCA permits a BHC, as well as any non-bank affiliate of such BHC, to make investment representing less than 5% of any class of voting shares of another company so long as that investment is otherwise non-controlling under the BHCA.
+Added: The BHCA also permits well-capitalized, well-managed BHCs that have elected to be treated as a FHC to engage in expanded “financial in nature” activities without prior approval of the Federal Reserve.
+Added: Such financial in nature activities include bona fide merchant banking activities, so long as (i) the FHC holds its merchant banking investments only for a period of time sufficient to enable the sale or disposition thereof on a reasonable basis (generally no more than 10 years) and (ii) the
+Added: FHC does not routinely manage or operate the companies in which it invests except as necessary or required to obtain a reasonable return on its investment.
+Added: The BHCA does not, however, require Morgan Stanley to financially support us.
+Added: Similarly, the Volcker Rule generally restricts any banking entity (which includes Morgan Stanley and most affiliates of Morgan Stanley, including us as a BDC controlled by Morgan Stanley) from engaging in “proprietary trading” as well as from acquiring or retaining any “ownership interest” in a “covered fund”, in each case unless the investment or activity is conducted in accordance with an exclusion or exemption.
+Added: The Volcker Rule also generally prohibits certain transactions between a banking entity and any of its affiliates, on the one hand, and a covered fund for which the banking entity or any of its affiliates serves, directly or indirectly, as the investment manager, investment adviser, or that the banking entity or any of its affiliates sponsors in connection with organizing and offering that fund (or with any other covered fund that is controlled by such fund, on the other hand.
+Added: It is not certain how all aspects of the Volcker Rule will be interpreted and applied, or what the impact of the Volcker Rule will have on us.
+Added: In addition, the restrictions and limitation on Morgan Stanley and us may change in the future as the Federal Reserve and other agencies consider whether and how to revise and apply the Volcker Rule.
+Added: We believe that we may perform our activities and services without violation of applicable U.S.
+Added: banking laws and regulations.
+Added: However, it is possible that future changes or clarifications in the BHCA and Volcker Rule, as well as judicial or administrative decisions or interpretations of present of future laws or regulations, could restrict (or possibly prevent) our ability to continue to conduct our operations as currently contemplated.
+Added: In such event, we, the Adviser and/or Morgan Stanley may agree to make certain amendments or changes to the extent necessary to permit the Adviser to continue to provide services to us, while enabling us to continue to achieve our purposes and objectives.
+Added: These regulations and any future legislative and regulatory proposals, as well as future interpretations of existing rules, that are directed at the financial services industry, including those that may be proposed or pending in the U.S.
+Added: Congress, may negatively impact the operations, cash flows or financial condition of us or our portfolio companies, impose additional costs on us or our portfolio companies, intensify the regulatory supervision of us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.
+Added: Laws that apply to us, either now or in the future, are often highly complex and may include licensing requirements.
+Added: The licensing process can be lengthy and can be expected to subject us to increased regulatory oversight.
+Added: Failure, even if unintentional, to comply fully with applicable laws may result in sanctions, fines or limitations on the ability of the Company or the Adviser to do business in the relevant jurisdiction or to procure required licenses in other jurisdictions, all of which could have a material adverse effect on us.
+Added: In addition, if we do not comply with applicable laws and regulations, we could lose any licenses that we then hold for the conduct of our business and may be subject to civil fines and criminal penalties.
+Added: Additionally, changes to the laws and regulations governing our operations, including those associated with RICs and BDCs, may cause us to alter our investment strategy in order to avail ourselves of new or different opportunities, or to comply with additional restrictions on our investments or capital structure, or result in the imposition of corporate-level taxes on us.
+Added: Such changes could result in material differences to our strategies and plans and may shift our investment focus from the areas of expertise of the Adviser to other types of investments in which the Adviser may have little or no expertise or experience.
+Added: Any such changes, if they occur, could have a material adverse effect on our results of operations and the value of your investment.
+Added: The Adviser currently acts pursuant to an exemption from registration as a commodity trading advisor with the CFTC.
+Added: These requirements restrict the types of commodity investment strategies that the Adviser can pursue while remaining exempt, and if the Adviser were to seek other investment strategies that required it to register with the CFTC, that registration would increase their, and therefore our, costs.
+Added: In addition, new legislation and any U.S.
+Added: Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S.
+Added: federal income tax consequences to us and our stockholders of such qualification, or could have other adverse consequences.
+Added: Stockholders are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in our securities.
+Added: In addition, certain regulations applicable to debt securitizations implementing credit risk retention requirements in effect in both the United States and in Europe may adversely affect or prevent us from entering into any future securitization transaction.
+Added: These risk retention rules may cause an increase in our cost of funds under or may prevent us from completing any future securitization transactions.
+Added: risk retention rules require the sponsor (directly or through a majority-owned affiliate) of a debt securitization subject to such rules, such as collateralized loan obligations, in the absence of an exemption, to retain an economic interest in the credit risk of the assets being securitized.
+Added: If, and to the extent that, we engage in securitization transactions that require the retention of an economic interest, these rules would increase our financing costs in comparison to other types of financings and this increase in financing costs would ultimately be borne by our stockholders.
+Added: Over the last several years, there also has been an increase in regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector will be subject to new regulation.
+Added: While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank credit extension could negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business, financial condition and results of operations.
+Added: The current U.S.
+Added: presidential administration has announced a number of tax law proposals that include, among other proposals, increases in the corporate and individual tax rates, and a minimum tax on book income and profits of certain multinational corporations.
+Added: Any significant changes in economic or tax policy and/or government programs as well as any future such changes could have a material adverse impact on us and on our investments.
+Added: We are highly dependent on information systems, and systems failures could significantly disrupt our business, which may, in turn, negatively affect the value of shares of our Common Stock and our ability to pay distributions.
+Added: The operations of the Company, the Adviser, the Administrator and any third-party service provider to any of the foregoing are susceptible to risks from cybersecurity attacks and incidents due to reliance on the secure processing, storage and transmission of confidential and other information in the relevant computer systems and networks.
+Added: In particular, cyber security incidents and cyber-attacks have been occurring globally at a more frequent and severe level and will likely continue to increase in frequency in the future.
+Added: These attacks could involve gaining unauthorized access to information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption and result in disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations.
+Added: We, the Adviser and the Administrator must each continuously monitor and innovate our cybersecurity to protect our technology and data from corruption or unauthorized access.
+Added: In addition, due to the use of third-party vendors, agents, exchanges, clearing houses and other financial institutions and service providers, we, the Adviser and the Administrator could be adversely impacted if any of us are subject to a successful cyber-attack or other breach of our information.
+Added: Although we, the Adviser and the Administrator have developed protocols, processes, internal controls and other protective measures to help mitigate cybersecurity risks and cyber intrusions, these measures, as well as our increased awareness of the nature and extent of the risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident.
+Added: If any of the foregoing events occur, the confidential and other information of the Company, the Adviser, and the Administrator could be compromised.
+Added: Such events could also cause interruptions or malfunctions in the operations of the Company, the Adviser or the Administrator, and in particular the Adviser’s investment activities on our behalf and the provision of administrative services to us by the Administrator.
+Added: The increased use of mobile and cloud technologies can heighten these and other operational risks.
+Added: We, the Adviser and the Administrator currently or in the future are expected to routinely transmit and receive personal, confidential and proprietary information by email and other electronic means.
+Added: We, the Adviser and the Administrator have discussed and worked with clients, vendors, service providers, counterparties and other third parties to develop secure transmission capabilities and protect against cyber-attacks.
+Added: However, we, the Adviser and the Administrator may not be able to ensure secure capabilities with all of our clients, vendors, service providers, counterparties and other third parties to protect the confidentiality of the information.
+Added: In addition, the systems and technology resources used by us, our Adviser, our Administrator and our and their respective affiliates could be strained by extended periods of remote working by our Adviser, our Administrator and their affiliate’s employees and such extended remote working could introduce operational risks, including heightened cybersecurity risk.
+Added: Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.
+Added: Terrorist attacks, acts of war, natural disasters, outbreaks or pandemics, such as the Coronavirus pandemic, may impact our portfolio companies and our Adviser and harm our business, operating results and financial condition.
+Added: Terrorist acts, acts of war, natural disasters, disease outbreaks, pandemics or other similar events may disrupt our operations, as well as the operations of our portfolio companies and our Adviser.
+Added: Such acts have created, and continue to create, economic and political uncertainties and have contributed to recent global economic instability.
+Added: For example, many countries have experienced outbreaks of infectious illnesses in recent decades, including swine flu, avian influenza, SARS and Coronavirus.
+Added: In February 2022, Russia launched a large-scale invasion of Ukraine.
+Added: The extent and duration of Russian military action in the Ukraine, resulting sanctions and resulting future market disruptions, including declines in stock markets in Russia and elsewhere and the value of the ruble against the U.S.
+Added: dollar, are impossible to predict, but could be significant.
+Added: Any such disruptions caused by Russian military or other actions (including cyberattacks and espionage) or resulting from actual or threatened responses to such actions could cause disruptions to any of our portfolio companies located in Europe or that have substantial business relationships with European or Russian companies.
+Added: The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
+Added: Any such market disruptions could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.
+Added: The ongoing spread of the Coronavirus has had, and will continue to have, a material adverse impact on local economies in the affected jurisdictions and also on the global economy, as cross border commercial activity and market sentiment continue to be impacted by the outbreak and government and other measures seeking to contain its spread.
+Added: In addition to these developments
+Added: potentially having adverse consequences for certain portfolio companies and other issuers in or through which we may invest and the value of our investments therein, the operations of the Adviser (including those relating to us) have been, and could continue to be, adversely impacted, including through quarantine measures, business closures and travel restrictions imposed on Morgan Stanley personnel or service providers based or temporarily located in affected countries, or any related health issues of such personnel or service providers.
+Added: Any of the foregoing events could materially and adversely affect our ability to source, manage and divest our investments and our ability to fulfill our investment objectives.
+Added: Similar consequences could arise with respect to other comparable infectious diseases.
+Added: As the impact of the Coronavirus is difficult to predict, the extent to which the Coronavirus and/or other disease outbreaks or health pandemics may negatively affect our and our portfolio companies’ operating results, or the duration of any potential business or supply-chain disruption, is uncertain.
+Added: While the Adviser believes that we will be able to pursue our investment strategy during this pandemic, there is risk that our investment objectives may not be achieved.
+Added: Any potential impact to our results will depend to a large extent on future developments and new information that may emerge regarding the duration and severity of the Coronavirus and the actions taken by authorities and other entities to contain the Coronavirus or treat its impact, all of which are beyond our control.
+Added: These potential impacts, while uncertain, could adversely affect our operating results and the operating results of the portfolio companies in which we invest.
+Added: Further, if a future pandemic occurs (including a recurrence of the Coronavirus) during a period when our investments are maturing, we may not be able to realize our investments within the Company’s term, or at all.
+Added: In addition, future terrorist activities, military or security operations, natural disasters, disease outbreaks, pandemics or other similar events could weaken the domestic/global economies and create additional uncertainties, which may negatively impact our portfolio companies and, in turn, could have a material adverse impact on our business, operating results and financial condition.
+Added: Uncertainties resulting from the United Kingdom’s decision to leave the European Union could adversely affect our business.
+Added: It is difficult to predict the future of the United Kingdom’s relationship with the European Union, the uncertainty of which may increase the volatility in the global financial markets in the short- and medium-term and may negatively disrupt regional and global financial markets.
+Added: On December 24, 2020 the United Kingdom and the European Union announced they had reached agreement on the terms of a trade and cooperation agreement to govern the future relationship between the parties.
+Added: The agreement consists of three main pillars including trade, citizens’ security and governance, covering a variety of arrangements in several areas.
+Added: The agreement was provisionally applicable with effect from January 1, 2021 and entered into force effective May 1, 2021.
+Added: With respect to financial services, although the United Kingdom chose to grant the European Union equivalence in a number of key areas under European financial regulations, the European Union only made certain more limited equivalence decisions, leaving decisions on equivalence and adequacy to be determined by each of the United Kingdom and European Union unilaterally in due course.
+Added: As a result, United Kingdom licensed entities are unable to provide regulated services in a number of European Union jurisdictions from the end of December 2020, absent regulatory relief or other measures implemented by individual countries.
+Added: Such agreement is untested and may lead to ongoing political and economic uncertainty and periods of exacerbated volatility in both the United Kingdom and in wider European and global markets for some time.
+Added: As such, it is difficult to predict the precise impact of Brexit on us.
+Added: This uncertainty is likely to continue to adversely affect the global economic climate and may affect companies or assets, including with respect to opportunity, pricing, regulation, value or exit, especially companies based in, doing business in, or having service or other significant relationships in or with the United Kingdom or the European Union.
+Added: In addition, the long-term stability of certain European financial markets remains uncertain and the possibility of defaults and/or bankruptcies by sovereign states in Europe in respect of their obligations remains a concern, which could have an impact on economic conditions and market activity in the European Union.
+Added: Given current market conditions of relatively weak growth in many European Union member states, there is a risk that default of certain participating member states of the European Union may lead to the collapse of the Eurozone as it is constituted today, that certain member states of the European Union may cease to use the Euro as their national currency or that one or more member states may seek to withdraw from European Union membership, which would likely have an adverse impact on the Company.
+Added: Moreover, financial and economic developments in one European Union member state may impact economic and financial conditions among other European Union member states.
+Added: A Euro collapse would likely have negative implications for the European financial industry and the global economy as a whole because of counterparty risks, exposures and other “systemic” risks.
+Added: A potential effect would be an immediate reduction of liquidity for particular investments in economically connected countries, thereby impairing the value of such investments.
+Added: We cannot predict for how long uncertain economic conditions will continue to impact markets adversely, or to what degree economic conditions will deteriorate further.
+Added: Volatility in the global credit markets (and in particular, the recent uncertainty of the credit markets in Europe) may make it more difficult for issuers and borrowers to obtain favorable financing or refinancing arrangements that may be needed to execute our investment strategy.
+Added: A Euro collapse could have an adverse effect on us by affecting the performance of our investments and our ability to fulfill our investment objectives.
+Added: Moreover, this could have a detrimental effect on the performance of investments both in those countries that may experience a default on liabilities and other countries which are economically connected with the European Union.
We may be the target of litigation.
1 unchanged sentence
We could also generally be subject to litigation, including derivative actions by our stockholders.
−Removed: Any litigation could
−Removed: result in substantial costs and divert management’s attention and resources from our business and cause a material adverse effect on our business, financial condition and results of operations.
+Added: Any litigation could result in substantial costs and divert management’s attention and resources from our business and cause a material adverse effect on our business, financial condition and results of operations.
We may experience fluctuations in our quarterly operating results.
5 unchanged sentences
Any significant changes in economic or tax policy and/or government programs as well as any future such changes could have a material adverse impact on us and on our investments.
+Added: We are an “emerging growth company,” and we do not know if such status will make our shares less attractive to investors.
+Added: We are an “emerging growth company,” as defined in the JOBS Act, until the earliest of:
+Added: • The last day of the fiscal year ending after the fifth anniversary of any initial public offering of our shares of Common Stock;
+Added: • The year in which our total annual gross revenues first exceed $1.07 billion;
+Added: • The date on which we have, during the prior three-year period, issued more than $1.0 billion in non-convertible debt;
+Added: • The last day of a fiscal year in which we (1) have an aggregate worldwide market value of our shares of our Common Stock held by non-affiliates of $700 million or more, computed at the end of the last business day of the second fiscal quarter in such fiscal year and (2) have been a reporting company under the Exchange Act for at least one year (and filed at least one annual report under the Exchange Act).
+Added: Although we are still evaluating the JOBS Act, we may take advantage of some or all of the reduced regulatory and disclosure requirements permitted by the JOBS Act and, as a result, some investors may consider shares of our Common Stock less attractive.
+Added: For example, while we are an emerging growth company and/or a non-accelerated filer within the meaning of the Exchange Act, we may take advantage of exemption from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting.
+Added: This may increase the risk that material weaknesses or other deficiencies in our internal control over financial reporting go undetected.
+Added: Efforts to comply with the Sarbanes-Oxley Act will involve significant expenditures, and non-compliance with the Sarbanes-Oxley Act would adversely affect us and the value of our Common Stock.
+Added: We are required to comply with certain requirements of the Sarbanes-Oxley Act and the related rules and regulations promulgated by the SEC but will not have to comply with certain requirements until we have been registered under the Exchange Act for a specified period of time or cease to be an “emerging growth company.” Because shares of our Common Stock are registered under the Exchange Act, we are subject to the Sarbanes-Oxley Act and the related rules and regulations promulgated by the SEC, and our management is required to report on our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act.
+Added: We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting.
+Added: As a result, we expect to incur significant additional expenses that may negatively impact our financial performance and our ability to make distributions.
+Added: This process will also result in a diversion of management’s time and attention.
+Added: We do not know when our evaluation, testing and remediation actions will be completed or its impact on our operations.
+Added: In addition, we may be unable to ensure that the process is effective or that our internal control over financial reporting is or will be effective.
+Added: In the event that we are unable to come into and maintain compliance with the Sarbanes-Oxley Act and related rules, we and the value of our securities would be adversely affected.
+Added: We do not currently have comprehensive documentation of our internal controls and have not yet tested our internal controls in accordance with Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and the value of our Common Stock .
+Added: We have not previously been required to maintain proper and effective internal control over financial reporting, including the internal control evaluation and certification requirements of Section 404 of the Sarbanes-Oxley Act.
+Added: We will not be required to comply with all of the requirements under Section 404 of the Sarbanes-Oxley Act until we have been subject to the reporting requirements of the Exchange Act for a specified period of time or the date we are no longer an emerging growth company under the JOBS Act.
+Added: Our internal controls over financial reporting do not currently meet all of the standards contemplated by Section 404 of the Sarbanes-Oxley Act that we will eventually be required to meet.
+Added: Our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company under the JOBS Act.
+Added: Because we do not currently have comprehensive documentation of our internal control and have not yet tested our internal control in accordance with Section 404 of the Sarbanes-Oxley Act, we cannot conclude, as required by Section 404, that we do not have a material weakness in our internal control or a combination of significant deficiencies that could result in the conclusion that we have a material weakness in our internal control.
+Added: As a public entity, we will be required to complete our initial assessment in a timely manner.
+Added: If we are not able to implement the applicable requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner or with adequate compliance, our operations, financial reporting or financial results could be adversely affected.
+Added: Matters impacting our internal controls may cause us to be unable to report our financial information on a timely basis and thereby subject us to adverse regulatory consequences, including sanctions by the SEC, and result in a breach of the covenants under the agreements governing any of our financing arrangements.
+Added: There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements.
+Added: Confidence in the reliability of our financial statements could also suffer if we or our independent registered public accounting firm were to report a material weakness in our internal controls over financial reporting.
+Added: This could materially adversely affect us.
+Added: Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud.
+Added: Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
+Added: If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and operating results could be harmed and we could fail to meet our financial reporting obligations.
We incur significant costs as a result of being registered under the Exchange Act.
11 unchanged sentences
It is possible that we could become subject to a lender’s liability claim, including as a result of actions taken if we render managerial assistance to the borrower.
+Added: Risks relating to compliance with the AIFMD
+Added: The European Union Directive on Alternative Investment Fund Managers (the “AIFMD” or the “Directive”) regulates, and imposes regulatory obligations in respect of, the marketing in the European Economic Area (the “EEA”) by alternative investment fund managers (each an “AIFM”) (whether established in the EEA or elsewhere) of alternative investment funds (each an “AIF”) (whether established in the EEA or elsewhere).
+Added: For these purposes, the Adviser is a non-EEA AIFM and we are a non-EEA AIF.
+Added: Each European jurisdiction that has implemented the Directive has implemented a new and, in most cases, more restrictive private placement regime in connection with the implementation of the Directive.
+Added: The AIFMD could have an adverse effect on the Adviser and us by, among other things, increasing the regulatory burden and costs of doing business in EEA member states.
+Added: Except in limited circumstances, a non-EEA AIFM marketing its AIF to prospective EEA investors will be required to satisfy extensive disclosure obligations, including periodic disclosures to EEA regulators.
+Added: The AIFMD could also limit the Adviser’s operating flexibility and our investment opportunities.
+Added: The Directive imposes extensive disclosure obligations on the Adviser in respect of companies located in EEA member states, if any, in which we invest and potentially disadvantages us as an investor in private companies located in EEA member states when compared to non-AIF/AIFM competitors which may not be subject to the requirements of the AIFMD, thereby potentially restricting our ability to make investments in such companies.
+Added: Further, the AIFMD may restrict certain of our activities in relation to EEA portfolio companies, including, in certain circumstances, our ability to recapitalize, refinance or potentially restructure an EEA portfolio company for the two year period following acquisition.
+Added: The AIFMD may expose the Adviser or us to conflicting regulatory requirements in the United States and Europe and may require the restructuring of the Company and the Adviser and/or the relations among them.
+Added: There is little guidance, and limited market practice, that has developed in respect of the AIFMD.
+Added: Many of the provisions of the AIFMD require the adoption of delegated acts and regulatory technical standards, as well as the establishment of guidelines.
+Added: Some, but not all, EEA member states have published the relevant acts, standards and guidelines.
+Added: Where these acts, standards and guidelines have been implemented, their practical application is still uncertain.
+Added: As such, it is difficult to predict the precise impact of the AIFMD on us and the Adviser.
+Added: Any regulatory changes, arising from the transposition of the AIFMD into national law that impair the ability of the Adviser to manage us or our investments or limit the Adviser’s ability to market the Common Stock in the future, may materially adversely affect our ability to carry out our investment approach and achieve our investment objectives.
Unresolved Staff Comments
2 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.