What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-03-10 compared with 2021-03-12 · 198 added, 182 removed, 309 unchanged (55% of the section changed)

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We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under Investment Company Act of 1940, as amended (the “1940 Act”).

In addition, we intend to elect, and to qualify annually thereafter, to be treated as a regulated investment company (a “RIC”) under the Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”) for the taxable year ending December 31, 2020.

In addition, we have elected, and intend to qualify annually thereafter, to be treated for U.S.

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

Effective June 1, 2020, we changed our name from “Nuveen Churchill BDC, Inc.” to “Nuveen Churchill Direct Lending Corp.”

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Our investment objective is to generate attractive risk-adjusted returns primarily through current income by investing primarily in senior secured loans to private equity-owned U.S.

middle market companies, which we define as companies with approximately $10.0 million to $100.0 million of earnings before interest, taxes, depreciation and amortization (“EBITDA”).

We will focus on privately originated debt to performing U.S.

middle market companies, with a portfolio expected to comprise primarily first-lien senior secured debt and unitranche loans (other than last-out positions in unitranche loans).

We will also opportunistically invest in junior capital opportunities (second-lien loans, subordinated debt, last-out positions in unitranche loans and equity-related securities).

We have entered into an investment advisory agreement (the “Investment Advisory Agreement”) with Nuveen Churchill Advisors LLC (the “Adviser”), under which the Adviser has delegated substantially all of its day-to-day portfolio management obligations through a sub-advisory agreement (the “Sub-Advisory Agreement” and, together with the Investment Advisory Agreement, the “Advisory Agreements”) with Churchill Asset Management LLC (the “Sub-Adviser” or “Churchill” and, together with the Adviser, the “Advisers”).

middle market companies, which we define as companies with approximately $10.0 million to $100.0 million of annual earnings before interest, taxes, depreciation and amortization (“EBITDA”).

We focus on privately originated debt to performing U.S.

middle market companies, with a portfolio comprised primarily first-lien senior secured debt and unitranche loans (other than last-out positions in unitranche loans).

We also opportunistically invest in junior capital opportunities (second-lien loans, subordinated debt, last-out positions in unitranche loans and equity-related securities).

We have entered into an investment advisory agreement (the “Investment Advisory Agreement”) with Nuveen Churchill Advisors LLC (the “Adviser”), under which the Adviser has delegated substantially all of its day-to-day portfolio management obligations through a sub-advisory agreement (as amended and restated, the “Sub-Advisory Agreement” and, together with the Investment Advisory Agreement, the “Advisory Agreements”) with Churchill Asset Management LLC (the “Sub-Adviser” or “Churchill” and, together with the Adviser, the “Advisers”).

Under the administration agreement (the “Administration Agreement”), we are provided with certain services by an administrator, Nuveen Churchill Administration LLC (the “Administrator”).

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SPV II and SPV III are wholly owned subsidiaries of the Company and are consolidated in our consolidated financial statements commencing from the date of their formation.

We will from time to time conduct a private offering of our common stock to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “1933 Act”) in reliance on exemptions from the registration requirements of the 1933 Act (our “Private Offering”).

We may from time to time conduct a private offering of our common stock to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the “1933 Act”) in reliance on exemptions from the registration requirements of the 1933 Act (the “Private Offering”).

Each investor will purchase shares pursuant to a subscription agreement entered into with us.

The initial closing of our Private Offering was held on March 13, 2020 (“Initial Closing”).

We expect to hold additional closings (each a “Subsequent Closing”) for a period of 18 months after the Initial Closing (our “Fundraising Period”).

Our Fundraising Period may be extended to 24 months after the Initial Closing in the sole discretion of our Board of Directors (our “Board”).

COVID-19 Developments

On March 11, 2020, the World Health Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide.

The COVID-19 pandemic has had a significant impact on the U.S.

The extent of the impact of the COVID-19 outbreak on the financial performance of our current and future investments will depend on future developments, including the duration and spread of the virus, related advisories and restrictions, and the health of the financial markets and economy as a result of COVID-19, all of which are highly uncertain and cannot be predicted.

To the extent our portfolio companies are adversely impacted by the effects of the COVID-19 pandemic, it may have a material adverse impact on our future net investment income, the fair value of our portfolio investments, our financial condition and results of operations and the financial condition of our portfolio companies.

As of December 31, 2020, we were in compliance with our asset coverage requirements under the 1940 Act.

In addition, we were not in default of any of the asset coverage requirements under any of our credit facilities as of December 31, 2020.

However, any continuing increase in unrealized depreciation of our investment portfolio or further significant reductions in our net asset value, as a result of the effects of the COVID-19 pandemic or otherwise, increases the risk of breaching the relevant covenants.

We will continue to monitor the rapidly evolving situation surrounding the COVID-19 pandemic and guidance from U.S.

and international authorities, including federal, state and local public health authorities, and may take additional actions based on their recommendations.

In these circumstances, there may be developments outside our control requiring us to adjust our plan of operation.

As such, given the dynamic nature of this situation, we cannot reasonably estimate the possible future impact of the COVID-19 pandemic on our financial condition, results of operations or cash flows.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”).

The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses.

Changes in the economic environment, financial markets and other factors used in determining such estimates could cause actual results to differ.

Management considers the following critical accounting policies important to understanding the financial statements.

In addition to the discussion below, our critical accounting policies are further described in the notes to our consolidated financial statements.

Basis of Accounting

The Company is an investment company for the purposes of accounting and financial reporting in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies (“ASC 946”), and pursuant to Regulation S-X.

Valuation of portfolio investments

Investments are valued in accordance with the fair value principles established by FASB Accounting Standards Codification Topic 820, Fair Value Measurement (“ASC Topic 820”) and in accordance with the 1940 Act.

ASC Topic 820’s definition of fair value focuses on the amount that would be received to sell the asset or paid to transfer the liability in the principal or most advantageous, market and prioritizes the use of market-based inputs (observable) over entity-specific inputs (unobservable) within a measurement of fair value.

Value, as defined in Section 2(a)(41) of the 1940 Act, is (i) the market price for those securities for which a market quotation is readily available and (ii) for all other securities and assets, fair value is as determined in good faith by our Board.

Because we expect that there typically will not be a readily available market price for our target portfolio investments, we expect that the value of most of our portfolio investments will be their fair value as determined by our Board consistent with a documented valuation policy and consistently applied valuation process.

In making these determinations, our Board will receive input from management and the audit committee of the Board (the "Audit Committee").

In addition, our Board has retained one or more independent valuation firms to review the valuation of each portfolio investment for which a market quotation is not available at least once during each 12-month period.

Our Board makes this fair value determination on a quarterly basis and in such other instances when a decision regarding the fair value of the portfolio investments is required.

Factors considered by our Board as part of the valuation of investments include credit ratings/risk, the portfolio company's current and projected earnings, current and expected leverage, ability to make interest and principal payments, the estimated remaining life of the investment, liquidity, compliance with applicable loan covenants, price to earnings (or other financial) ratios of the portfolio company and other comparable companies, current market yields and interest rate spreads of similar securities as of the measurement date.

Other factors taken into account include changes in the interest rate environment and the credit markets, that may affect the price at which similar investments would trade.

Our Board may also base its valuation on recent investments and securities with similar structure and risk characteristics.

Churchill obtains market data from its ongoing investment purchase efforts, in addition to monitoring transactions that have closed and are announced in industry publications.

External information may include (but is not limited to) observable market data derived from the U.S.

loan and equity markets.

As part of compiling market data as an indication of current market conditions, Churchill may utilize third-party sources.

ASC Topic 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.

ASC Topic 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level within the hierarchy of information used in the valuation.

In accordance with ASC Topic 820, these inputs are summarized in the three levels listed below:

• Level 1 - Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

• Level 2 - Valuations are based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

• Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy.

In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of observable input that is significant to the fair value measurement.

The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

With respect to investments for which market quotations are not readily available (Level 3), our Board undertakes a multi-step valuation process each quarter, as follows:

the quarterly valuation process begins with each portfolio company or investment being initially valued by the professionals of the applicable investment team that are responsible for the portfolio investment;

preliminary valuation conclusions are documented and approved by the applicable investment team’s investment committee;

one or more third-party valuation firms engaged by, or on behalf of, our Board provide positive assurance on portions of the portfolio each quarter (such that each investment is be reviewed by a third-party valuation firm at least once on a rolling 12-month basis), including a review of management’s preliminary valuation and recommendation of fair value;

the Audit Committee reviews the valuations approved by the applicable investment team’s investment committee and, where appropriate, the independent valuation firm(s) and recommends those values to our Board;

our Board discusses the valuations and determines the fair value of each investment in our portfolio in good faith, based on the input of the applicable investment team, and, where appropriate, the respective independent valuation firm(s) and the Audit Committee.

The value assigned to these investments is based upon available information and may fluctuate from period to period.

In addition, the value assigned does not necessarily represent the amount that ultimately might be realized upon sale.

Due to the inherent uncertainty of valuation, the estimated fair value of investments may differ from the value that would have been used had a ready market for the security existed, and the difference could be material.

As of December 31, 2020 and 2019, all of our portfolio investments were Level 3 investments.

Determination of fair value involves subjective judgments and estimates.

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

Revenue recognition

Our revenue recognition policies are as follows:

Net realized gains (losses) on investments:

Gains or losses on investment transactions are determined on a specific identification basis.

Interest Income:

Interest income, including amortization of premium and accretion of discount on loans are recorded on the accrual basis.

We accrue interest income based on the effective yield if we expect that, ultimately, we will be able to collect such income.

Other income may include income such as consent, waiver, amendment, unused, and prepayment fees associated with our investment activities as well as any fees for managerial assistance services rendered by us to our portfolio companies.

Such fees are recognized as income when earned or the services are rendered.

For the years then ended December 31, 2020 and 2019, we earned $257 thousand and $365 thousand, respectively, in other income, primarily related to prepayment and amendment fees.

We may have loans in our portfolio that contain payment-in-kind (“PIK”) provisions.

PIK represents interest that is accrued and recorded as interest income at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity.

As of December 31, 2020, the fair value of the loans in the portfolio with PIK provisions was $9.6 million, which represents approximately 2.9% of our total investments at fair value.

As of December 31, 2019, no loans in the portfolio contained PIK provisions.

Generally, when a payment default occurs on a loan in the portfolio, or if management otherwise believes that the issuer of the loan will not be able to make contractual interest payments or principal payments, the Sub-Adviser will place the loan on non-accrual status and we will cease recognizing interest income on that loan until all principal and interest is current through payment or until a restructuring occurs, such that the interest income is deemed to be collectible.

However, we remain contractually entitled to this interest.

We may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection.

Accrued interest is written off when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated.

As of December 31, 2020 and 2019, there were no loans in the portfolio on non-accrual status.

We have held and expect to continue to hold additional closings (each a “Subsequent Closing”) for a period of 18 months after the Initial Closing (the “Fundraising Period”).

On September 1, 2021, the Company's board of directors (the "Board") determined to extend the Fundraising Period from 18 months to 24 months after the Initial Closing.

As a result of the foregoing, we extended the period during which we may hold Subsequent Closings from September 13, 2021 to March 13, 2022 (the "Fundraising Period").

On March 8, 2022, our Board determined to conduct a follow-on private offering of our shares of common stock following the end of the Fundraising Period (the “Follow-on Offering”).

The initial closing of the Follow-on Offering may occur at any time on or after March 14, 2022 (the “Initial Closing”) and the Company expects to hold additional closings until the conclusion of the fiscal quarter ending June 30, 2022.

The Board may, in its sole discretion, extend the Follow-on Offering.

If the Company is unable to list its shares on a national securities exchange (an "Exchange Listing") or effectuate another permissible liquidity event (as described in the Company's offering documents) within five years of the Initial Closing, subject to up to two one-year extensions at the discretion of the Board, then the Company will use its best efforts to wind down and/or liquidate and dissolve.

Recent COVID-19 Developments

We have been closely monitoring, and will continue to monitor, the impact of the COVID-19 pandemic (including new variants of COVID-19) and its impact on all aspects of our business, including how it will impact our portfolio companies, employees, due diligence and underwriting processes, and financial markets.

Given the fluidity of the pandemic, we cannot estimate the long-term impact of COVID-19 on our business, future results of operations, financial position or cash flows at this time.

Further, the operational and financial performance of the portfolio companies in which we make investments may be significantly impacted by COVID-19, which may in turn impact the valuation of our investments.

We believe our portfolio companies have taken, and continue to take, immediate actions to effectively and efficiently respond to the challenges posed by COVID-19 and related orders imposed by state and local governments, including developing liquidity plans supported by internal cash reserves, and shareholder support.

The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused, and are continuing to cause, business shutdowns, cancellations of events and restrictions on travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain disruptions, labor difficulties and shortages, commodity inflation and elements of economic and financial market instability in the United States and globally.

Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter.

Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount we have available to invest as well as the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity in the middle market, the general economic environment and the competitive environment for the types of investments we make.

To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements.

To the extent we continue to qualify as a RIC, we generally will not have to pay corporate-level U.S federal income taxes on any income we distribute to our shareholders.

To the extent we continue to qualify as a RIC, we generally will not be subject to U.S federal income tax on any income we timely distribute to our shareholders.

As a BDC, we are required to comply with certain regulatory requirements.

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As a BDC, we must not acquire any assets other than “qualifying assets” specified in the 1940 Act unless, at the time the acquisition is made, at least 70% of our total assets are qualifying assets (with certain limited exceptions).

Qualifying assets include investments in “eligible portfolio companies.” Under the relevant Securities and Exchange Commission (“SEC”) rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250.0 million.

We must be organized in the United States to qualify as a BDC.

Qualifying assets include investments in “eligible portfolio companies.” Under the relevant Securities and Exchange Commission (the “SEC”) rules, the term “eligible portfolio company” includes all private companies, companies whose securities are not listed on a national securities exchange, and certain public companies that have listed their securities on a national securities exchange and have a market capitalization of less than $250.0 million.

We also must be organized in the United States to qualify as a BDC.

We generate revenue primarily in the form of interest income on debt investments we hold.

In addition, we may generate income from dividends on direct equity investments, capital gains on the sales of loans and debt and equity securities.

In addition, we may generate income from dividends on direct equity investments, and capital gains on the sales of loans or debt and equity securities.

Our debt investments generally bear interest at a floating rate usually determined on the basis of a benchmark such as LIBOR.

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Our portfolio activity also may reflect the proceeds of sales of securities.

In addition, we may generate revenue in the form of commitment, origination, structuring, diligence, consulting or prepayment fees associated with our investment activities as well as any fees for managerial assistance services rendered by us to the portfolio companies and other investment related income.

In addition, we may generate revenue in the form of commitment, origination, structuring, diligence, consulting or prepayment fees associated with our investment activities as well as any fees for managerial assistance services rendered by us to portfolio companies and other investment related income.

The Adviser, the Sub-Adviser and their affiliates are responsible for bearing the compensation and routine overhead expenses allocable to personnel providing investment advisory and management services to us.

We will bear all other out-of-pocket costs and expenses of its operations and transactions, including those costs and expenses incidental to the provision of investment advisory and management services to us (such as items in the third and fourth bullets listed below).

We bear all other out-of-pocket costs and expenses of its operations and transactions, including those costs and expenses incidental to the provision of investment advisory and management services to us (such as items in the third and fourth bullets listed below).

• our organizational costs;

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Portfolio companies at end of period 96 61

As of December 31, 2020 and 2019, our investments consisted of the following (dollar amounts in thousands):

As of December 31, 2021 and December 31, 2020, our investments consisted of the following (dollar amounts in thousands):

December 31, 2021 December 31, 2020

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The industry composition of our portfolio as a percentage of fair value as of December 31, 2021 and 2020 were as follows:

Industry Composition December 31, 2020 December 31, 2019

Industry December 31, 2021 December 31, 2020

Aerospace & Defense 4.2 % 5.7 %

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Containers, Packaging & Glass 4.3 % 9.8 %

Electricity — 0.5

Environmental Industries 1.4 % — %

Healthcare & Pharmaceuticals 8.4 % 0.8 %

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Retail 0.8 % 2.6 %

Road and Rail — 1.2

Business 21.7 % 15.4 %

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Electric 0.5 % 0.6 %

Wholesale 1.5 % — %

Total 100.0 % 100.0 %

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Each investment team will review the investment ratings in connection with monthly or quarterly portfolio reviews.

As the COVID-19 pandemic continues to evolve, we are maintaining close communications with our portfolio companies to proactively assess and manage potential risks across our debt investment portfolio.

We have also increased oversight and analysis of credits in any vulnerable industries in an attempt to improve loan performance and reduce credit risk.

The following table shows the investment ratings of the investments in our portfolio (dollar amounts in thousands):

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Total $ 773,013 100.0 % 96 $ 335,259 100.0 % 61

As of December 31, 2020, one portfolio company with a fair value of $2.4 million was downgraded to an Internal Risk Rating of 5 and four portfolio companies with an aggregate fair value of $17.6 million were downgraded to an Internal Risk Rating of 6 due to changes in financial condition and performance of the respective portfolio companies as a result of the COVID-19 pandemic.

As of December 31, 2021 and 2020, the weighted average Internal Risk Rating of our investment portfolio was 4.1 and 4.1, respectively.

Results of Operations

Results comparisons are for the years ended December 31, 2020 and 2019.

Results of the Predecessor Entity for the period from January 12, 2018 (Commencement of Operations) through December 31, 2018 can be found in Item 2 of the Company’s registration statement on Form 10 filed on January 29, 2020, which is incorporated by reference herein.

Operating results for the years ended December 31, 2021, 2020 and 2019 were as follows (dollars amounts in thousands):

For the Years Ended December 31,

2021 2020 2019

Investment Income

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Payment-in-kind interest income 113 28 —

Dividend income 213 — —

Other income 1,062 257 365

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Total expenses before expense support 16,559 8,512 10,671

Expense support (See Note 4 )

(424) (1,696)

Expense support (522) (424) (1,696)

Net expenses after expense support 16,037 8,088 8,975

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Excise taxes — — 4

Net investment income after excise taxes $ 5,215 $ 6,417

Net investment income $ 20,253 $ 5,215 $ 6,417

Net Realized and Change in Unrealized Gains (Losses)

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Investment income

Investment income, attributable to interest and fees on our debt investments decreased to $13.3 million for the year ended December 31, 2020 from $15.4 million for the year ended December 31, 2019, primarily as a result of the decrease in our investment activity in the first quarter of 2020 due to the pending effectiveness of our Registration Statement with the SEC and during the second quarter of 2020 due to the onset of the COVID-19 pandemic.

Investment income, attributable to interest and fees on our debt investments increased to $36.3 million for the year ended December 31, 2021 from $13.3 million for the year ended December 31, 2020, primarily due to the increase in our investment activity.

We expect our portfolio to continue to grow as we raise additional capital through the Private Offering and the Follow-on Offering and our investment income to grow commensurately.

Investment income, attributable to interest and fees on our debt investments decreased to $13.3 million for the year ended December 31, 2020 from $15.4 million for the year ended December 31, 2019, primarily as a result of the decrease in our investment activity in the first quarter of 2020 due to the pending effectiveness of our Registration Statement on Form 10 with the SEC and during the second quarter of 2020 due to the onset of the COVID-19 pandemic.

Our investment activity began to increase towards the end of the third quarter of 2020 and continued to increase in the fourth quarter of 2020.

We expect our portfolio to continue to grow as we raise additional capital through the Private Offering of our common stock and expect our investment income to grow commensurately.

The COVID-19 pandemic has and may continue to negatively impact our portfolio growth and may have a negative impact on the liquidity of certain of our portfolio companies, which in turn could restrict their ability to make interest payments.

Total expenses before expense support increased to $16.6 million for the year ended December 31, 2021 from $8.5 million for the year ended December 31, 2020.

The increase in interest and debt financing expenses for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily driven by increased draws under the Financing Facilities (as defined below) due to the increased deployment of capital for investment purchases.

The increase in management fees for the year ended December 31, 2021 from the comparable year in 2020 was driven by increases in deployed capital.

Total expenses before expense support decreased to $8.5 million for the year ended December 31, 2020 from $10.7 million for the year ended December 31, 2019.

The decrease in interest and debt financing expenses for the year ended December 31, 2020 compared to the year ended December 31, 2019 was due to a decrease in the usage of the SPV I Financing Facility and a decrease in the LIBOR rate of all of our financing facilities.

The decrease in interest and debt financing expenses for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to a decrease in the usage of the SPV I Financing Facility and a decrease in the LIBOR rate associated with all of our Financing Facilities.

Historical operating expenses do not reflect the increased allocation of certain professional fees, administrative and other expenses that have been incurred following the election to become a BDC.

Accordingly, the operating expenses incurred during the year ended December 31, 2020 are not comparable to the operating expenses prior to the Merger and our election to become a BDC.

The expense support amount represents the amount of expenses paid by the Adviser on our behalf in accordance with the Expense Support Agreement (defined further below).

Accordingly, the operating expenses incurred during the years ended December 31, 2021 and 2020 are not comparable to the operating expenses prior to the Merger and our election to become a BDC.

The expense support amount represents the amount of expenses paid by the Adviser on our behalf in accordance with the Expense Support Agreement (described further below).

These expenses are subject to reimbursement by us in accordance with the terms of the Expense Support Agreement.

The follow table presents a cumulative summary of the Expense Payments and Reimbursement Payments since our commencement of operations (dollars amounts in thousands):

As of Expense Payments by Adviser Reimbursement Payments to Adviser Unreimbursed Expense Payments

December 31, 2020 $ 2,403 $ — $ 2,403

December 31, 2019 1,696 — 1,696

Refer to the "Related Party Transactions" section below for further details on the Expense Support Agreement.

Net realized gain (loss) and Net change in unrealized appreciation (depreciation) on investments

As a result of repayment and/or sales activity during the following periods, we had a net realized gain on investments of $819 thousand for the year ended December 31, 2021 compared to a realized gain of $409 thousand for the year ended December 31, 2020.

The net realized gain on investments decreased to $409 thousand for the year ended December 31, 2020 from $490 thousand for the year ended December 31, 2019, due to gains or losses on repayment and/or sales activity during the periods.

We recorded a net change in unrealized appreciation of $6.2 million for the year ended December 31, 2021, compared to net unrealized depreciation of $(3.5) million for the year ended December 31, 2020, which reflects the net change in the fair value of our investment portfolio relative to its cost basis over the period.

We recorded a net change in unrealized depreciation of $(3.5) million for the year ended December 31, 2020, compared to net unrealized appreciation of $378 thousand for the year ended December 31, 2019, which reflects the net change in the fair value of our investment portfolio relative to its cost basis over the period.

The total net loss for the year ended December 31, 2020, was primarily related to the overall financial markets decline, which directly impacted the prices of our portfolio investments.

The fair value of our portfolio investments throughout 2020 was negatively impacted by a widening credit spread environment and a decline in financial performance of the portfolio companies due to the COVID-19 pandemic.

The fair values of our portfolio investments in certain industries that experienced heightened effects of the COVID-19 pandemic, such as Services:

Consumer, were most impacted.

Management continues to monitor the impact of the COVID-19 pandemic on the portfolio, which may incur additional unrealized depreciation in the future to the extent that the credit risk of our portfolio companies increases as a result of deterioration in their financial conditions.

The total net gain for the year ended December 31, 2021, was primarily related to the continued improvement of the financial markets, which directly benefited the valuation of our portfolio investments.

The fair value of our portfolio investments for the year ended December 31, 2021 was positively impacted by a tightening credit spread environment, an improvement in financial performance due to the lessening impacts of the COVID-19 pandemic, as well as tailwinds from an improving economy on certain portfolio companies.

Management continues to monitor the impact of the COVID-19 pandemic on the portfolio, which may cause credit spreads to widen and/or unrealized depreciation to the extent that the credit risk of certain portfolio companies increases as a result of deterioration in their financial conditions.

Liquidity and Capital Resources

Our liquidity and capital resources are generated primarily from the proceeds of capital drawdowns of our privately placed capital commitments, cash flows from income earned from our investments and principal repayments, and our Financing and Subscription Facilities (each as defined below).

Our liquidity and capital resources are generated primarily from the proceeds of capital drawdowns of our privately placed capital commitments, cash flows from income earned from our investments and principal repayments, and our Financing Facilities and Subscription Facility (each as defined below).

Due to the diverse capital sources available to us at this time, we believe we have adequate liquidity to support our near-term capital requirements.

As the impact of COVID-19 continues to evolve, we will continually evaluate our overall liquidity position and take proactive steps to maintain that position based on the current circumstances.

The primary uses of our cash are (i) purchases of investments in portfolio companies, (ii) funding the cost of our operations (including fees paid to our Adviser), (iii) debt service, repayment and other financing costs of our borrowings and (iv) cash distributions to the holders of our shares.

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In connection with our organization, our Board and TIAA (as our initial shareholder) authorized us to adopt the 150% asset coverage ratio.

As of December 31, 2020 and December 31, 2019, our asset coverage ratio was 182.0% and 155.9%.

Cash and restricted cash as of December 31, 2020, taken together with our uncalled capital commitments of $191.3 million, is expected to be sufficient for our investing activities and to conduct our operations in the near term.

As of December 31, 2020, we had $121.1 million available under our SPV I Financing Facility (as defined below), $111.8 million available under our SPV II Financing Facility (as defined below) and $12.5 million available under our Subscription Facility (as defined below).

As of December 31, 2021 and December 31, 2020, our asset coverage ratio was 191.2% and 182.0%, respectively.

Cash and restricted cash as of December 31, 2021, taken together with our uncalled capital commitments of $197.1 million, is expected to be sufficient for our investment activities and to conduct our operations in the near term.

As of December 31, 2021, we had $8.0 million available under our SPV I Financing Facility (as defined below), $16.0 million available under our Subscription Facility (as defined below) and $62.1 million available under our SPV II Financing Facility (as defined below).

For the year ended December 31, 2021, our cash and cash equivalents balance increased by $22.6 million.

During that period, $389.1 million was used in operating activities, primarily due to investment purchases of $610.7 million, offset by $181.1 million in repayments and sales of investments in portfolio companies.

During the same period, $411.7 million was provided by financing activities, consisting primarily of proceeds from issuance of common shares of $209.2 million, proceeds from secured borrowings of $329.4 million, and repayments of secured borrowings of $111.5 million.

For the year ended December 31, 2020, our cash and cash equivalents balance increased by $9.2 million.

During that period, $152.1 million was used for operating activities, primarily due to investment purchases of $211.2 million, offset by $51.9 million in repayments and sales of investments in portfolio companies.

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Under the terms of the subscription agreements, investors are required to fund drawdowns to purchase our shares of common stock up to the amount of their respective capital commitment each time we deliver a drawdown notice.

As of December 31, 2020, we had received capital commitments totaling $352.6 million ($191.3 million remaining undrawn) of which $100.0 million ($33.8 million remaining undrawn) is from TIAA, an affiliated entity of the Company.

As of December 31, 2021, we had received capital commitments totaling $567.5 million ($197.1 million remaining undrawn), of which $100.0 million ($28.0 million remaining undrawn) is from TIAA, an entity affiliated with the Company.

The following table summarizes total shares issued and proceeds received related to capital activity from inception to December 31, 2021 (dollar amounts in thousands, except per share data):

Date Shares Issued Proceeds Received Issuance Price per Share

December 9, 2021 1,491,676 $29,207 $19.58

November 1, 2021 1,546,427 $30,000 $19.40

August 23, 2021 2,593,357 $50,000 $19.28

July 26, 2021 1,564,928 $30,000 $19.17

June 22, 2021 1,034,668 $20,000 $19.33

April 23, 2021 1,845,984 $35,000 $18.96

March 11, 2021 785,751 $15,000 $19.09

November 6, 2020 1,870,660 $35,000 $18.71

October 16, 2020 1,057,641 $20,000 $18.91

6 unchanged sentences

Dividends and distributions to common shareholders are recorded on the applicable record date.

The amount to be distributed is determined by our Board each quarter and is generally based upon the taxable earnings estimated by management and available cash.

The amount to be distributed to common shareholders is determined by our Board each quarter and is generally based upon the taxable earnings estimated by management and available cash.

Net realized capital gains, if any, will generally be distributed at least annually, although we may decide to retain such capital gains for investment.

We have adopted a dividend reinvestment plan under which shareholders will automatically receive dividends and other distributions in cash unless they elect to have their dividends and other distributions reinvested in additional shares.

As a result of adopting such a plan, if our Board authorizes, and we declare, a cash dividend or distribution, shareholders that have “opted in” to our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares rather than receiving cash.

As a result of the foregoing, if our Board authorizes, and we declare, a cash dividend or distribution, shareholders that have “opted in” to our dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares rather than receiving cash.

The following table summarizes the dividends declared from inception through December 31, 2021:

1 unchanged sentence

December 29, 2021 December 29, 2021 January 18, 2022 $0.40

September 29, 2021 September 29, 2021 October 11, 2021 $0.38

June 29, 2021 June 29, 2021 July 12, 2021 $0.31

March 29, 2021 March 29, 2021 April 19, 2021 $0.30

December 29, 2020 December 29, 2020 January 18, 2021 $0.28

November 4, 2020 November 4, 2020 November 11, 2020 $0.23

1 unchanged sentence

April 16, 2020 April 16, 2020 April 21, 2020 $0.17

The following table reflects the shares issued pursuant to the dividend reinvestment plan during the year ended December 31, 2020:

The following table reflects the shares issued pursuant to the dividend reinvestment plan from inception through December 31, 2021:

Date Declared Record Date Payment Date Shares Issued

December 29, 2021 December 29, 2021 January 18, 2022 23,017

September 29, 2021 September 29, 2021 October 11, 2021 10,639

June 29, 2021 June 29, 2021 July 12, 2021 3,039

March 29, 2021 March 29, 2021 April 19, 2021 1,824

December 29, 2020 December 29, 2020 January 18, 2021 1,550

November 4, 2020 November 4, 2020 November 11, 2020 98

August 4, 2020 August 4, 2020 August 11, 2020 34

We intend to elect to be treated, and to comply with the requirements to qualify annually, as a RIC under the Code.

We intend to qualify annually to be treated as a RIC for U.S.

federal income tax purposes under the Code.

If we qualify as a RIC, we will not be taxed on our investment company taxable income or realized net capital gains, to the extent that such taxable income or gains are distributed, or deemed to be distributed, to shareholders on a timely basis.

3 unchanged sentences

To qualify for RIC tax treatment, we must, among other things, distribute, with respect to each taxable year, at least 90% of our investment company net taxable income (i.e., our net ordinary income and our realized net short-term capital gains in excess of realized net long-term capital losses, if any).

If we qualify as a RIC, we will also be subject to a federal excise tax, based on distribution requirements of our taxable income on a calendar year basis.

If we qualify as a RIC, we may also be subject to a U.S.

federal excise tax, based on distribution requirements of our taxable income on a calendar year basis.

Depending on the level of taxable income earned in a tax year, we may choose to carry forward taxable income in excess of current year distributions into the next year and pay a 4% U.S.

federal excise tax on such income.

Any such carryover taxable income must be distributed through a dividend declared prior to filing the final tax return related to the year that generated such taxable income.

We intend to distribute to our shareholders between 90% and 100% of our annual taxable income (which includes our taxable interest and fee income).

12 unchanged sentences

The amendment increased the maximum facility amount available from $175 million to $275 million and extended the reinvestment period to October 28, 2023 and the maturity date to October 28, 2025, among other changes.

The SPV I Financing Facility, as so amended, also requires us to maintain an asset coverage ratio at least equal to 1.50:1.00.

Advances under the SPV I Financing Facility may be prepaid and reborrowed at any time during the reinvestment period, however any termination or reduction of the facility amount prior to the second anniversary of the amendment date (subject to certain exceptions) is subject to a commitment reduction fee of 2% (during the first year following the amendment date) or 1% (during the second year).

As of December 31, 2020, the SPV I Financing Facility bears interest at daily LIBOR plus 2.50% per annum.

The SPV I Financing Facility also includes certain financial covenants related to liquidity and other maintenance covenants.

The SPV I Financing Facility, as so amended, also requires us to maintain an asset coverage ratio equal to at least 1.50:1.00.

Advances under the SPV I Financing Facility may be prepaid and reborrowed at any time during the reinvestment period;

however, any termination or reduction of the SPV I Financing Facility amount prior to the second anniversary of the amendment date (subject to certain exceptions) is subject to a commitment reduction fee of 2% (during the first year following the amendment date) or 1% (during the second year).

As of December 31, 2021 and December 31, 2020, the SPV I Financing Facility bore interest at monthly LIBOR rate, reset daily, plus 2.50% and 2.50%, respectively, per annum.

SPV I has pledged all of its assets to the collateral agent to secure its obligations under the SPV I Financing Facility.

Both the Company and SPV I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar facilities.

Subscription Facility

On September 10, 2020, we entered into a revolving credit agreement (the ‘‘Subscription Facility’’) with Sumitomo Mitsui Banking Corporation (“SMBC”), as the administrative agent for certain secured parties, the syndication agent, the lead arranger, the book manager, the letter of credit issuer and the lender.

The Subscription Facility has a maximum facility amount of $30 million subject to availability under the "Borrowing Base".

Borrowing Base is calculated based on the unfunded capital commitments of certain investors that have subscribed to purchase shares of the Company, to the extent the capital commitments of such investors have also been approved by SMBC for inclusion in the Borrowing Base and meet certain additional criteria.

Pursuant to the terms of the revolving credit agreement on September 10, 2021, we extended the maturity date from September 10, 2021 to September 9, 2022.

On August 12, 2021, pursuant to the terms of the revolving credit agreement, we increased the maximum commitment of the Subscription Facility from $30 million to $50 million subject to availability under the "Borrowing Base".

The Borrowing Base is calculated based on the unfunded capital commitments of certain investors that have subscribed to purchase shares of the Company, to the extent the capital commitments of such investors also have been approved by SMBC for inclusion in the Borrowing Base and meet certain additional criteria.

The Subscription Facility bears interest at a rate of LIBOR plus 1.75% per annum.

We also will pay an unused commitment fee of 0.25% per annum on the unused commitments.

The Subscription Facility will mature upon the earliest of:

(a) September 10, 2021 (b) the date upon which the administrative agent declares the obligations under the Subscription Facility due and payable after the occurrence and during the continuance of an event of default;

(c) the date of the occurrence of an event of default pursuant to the Subscription Facility, (d) the date upon which the Company terminates the commitments pursuant to the Subscription Facility;

or (e) 45 days prior to any capital call termination event (which shall include, without limitation, a listing of our shares on a national securities exchange (an "Exchange Listing")).

The Subscription Facility is structured as a revolving credit facility secured by the capital commitments of the Company’s subscribed investors and certain related assets.

The Subscription Facility contains certain customary affirmative and negative covenants and events of default.

We also pay an unused commitment fee of 0.25% per annum.

The Subscription Facility is structured as a revolving credit facility secured by the capital commitments of our subscribed investors.

The Subscription Facility contains certain financial covenants and events of default.

SPV II Financing Facility

On November 24, 2020, SPV II entered into a senior secured revolving credit facility (the “SPV II Financing Facility” and, together with the SPV I Financing Facility (the "Financing Facilities")) with SMBC, as the administrative agent, the collateral agent and the lender.

The maximum amount for the SPV II Financing Facility is $150 million (the “Maximum Facility Amount”).

On December 23, 2021, the Company amended the SPV II Financing Facility agreement, which increased the maximum commitment of the SPV II Financing Facility from $150 million to $225 million (the “Maximum Facility Amount”) and reduced the interest rate on the borrowings from LIBOR plus 2.50% to LIBOR plus 2.15%.

Under the SPV II Financing Facility, which matures on November 24, 2025, the lender has agreed to extend credit to SPV II in an aggregate principal amount up to the Maximum Facility Amount.

SPV II’s ability to draw under the Facility is scheduled to terminate on November 24, 2023.

As of December 31, 2020, the SPV II Financing Facility bears interest at one-month LIBOR plus 2.50% per annum.

SPV II has pledged all of its assets to the collateral agent to secure its obligations under the facility.

The Company's ability to draw under the SPV II Financing Facility is scheduled to terminate on November 24, 2023.

As of December 31, 2021 and December 31, 2020, the SPV II Financing Facility bore interest at one-month LIBOR plus 2.15% and 2.50%, respectively, per annum.

SPV II has pledged all of its assets to the collateral agent to secure its obligations under the SPV II Financing Facility.

Both the Company and SPV II have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar facilities.

Contractual Obligations

The following tables show the contractual maturities of our debt obligations as of December 31, 2020 and 2019 (dollar amounts in thousands):

The following tables show the contractual maturities of our debt obligations as of December 31, 2021 and December 31, 2020 (dollar amounts in thousands):

Payments Due by Period

As of December 31, 2021 Total Less than 1 Year 1 to 3 years 3 to 5 years More than 5 Years

Financing Facility - SPV I $ 146,135 $ — $ — $ 146,135 $ —

SPV I - Financing Facility $ 231,600 $ — $ — $ 231,600 $ —

Subscription Facility 34,000 34,000 — — —

Financing Facility - SPV II 28,547 — — 28,547 —

SPV II - Financing Facility 144,447 — — 144,447 —

Total debt obligations $ 410,047 $ 34,000 $ — $ 376,047 $ —

1 unchanged sentence

As of December 31, 2020 Total Less than 1 Year 1 to 3 years 3 to 5 years More than 5 Years

Financing Facility - SPV I $ 118,435 $ — $ 118,435 $ — $ —

SPV I - Financing Facility $ 146,135 $ — $ — $ 146,135 $ —

Subscription Facility 17,500 17,500 — — —

SPV II - Financing Facility 28,547 — — 28,547 —

Total debt obligations $ 192,182 $ 17,500 $ — $ 174,682 $ —

5 unchanged sentences

• the Expense Support Agreement

In addition to the aforementioned agreements, the Advisers, us, and certain other funds and accounts sponsored or managed by either of the Advisers and/or their affiliates were granted an order (the “Order”) that permits us greater flexibility than the 1940 Act permits to negotiate the terms of co-investments if our Board determines that it would be advantageous for us to co-invest with other accounts sponsored or managed by either of the Advisers or their respective affiliates in a manner consistent with our investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.

In addition to the aforementioned agreements, the SEC has granted an exemptive order (the “Order”) that permits us to participate in negotiated co-investment transactions with certain other funds and accounts sponsored or managed by either of the Advisers and/or their affiliates.

Co-investment under the Order is subject to certain conditions therein, including the condition that, in the case of each co-investment transaction, the Board determines that it would be in the Company’s best interest to participate in the transaction.

Neither we nor the affiliated funds are obligated to invest or co-invest when investment opportunities are referred to us or them.

Expense Support Agreement

3 unchanged sentences

Following any calendar quarter in which Available Operating Funds (as defined below) exceed the cumulative distributions accrued to our shareholders based on distributions declared with respect to record dates occurring in such calendar quarter (such amount referred to as the “Excess Operating Funds”), we shall pay such Excess Operating Funds, or a portion thereof (each, a “Reimbursement Payment”), to the Adviser until such time as all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter have been reimbursed.

"Available Operating Funds" means the sum of (i) net investment income (including net realized short-term capital gains reduced by net realized long-term capital losses), (ii) net capital gains (including the excess of net realized long-term capital gains over net realized short-term capital losses) and (iii) dividends and other distributions paid to us on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

"Available Operating Fund" means the sum of (i) net investment income (including net realized short-term capital gains reduced by net realized long-term capital losses), (ii) net capital gains (including the excess of net realized long-term capital gains over net realized short-term capital losses) and (iii) dividends and other distributions paid to us on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above).

The amount of the Reimbursement Payment for any calendar quarter shall equal the lesser of (i) the Excess Operating Funds in such quarter and (ii) the aggregate amount of all Expense Payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser.

3 unchanged sentences

“Operating Expenses” means all of our operating costs and expenses incurred, as determined in accordance with US GAAP.

The Adviser may waive its right to receive all or a portion of any Reimbursement Payment in any particular calendar quarter, so that such Reimbursement Payment may be reimbursable in a future calendar quarter.

The Adviser may waive its right to receive all or a portion of any Reimbursement Payment in any particular calendar quarter, in which case such Reimbursement Payment may be reimbursable in a future calendar quarter.

The following table presents a cumulative summary of the Expense Payments and Reimbursement Payments since our commencement of operations (dollars amounts in thousands):

For the Quarter Ended Expense Payments by Adviser Reimbursement Payments to Adviser Unreimbursed Expense Payments Reimbursement Eligibility Expiration

December 31, 2019 $ 1,696 $ — $ 1,696 December 31, 2022

March 31, 2020 182 — 182 March 31, 2023

June 30, 2020 3 — 3 June 30, 2023

September 30, 2020 466 — 466 September 30, 2023

December 31, 2020 56 — 56 December 31, 2023

March 31, 2021 97 — 97 March 31, 2024

June 30, 2021 62 — 62 June 30, 2024

September 30, 2021 47 — 47 September 30, 2024

December 31, 2021 42 — 42 December 31, 2024

Total $ 2,651 $ — $ 2,651

Off-Balance Sheet Arrangements

In the ordinary course of its business, we enter into contracts or agreements that contain indemnifications or warranties.

As of December 31, 2020 and 2019, our off-balance sheet arrangements consisted of the following unfunded commitments (dollar amounts in thousands):

Portfolio Company December 31, 2020 December 31, 2019

Anne Arundel $ 631 $ —

Arotech 3,514 —

B2B Packaging 178 —

Blackbird Purchaser Inc — 640

Brillio LLC 500 1,000

Cornerstone Advisors of Arizona LLC 216 —

Diligent Corporation 503 —

Gabriel Partners LLC 1,429 —

Heartland Home Services 2,637 —

NJEye LLC 2,277 351

North Haven Spartan US Holdco LLC — 1,228

Output Services Group Inc — 24

PCF Insurance 9,868 —

Resource Label Group LLC 1,043 —

SEKO Global Logistics 907 —

Spectrio II 2,941 —

TailWind Randy's LLC 317 500

Tinuiti 1,961 —

Unified Physician Management LLC — 432

Warrior Acquisition Inc 622 —

Total unfunded commitments $ 29,544 $ 4,175

Recent Accounting Standard Updates

The FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reportin g in March 2020.

This new update provides temporary optional expedients and exceptions to the US GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from the London Interbank Offered Rate ("LIBOR") and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate.

Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met.

This guidance is effective upon issuance and generally can be applied through December 31, 2022.

The Company is currently evaluating the impact of adopting ASU 2020-04.

In the ordinary course of its business, the Company enters into contracts or agreements that contain indemnifications or warranties.

Future events could occur which may give rise to liabilities arising from these provisions against us.

We believe that the likelihood of such an event is remote;

however, the maximum potential exposure is unknown.

No accrual has been made in these consolidated financial statements as of December 31, 2021 and December 31, 2020.

We have in the past and may in the future become obligated to fund commitments such as delayed draw commitments.

For more information on our off-balance sheet arrangements, commitments and contingencies see Note 6 t o the consolidated financial statements in Part II, Item 8 of this Form 10-K.

Critical Accounting Policies and Estimates

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

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

Our critical accounting policies and estimates, including those relating to the valuation of our portfolio investments, are described below.

We consider the most significant accounting policies to be those related to our Valuation of Investments, Fair Valuation Measurements, Income Recognition, and Income Taxes, are described below.

The valuation of investments is our most significant critical estimate.

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

Risk Factors .”

Valuation of portfolio investments

At all times, consistent with US GAAP and the 1940 Act, we conduct a valuation of our assets, pursuant to which our net asset value is determined.

Our assets are valued on a quarterly basis, or more frequently if required under the 1940 Act.

For purposes of the 1940 Act, the Board of Directors of the Company (the “Board”) is ultimately and solely responsible for determining the fair value of our portfolio investments in good faith, including investments that are not publicly traded, those whose market prices are not readily available and any other situation where our portfolio investments require a fair value determination.

Security transactions are accounted for on a trade date basis.

For all valuations, the Audit Committee of our Board (the “Audit Committee”), which consists solely of directors who are not ‘‘interested persons’’ of the Company, as such term is used under the 1940 Act (the ‘‘Independent Directors’’), will review these preliminary valuations and our Board, a majority of whom are Independent Directors, will discuss the valuations and determine the fair value of each investment in the portfolio in good faith.

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

Market quotations are obtained from independent pricing services, where available.

Generally investments marked in this manner will be marked at the mean of the bid and ask of the quotes obtained.

To validate market quotations, we utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations.

With respect to investments for which market quotations are not readily available, we or an independent third-party valuation firm engaged by us, will take into account relevant factors in determining the fair value of our investments, including and in combination of:

comparison to publicly traded securities, including factors such 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 flows;

and the markets in which the portfolio company does business.

Investment performance data utilized are the most recently available financial statements and compliance certificates received from the portfolio companies as of the measurement date which in many cases may reflect a lag in information.

The independent third-party valuation firm provides a fair valuation report, a description of the methodology used to determine the fair value and their analysis and calculations to support their conclusion.

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.

GAAP establishes a hierarchical disclosure framework which ranks the level of observability of market price inputs used in measuring investments at fair value.

The observability of inputs is impacted by a number of factors, including the type of investment and the characteristics specific to the investment and state of the marketplace, including the existence and transparency of transactions between market participants.

Investments with readily available quoted prices or for which fair value can be measured from quoted prices in active markets generally have a higher degree of market price observability and a lesser degree of judgment applied in determining fair value.

W e review pricing and methodologies in order to determine if observable market information is being used, versus unobservable inputs.

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

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

For more information on the fair value hierarchies, our framework for determining fair value and the composition of our portfolio see Note 3 t o the consolidated financial statements in Part II, Item 8 of this Form 10-K.

Revenue recognition

Our revenue recognition policies are as follows:

Net realized gains (losses) on investments:

Gains or losses on investment transactions are determined on a specific identification basis.

Interest Income:

Interest income, including amortization of premium and accretion of discount on loans are recorded on the accrual basis.

We accrue interest income based on the effective yield if we expect that, ultimately, we will be able to collect such income.

Such fees are recognized as income when earned or the services are rendered.

We may have loans in our portfolio that contain payment-in-kind (“PIK”) income provisions.

Generally, if a payment default occurs on a loan in the portfolio, or if management otherwise believes that the issuer of the loan will not be able to make contractual interest payments or principal payments, the Sub-Adviser will place the loan on non-accrual status and we will cease recognizing interest income on that loan until all principal and interest is current through payment or until a restructuring occurs, such that the interest income is deemed to be collectible even though we remain contractually entitled to this interest.

We may make exceptions to this policy if the loan has sufficient collateral value and is in the process of collection.

Accrued interest is written off when it becomes probable that the interest will not be collected and the amount of uncollectible interest can be reasonably estimated.

Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected.

Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.

Recent Developments

On January 6, 2022, we delivered a drawdown notice to our shareholders relating to the issuance of 1,541,568 shares of the Company's common stock, par value $0.01 per share, for an aggregate offering price of $30.0 million.

The shares were issued on January 21, 2022.

On January 18, 2022, we held a Subsequent Closing and entered into subscription agreements with additional investors for total commitments of $46.5 million.

On February 25, 2021, we delivered a drawdown notice to our shareholders relating to the issuance of 785,751 shares of our common stock, par value $0.01 per share, for an aggregate offering price of $15.0 million.

The shares are were issued on March 11, 2021.

On March 10, 2021, we held a Subsequent Closing and entered into subscription agreements with additional investors for total commitments of $48.2 million.

On February 15, 2022, we held a Subsequent Closing and entered into subscription agreements with additional investors for total commitments of $46.8 million.

On February 28, 2022, the Company held a Subsequent Closing and entered into subscription agreements with additional investors for total commitments of $30.7 million.

On March 8, 2022, our board of directors determined to conduct a follow-on offering of our shares of common stock following the end of the current Fundraising Period, which will end on March 13, 2022, to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated under the 1933 Act in reliance on exemptions from the registration requirements of the 1933 Act (the “Follow-on Offering”).

The Board may, in its sole discretion, extend the Follow-on Offering.

On March 8, 2022, the Adviser and Sub-Adviser entered into the third amended and restated investment sub-advisory agreement (the “Third Amended and Restated Sub-Advisory Agreement”).

The terms of the Third Amended and Restated Sub-Advisory Agreement are substantially the same as the second amended and restated investment sub-advisory agreement, dated as of October 7, 2021, by and between the Adviser and the Sub-Adviser, except for the allocation of compensation between the Adviser and the Sub-Adviser thereunder.

Pursuant to the Third Amended and Restated Sub-Advisory Agreement, the percentage of the aggregate management and incentive fees payable by the Company to the Adviser (the “Advisory Fees”) that the Adviser is required to pay to the Sub-Adviser was reduced from 70% to 67.5%.

The Third Amended and Restated Sub-Advisory Agreement and accompanying changes in allocation of the Advisory Fees between the Adviser and the Sub-Adviser will not have an economic impact on the Advisory Fees payable by the Company or result in any changes to services provided by the Adviser or the Sub-Adviser to the Company.

The Company’s board of directors unanimously approved the Third Amended and Restated Sub-Advisory Agreement pursuant to the requirements of the 1940 Act.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis