What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-09 compared with 2022-03-10 · 182 added, 111 removed, 396 unchanged (43% of the section changed)

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The Predecessor Entity was a Cayman exempt limited company and was formed under the laws of the Cayman Islands on November 14, 2017 and commenced operations on January 12, 2018.

We have consolidated the investments held in SPV I, in accordance with our consolidation policy.

On May 20, 2022, SPV I completed a term debt securitization and, in connection therewith, changed its name to Churchill NCDLC CLO-I, LLC (“CLO-I”).

We have consolidated the investments held in CLO-I, in accordance with our consolidation policy.

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.

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SPV II and SPV III primarily invest in first-lien senior secured debt and unitranche loans (other than last-out positions in unitranche loans).

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 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”).

NCDL Equity Holdings LLC ("NCDL Equity Holdings") was formed on June 13, 2022 and commenced operations on October 5, 2022 the date of its first investment transaction.

NCDL Equity Holdings was formed to hold certain equity-related securities.

SPV II, SPV III and NCDL Equity Holdings are wholly owned subsidiaries of the Company and are consolidated in these consolidated financial statements commencing from the date of their formation.

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 "Securities Act"), in reliance on exemptions from the registration requirements of the Securities 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 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 initial closing of our Private Offering was held on March 13, 2020 (the "Initial Closing").

We held additional closings (each a “Subsequent Closing”) after the Initial Closing (the “Initial Fundraising Period”).

On September 1, 2021, the Company's board of directors (the "Board") determined to extend the Initial 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.

On March 8, 2022, our Board determined to conduct a follow-on offering of our shares of common stock following the end of the Initial Fundraising Period, which ended on March 13, 2022 (the “Follow-on Offering”).

The final closing of the Follow-on Offering was held on June 15, 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.

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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 (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.

Qualifying assets include investments in “eligible portfolio companies.” Under the 1940 Act, 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.

In addition, we 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, 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.

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

Interest on these debt investments is generally paid quarterly.

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Portfolio companies at beginning of period 96 61

Number of new portfolio companies 52 24

Number of exited portfolio companies (17) (9)

Number of new portfolio companies funded 52 52

Number of portfolio companies sold or repaid (3) (17)

Portfolio companies at end of period 145 96

Count of investments 288 179

Count of industries 23 22

As of December 31, 2022, our portfolio companies had a weighted average annual EBITDA of $74.6 million .

These calculations include all private debt investments for which fair value is determined by the Board in conjunction with third-party valuation firms and excludes quoted assets.

Amounts are weighted based on fair market value of each respective investment.

Amounts were derived from the most recently available portfolio company financial statements, have not been independently reviewed by us, and may reflect a normalized or adjusted amount.

Accordingly, we make no representation or warranty in respect of this information.

As of December 31, 2022 and December 31, 2021, our investments consisted of the following (dollar amounts in thousands):

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Average portfolio company investment $ 8,452 $ 8,278 0.69 % $ 8,024 $ 8,052 1.04 %

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

The industry composition of our portfolio as a percentage of fair value as of December 31, 2022 and 2021 was as follows:

Industry December 31, 2022 December 31, 2021

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High Tech Industries 9.14 % 10.21 %

Hotel, Gaming & Leisure — % 0.8 %

Advertising, Printing & Publishing 1.25 % 0.44 %

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Consumer 4.47 % 1.50 %

Sovereign & Public Finance 0.85 % — %

Telecommunications 4.09 % 5.74 %

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Percentage of debt investments bearing a fixed rate 4.58 % 2.55 %

As of December 31, 2022 , 95.13% and 95.09% of our debt and income producing investments at cost and at fair value, respectively, had interest rate floors that limit the minimum applicable interest rates on such loans.

The weighted average yield of our debt and income producing securities is not the same as a return on investment for our shareholders, but rather relates to our investment portfolio and is calculated before the payment of all of our and our subsidiaries’ fees and expenses.

The weighted average yield was computed using the effective interest rates as of each respective date, including accretion of original issue discount.

The weighted average yield was computed using the effective interest rates as of each respective date, including accretion of original issue discount, but excluding investments on non-accrual status, if any.

There can be no assurance that the weighted average yield will remain at its current level.

Total weighted average yields of our debt and income producing investments, at cost, increased from 6.93% to 10.61% from December 31, 2021 to December 31, 2022.

The increase in weighted average yields was primarily due to rising benchmark interest rates.

Based on current market conditions, the pace of our investment activities, including originations and repayments, may vary.

The past strength of the financing and mergers and acquisitions markets and the historically low interest rate environment previously led to increased originations and repayments.

However, we have observed, and continue to observe, supply chain disruptions, labor and resource shortages, commodity inflation, elements of financial market instability (including rapidly rising interest rates), an uncertain economic outlook for the United States (which may include a recession), and elements of geopolitical instability (including the ongoing war in Ukraine and U.S.

and China relations).

T here have been headwinds in the financing and merger and acquisitions markets resulting from the foregoing factors.

I n the event that the U.S.

economy enters into a protracted recession, it is possible that the results of certain U.S.

middle market companies could experience deterioration.

We are closely monitoring the effect of such market volatility may have on our portfolio companies and our investment activities, and we will continue to seek to invest in defensive businesses with low levels of cyclicality and strong levels of free cash flow generation.

While we are not seeing signs of an overall, broad deterioration in our results or those of our portfolio companies at this time, there can be no assurance that the performance of certain of our portfolio companies will not be negatively impacted by economic conditions, which could have a negative impact on our future results.

Asset Quality

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The prospects for improvement in the borrower’s situation are sufficiently negative that loss of some or all principal is probable.

The Sub-Adviser monitors and, when appropriate, changes the investment rating assigned to each investment in our portfolio.

The Sub-Adviser regularly monitors and, when appropriate, changes the investment rating assigned to each investment in our portfolio.

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.

Based on a generally uncertain economic outlook in the United States (which includes a possible recession), we have 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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Professional fees 1,811 1,316 1,299

Organization expenses — — 1,705

Directors' fees 383 383 383

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Net expenses after expense support 36,993 16,037 8,088

Net investment income before excise taxes $ 20,253 $ 5,215 $ 6,421

Excise taxes — — 4

Net investment income $ 45,460 $ 20,253 $ 5,215

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Investment income

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.

Investment income, attributable to interest and fees on our debt investments, increased to $82.5 million for the year ended December 31, 2022, from $36.3 million for the year ended December 31, 2021, primarily due to the increase in our investment activity as a result of our increase in deployed capital and an increase in interest income from higher weighted average interest rates.

As of December 31, 2022, the size of our portfolio increased to $1,225.6 million from $770.3 million as of December 31, 2021, at cost.

As of December 31, 2022, the weighted average yield of our debt and income producing investments increased to 10.61% from 6.93% as of December 31, 2021 on cost, primarily due to the increase in base interest rates.

The shifting environment in base interest rates, such as LIBOR or SOFR, may continue to affect our investment income over the long term.

As of December 31, 2021, the size of our portfolio increased to $770.3 million from $338.7 million as of December 31, 2020, at cost.

Total expenses before expense support increased to $37.2 million for the year ended December 31, 2022, from $16.6 million for the year ended December 31, 2021.

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 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 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.

Interest and debt financing expenses increased for the year ended December 31, 2022 compared to the year ended December 31, 2021 primarily due to higher average daily borrowings, higher average interest rates, and the CLO-I 2022 Debt Securitization (defined below).

The average daily borrowings for the year ended December 31, 2022 was $566.2 million compared to $287.3 million for the year ended December 31, 2021.

The average interest rate for the year ended December 31, 2022 was 4.29% compared to 3.00% for the year ended December 31, 2021.

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 management fees for the year ended December 31, 2022 from the comparable period in 2021 and for the year ended December 31, 2021 from the comparable period in 2020 were driven by our deployment of capital and our increasing invested balance.

Professional fees include legal, audit, tax, valuation, and other professional fees incurred related to the management of us.

Administrative service fees represent fees paid to the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of certain of our executive officers and their respective staff.

Other general and administrative expenses include insurance, filing, research, rating agencies, subscriptions and other costs.

The increase in administration fees and other general and administrative fees for the year ended December 31, 2022 from the comparable period in 2021 was driven by growing needs of the business given the increase in the Company's size.

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).

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

For the year ended December 31, 2022, we had a net realized loss on investments of $(262) thousand compared to a net realized gain of $819 thousand for the year ended December 31, 2021.

This is primarily due to a realized loss from a restructuring of a portfolio company, partially offset by gains from repayment activity of multiple portfolio companies during the year ended December 31, 2022.

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 depreciation of $(27.9) million for the year ended December 31, 2022, compared to net unrealized appreciation of $6.2 million for the year ended December 31, 2021, 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 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 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 decrease in total net gain for the year ended December 31, 2022, compared to the total net gain for the year ended December 31, 2021 was primarily related to the economic uncertainty relating to both macroeconomic and geopolitical factors in the financial markets that, in turn, further negatively impacted the valuation of our portfolio investments primarily through a combination of overall market widening of credit spreads and modest softening of our portfolio companies' credit metrics.

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.

While, 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.

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 Facilities and Subscription Facility (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 net borrowings from our credit facilities and CLO-I debt issuance (discussed further 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.

Due to an uncertain economic outlook and current market volatility, we regularly evaluate our overall liquidity position and take proactive steps to maintain that position based on such 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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Cash and restricted cash as of December 31, 2022, taken together with our uncalled capital commitments of $359.7 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).

As of December 31, 2022, we had $158.9 million available under our Wells Fargo Financing Facility (as defined below), $50.0 million available under our Subscription Facility (as defined below) and $45.0 million available under our SMBC Financing Facility (as defined below).

For the year ended December 31, 2022, our cash and cash equivalents balance increased by $4.1 million.

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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.

During the same period, $161.3 million was provided by financing activities, consisting primarily of proceeds from issuance of common shares of $95.0 million, proceeds from secured borrowings of $147.7 million and repayments of secured borrowings of $74.0 million.

For the year ended December 31, 2019, our cash balance increased by $1.2 million.

During that period, we used $18.0 million in cash towards operating activities, primarily due to new investments in portfolio companies of $107.1 million, partially offset by $91.3 million in repayments and sales of investments in portfolio companies.

During the same period, we generated $19.2 million from financing activities, consisting primarily of proceeds from the issuance of the Predecessor Entity's Preference Shares (as defined below), the issuance of 50 Shares in connection with our formation and 3,310,540 Shares in connection with the consummation of the Merger, and borrowings partially offset by distributions and share redemptions.

Subscriptions and Drawdowns

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As of December 31, 2022, TIAA owned 3,671,631 shares of our common stock.

On March 13, 2020, we held our Initial Closing and entered into subscription agreements with a number of investors providing for the private placement of our shares.

We have held several Subsequent Closings since the Initial Closing.

On March 13, 2020, we held our Initial Closing in connection with the Initial Fundraising Period and entered into subscription agreements with a number of investors providing for the private placement of our shares.

We have held several Subsequent Closings since the Initial Closing until March 13, 2022.

The final closing of the Follow-on Offering was held on June 15, 2022.

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.

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December 21, 2022 3,193,195 $60,000 $18.79

August 1, 2022 2,652,775 $50,082 $18.88

April 25, 2022 1,800,426 $34,964 $19.42

January 21, 2022 1,541,568 $30,000 $19.46

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

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

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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

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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

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We cannot assure shareholders that they will receive any distributions or distributions at a particular level.

SPV I Financing Facility

Wells Fargo Financing Facility

The Predecessor Entity borrowed funds under a credit agreement (the “Agreement”) executed on October 23, 2018.

The Agreement was originally executed among the Predecessor Entity, Nuveen Alternatives Advisors LLC, as the original collateral manager to the Predecessor Entity, TIAA, as the sole preference shareholder (the “Preference Shareholder”), and Wells Fargo Bank, N.A., as lender (the “Lender”) and administrative agent.

As part of the Agreement, the Predecessor Entity issued to the Lender a $175 million variable funding note (“SPV I Financing Facility”).

Effective on the date of the Merger, the Agreement with the Lender was transferred to SPV I and the borrowings under the Agreement were assumed by SPV I.

See Note 5 to the consolidated financial statements in Part II, Item 8 of this Form 10-K for more information on our debt.

The amount of the borrowings under the SPV I Financing Facility equals the amount of the outstanding advances.

Each borrowing bears an interest rate of daily LIBOR, plus the applicable margin per annum.

In addition, there is an annual commitment fee and an unused commitment fee per annum on the undrawn amount.

On October 28, 2020, we amended the SPV I Financing Facility.

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 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.

As part of the Agreement, the Predecessor Entity issued to the Lender a $175 million variable funding note (“Wells Fargo Financing Facility”).

Effective on the date of the Merger, the Agreement with the Lender was transferred to SPV I and the borrowings under the Agreement were assumed by SPV I and the Company services as the collateral manager (the “Wells Fargo Financing Facility Agreement”).

See Note 5 to the consolidated financial statements in Part I, Item 1 of this Annual Report on Form 10-K for more information on our debt.

The Wells Fargo Financing Facility Agreement was amended on October 28, 2020 and March 31, 2022.

The most recent amendment on March 31, 2022 extended the reinvestment period from October 28, 2023 to March 31, 2025 and the maturity date from October 28, 2025 to March 31, 2027, and changed the interest rate payable under the Agreement to the sum of 2.20% plus the Secured Overnight Financing Rate (“SOFR”), among other changes.

On May 5, 2022, SPV III entered into the borrower joinder agreement (the “Joinder”) to become party to the Wells Fargo Financing Facility Agreement.

Effective May 20, 2022, following the closing of the term debt securitization (discussed further below), the maximum facility amount available was reduced to $275 million from $350 million and SPV III began borrowing on the Wells Fargo Financing Facility.

The Wells Fargo Financing Facility, as amended, also requires the Company to maintain an asset coverage ratio equal to at least 1.50:1.00.

The amount of the borrowings under the Wells Fargo Financing Facility equals the amount of the outstanding advances.

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

As of December 31, 2022 the Wells Fargo Financing Facility bore interest at a rate of SOFR, reset daily plus 2.20% per annum.

As of December 31, 2021, the Wells Fargo Financing Facility bore interest at monthly LIBOR rate, reset daily plus 2.50% per annum.

CLO-I and SPV III, beginning May 5, 2022, have pledged all of its assets to the collateral agent to secure its obligations under the Wells Fargo Financing Facility.

Each of the Company, CLO-I, and SPV III have made customary representations and warranties and are required to comply with various financial covenants related to liquidity and other maintenance 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.

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 Subscription Facility was subsequently amended on August 12, 2021, September 10, 2021, and September 1, 2022.

The most recent amendment on September 1, 2022, among other things, extended the maturity date from September 9, 2022 to September 8, 2023, and changed the underlying benchmark used to compute interest from LIBOR to SOFR.

The Subscription Facility has a maximum commitment of $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.

As of December 31, 2022 and December 31, 2021, the Subscription Facility bore interest at a rate of SOFR, plus 1.75% and LIBOR plus 1.75%, respectively, per annum.

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

1 unchanged sentence

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.

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.

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.

SMBC Financing Facility

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

The SMBC Financing Facility Agreement was amended on December 23, 2021 and June 29, 2022.

The most recent amendment on June 29, 2022 increased the maximum facility amount available from $225 million to $300 million (the “Maximum Facility Amount”), and changed the benchmark used to compute interest from LIBOR plus 2.15% to SOFR plus 2.15%, among other changes.

In addition to the interest rate payable, there is a structuring fee of 1.00% and an unused commitment fee of 0.50% per annum on the undrawn amount.

Advances under the SMBC Financing Facility Agreement may be prepaid and reborrowed at any time during the reinvestment period, but any termination or reduction of the Maximum Facility Amount prior to the second anniversary of the closing date (subject to certain exceptions) is subject to a commitment reduction fee of 0.75%.

Under the SMBC 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.

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

As of December 31, 2022 and December 31, 2021, the SMBC Financing Facility bore interest at one-month SOFR plus 2.15% and one month LIBOR plus 2.15%, respectively, per annum.

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

On May 20, 2022 (the “Closing Date”), the Company completed a $448.3 million term debt securitization (the “2022 Debt Securitization”).

Term debt securitization is also known as a collateralized loan obligation and is a form of secured financing incurred by the Company.

The notes offered in the 2022 Debt Securitization (the “2022 Notes”) were issued by CLO-I, an indirect, wholly-owned, consolidated subsidiary of the Company.

The 2022 Notes consist of $199.0 million of AAA Class A-1 2022 Notes, which bear interest at the three-month Term SOFR plus 1.80%;

$34.3 million of AAA Class A-1F 2022 Notes, which bear interest at 4.42%;

$47.3 million of AA Class B 2022 Notes, which bear interest at the three-month Term SOFR plus 2.30%;

$31.5 million of A Class C 2022 Notes, which bear interest at the three-month Term SOFR plus 3.15%;

$27.0 million of BBB Class D 2022 Notes, which bear interest at the three-month Term SOFR plus 4.15%;

and approximately $79.3 million of Subordinated 2022 Notes, which do not bear interest.

The Company directly owns all of the BBB Class D 2022 Notes and the Subordinated 2022 Notes and as such, these notes are eliminated in consolidation.

As part of the 2022 Debt Securitization, CLO-I also entered into a loan agreement (the “CLO-I Loan Agreement”) on the Closing Date, pursuant to which various financial institutions and other persons which are, or may become, parties thereto as lenders (the “Lenders”) committed to make $30.0 million of AAA Class A-L 2022 Loans to CLO-I (the “2022 Loans” and, together with the 2022 Notes, the “2022 Debt”).

The 2022 Loans bear interest at the three-month Term SOFR plus 1.80% and were fully drawn upon the closing of the transactions.

Any Lender may elect to convert all of the Class A-L 2022 Loans held by such Lenders into Class A-1 2022 Notes upon written notice to CLO-I in accordance with the CLO-I Loan Agreement.

The 2022 Debt is backed by a diversified portfolio of senior secured and second lien loans.

Through April 20, 2026, all principal collections received on the underlying collateral may be used by CLO-I to purchase new collateral under the direction of the Company, in its capacity as collateral manager of CLO-I and in accordance with the Company’s investment strategy, allowing the Company to maintain the initial leverage in the 2022 Debt Securitization.

The 2022 Notes are due on April 20, 2034.

The 2022 Loans are scheduled to mature, and, unless earlier repaid, the entire unpaid principal balance thereof is due and payable on April 20, 2034.

The 2022 Debt is the secured obligation of CLO-I, and the indenture and the CLO-I Loan Agreement, as applicable, governing the 2022 Debt includes customary covenants and events of default.

The 2022 Debt has not been, and will not be, registered under the Securities Act of 1933, as amended, or any state “blue sky” laws and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or applicable exemption from registration.

The Company serves as collateral manager to CLO-I under a collateral management agreement (the “Collateral Management Agreement”) and has waived the management fee due to it in consideration for providing these services.

Contractual Obligations

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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

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

As of December 31, 2022

Total Less than 1 Year 1 to 3 years 3 to 5 years More than 5 Years

Wells Fargo Financing Facility $ 111,300 $ — $ — $ 111,300 $ —

Subscription Facility — — — — —

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

SMBC Financing Facility 252,147 — 252,147 — —

CLO-I 342,000 — — — 342,000

Total debt obligations $ 705,447 $ — $ 252,147 $ 111,300 $ 342,000

11 unchanged sentences

• the Expense Support Agreement

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.

In addition, on June 7, 2019, the SEC 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, subject to the conditions of the Order.

Pursuant to the Order, the Company is permitted to co-invest with its affiliates if a "required majority" (as defined in Section 57(o) of the 1940 Act) of the Company's independent directors make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to the Company and its stockholders and do not involve overreaching in respect of the Company or its stockholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of the Company's stockholders and is consistent with its then-current investment objective and strategies.

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

In addition, pursuant to an exemptive order issued by the SEC on April 8, 2020 and applicable to all BDCs through December 31, 2020 (the “Temporary Relief”), the Company was permitted, subject to the satisfaction of certain conditions, to co-invest in our existing portfolio companies with certain affiliates that are private funds if such private funds had not previously invested in such existing portfolio company.

Without the Temporary Relief, such private funds would not be able to participate in such co-investments with us unless the private funds had previously acquired securities of the portfolio company in a co-investment transaction with the Company.

Although the Temporary Relief expired on December 31, 2020, the SEC’s Division of Investment Management had indicated that until March 31, 2022, it would not recommend enforcement action, to the extent that any BDC with an existing co-investment order continues to engage in certain transactions described in the Temporary Relief, pursuant to the same terms and conditions described therein.

The conditional exemptive order is no longer effective;

however, on October 14, 2022, the SEC granted an exemptive order to permit the Company to continue to co-invest in its existing portfolio companies with certain affiliates that are private funds if such private funds had not previously invested in such existing portfolio company, subject to certain conditions.

Expense Support Agreement

11 unchanged sentences

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

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

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

7 unchanged sentences

December 31, 2021 42 — — 42 December 31, 2024

March 31, 2022 71 — — 71 March 31, 2025

June 30, 2022 54 — — 54 June 30, 2025

September 30, 2022 67 — — 67 September 30, 2025

Total $ 2,843 $ — $ (1,696) $ 1,147

6 unchanged sentences

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.

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

Critical Accounting Policies and Estimates

2 unchanged sentences

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.

We consider the most significant accounting policies to be those related to our Valuation of Portfolio Investments, Revenue Recognition, and U.S.

Federal 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 .”

The critical accounting policies and estimates should be read in conjunction with our consolidated financial statements and related notes in Part II, Item 8, as well as with our “ Risk Factors ” in Part I, Item 1A of this Annual Report Form 10-K.

Valuation of Portfolio Investments

1 unchanged sentence

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.

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" (as defined in Rule 2a-5 under the 1940 Act) and any other situation where our portfolio investments require a fair value determination.

For all valuations, the Audit Committee of our Board (the “Audit Committee”), which consists solely of directors who are not ‘‘interested persons’’ (as such term is used under Section 2(a)(19) of the 1940 Act) of the Company (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.

2 unchanged sentences

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:

With respect to investments for which market quotations are not readily available, we or an independent third-party valuation firm engaged by the Board, 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;

12 unchanged sentences

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

1 unchanged sentence

Net realized gains (losses) on investments:

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

Interest Income:

Investment transactions are recorded on the trade date.

Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method

Investment 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.

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

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

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.

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.

1 unchanged sentence

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.

Federal Income Taxes

We have elected to be treated as a BDC under the 1940 Act.

We have elected, and intend to qualify annually thereafter, to be treated as a RIC under the Code.

So long as we maintain our status as a RIC, we generally will not be subject to U.S.

federal income or excise taxes on any ordinary income or capital gains that we timely distribute at least annually to our stockholders as dividends.

As a result, any tax liability related to income earned and distributed by us represents obligations of our stockholders and will not be reflected in our consolidated financial statements.

We evaluate tax positions taken or expected to be taken in the course of preparing our financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority.

Tax positions not deemed to meet the “more-likely-than-not” threshold are reversed and recorded as a tax benefit or expense in the current year.

All penalties and interest associated with income taxes are included in income tax expense.

Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.

As of December 31, 2022, the Company did not have any uncertain tax positions that met the recognition or measurement criteria, nor did the Company have any unrecognized tax benefits.

Our accounting policy on income taxes is critical because if we are unable to maintain our status as a RIC, we would be required to record a provision for U.S.

federal income taxes which may be significant to our financial results.

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 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.

On March 7, 2023, our Board has designated the Adviser as our valuation designee pursuant to Rule 2a-5 under the 1940 Act to determine the fair value of our investments that do not have readily available market quotations.

On March 7, 2023, our Board determined to conduct a follow-on private offering of our shares of common stock (the "Follow-on Offering").

The initial closing of the Follow-on Offering is expected to occur during the fiscal year ending March 31, 2023 and to hold additional closings until the conclusion of fiscal quarter ending June 30, 2023.

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