What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-07 compared with 2023-08-08 · 178 added, 199 removed, 610 unchanged (38% of the section changed)

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changes in political, economic or industry conditions, relations between the United States, Russia, Ukraine and other nations, the interest rate environment or conditions affecting the financial and capital markets;

the escalating conflict in the Middle East;

changes in the general economy, slowing economy, rising inflation, risk of recession and risks in respect of a failure to increase the U.S.

debt ceiling;

our ability to anticipate and identify evolving market expectations with respect to environmental, social and governance matters, including the environmental impacts of our portfolio companies’ supply chain and operations.

These statements are not guarantees of future performance and are subject to risks, uncertainties, and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:

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and current reports on Form 8-K.

Solar Capital LLC, a Maryland limited liability company, was formed in February 2007 and commenced operations on March 13, 2007 with initial capital of $1.2 billion of which 47.04% was funded by affiliated parties.

SLR Investment Corp.

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Executive Officer and President, and Bruce Spohler, our Co-Chief

Executive Officer and Chief Operating Officer, collectively purchased an additional 0.6 million shares of our common stock through a private placement transaction exempt from registration under the Securities Act.

We invest primarily in privately held U.S.

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Recent Developments

On July 5, 2023, the Board declared a monthly distribution of $0.136667 per share payable on August 1, 2023 to holders of record as of July 20, 2023.

On August 8, 2023, the Board declared a monthly distribution of $0.136667 per share payable on August 30, 2023 to holders of record as of August 18, 2023.

Timing of Future Distributions

Effective with the fourth quarter of 2023, SLRC’s board of directors intends to adjust the timing of declaring and paying distributions to SLRC’s shareholders from monthly to quarterly.

As a result, SLRC’s management anticipates that the last monthly distribution, if declared by SLRC’s board of directors, will be for September 2023 and the next distribution after that, if declared by SLRC’s board of directors, will be a quarterly distribution for the fourth quarter of 2023.

The amount and timing of past distributions are not a guarantee of any future distributions or the amount thereof.

The payment, timing and amount of any future distributions will be determined by SLRC’s board of directors.

On November 7, 2023, the Board declared a quarterly distribution of $0.41 per share payable on December 28, 2023 to holders of record as of December 14, 2023.

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

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Portfolio and Investment Activity

During the three months ended June 30, 2023, we invested approximately $212.9 million across 44 portfolio companies.

This compares to investing, exclusive of assets acquired through the Merger, approximately $94.7 million in 29 portfolio companies for the three months ended June 30, 2022.

Investments sold, prepaid or repaid during the three months ended June 30, 2023 totaled approximately $122.4 million versus approximately $78.5 million for the three months ended June 30, 2022.

At June 30, 2023, our portfolio consisted of 156 portfolio companies and was invested 33.7% in cash flow senior secured loans, 27.8% in asset-based senior secured loans / SLR Credit Solutions (“SLR Credit”) / SLR Healthcare ABL / SLR Business Credit, 22.9% in equipment senior secured financings / SLR Equipment Finance (“SLR Equipment”) / Kingsbridge Holdings, LLC (“KBH”) and 15.6% in life science senior secured loans, in each case, measured at fair value, versus 127 portfolio companies invested 30.0% in cash flow senior secured loans, 30.9% in asset-based senior secured loans / SLR Credit, 24.3% in equipment senior secured financings / SLR Equipment / KBH, and 14.8% in life science senior secured loans, in each case, measured at fair value, at June 30, 2022.

At June 30, 2023, 78.0% or $1.68 billion of our income producing investment portfolio *

During the three months ended September 30, 2023, we invested approximately $187.4 million across 35 portfolio companies.

This compares to investing approximately $245.4 million in 44 portfolio companies for the three months ended September 30, 2022.

Investments sold, prepaid or repaid during the three months ended September 30, 2023 totaled approximately $205.6 million versus approximately $81.1 million for the three months ended September 30, 2022.

At September 30, 2023, our portfolio consisted of 154 portfolio companies and was invested 37.1% in cash flow senior secured loans, 25.2% in asset-based senior secured loans / SLR Credit Solutions (“SLR Credit”) / SLR Healthcare ABL / SLR Business Credit, 22.6% in equipment senior secured financings / SLR Equipment Finance (“SLR Equipment”) / Kingsbridge Holdings, LLC (“KBH”) and 15.1% in life science senior secured loans, in each case, measured at fair value, versus 135 portfolio companies invested 30.2% in cash flow senior secured loans, 31.9% in asset-based senior secured loans / SLR Credit, 21.6% in equipment senior secured financings / SLR Equipment / KBH, and 16.3% in life science senior secured loans, in each case, measured at fair value, at September 30, 2022.

At September 30, 2023, 78.4% or $1.68 billion of our income producing investment portfolio *

is floating rate and 21.6% or $462.1 million is fixed rate, measured at fair value.

At June 30, 2022, 77.1% or $1.53 billion of our income producing investment portfolio *

At September 30, 2022, 79.7% or $1.71 billion of our income producing investment portfolio *

is floating rate and 20.3% or $434.9 million is fixed rate, measured at fair value.

As of June 30, 2023 and 2022, we had three and two issuers, respectively, on non-accrual

As of September 30, 2023 and 2022, we had two and two issuers, respectively, on non-accrual

We have included SLR Credit Solutions, SLR Equipment Finance, SLR Healthcare ABL, SLR Business Credit and Kingsbridge Holdings, LLC within our income producing investment portfolio.

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On September 30, 2016, Crystal Capital Financial Holdings LLC was dissolved.

As of June 30, 2023, total commitments to the revolving credit facility are $300 million.

As of June 30, 2023, SLR Credit had 29 funded commitments to 25 different issuers with total funded loans of approximately $425.0 million on total assets of $443.0 million.

As of September 30, 2023, total commitments to the revolving credit facility are $300 million.

As of September 30, 2023, SLR Credit had 32 funded commitments to 28 different issuers with total funded loans of approximately $469.5 million on total assets of $506.1 million.

As of December 31, 2022, SLR Credit had 29 funded commitments to 25 different issuers with total funded loans of approximately $439.5 million on total assets of $460.7 million.

As of June 30, 2023 and December 31, 2022, the largest loan outstanding totaled $30.0 million and $33.4 million, respectively.

As of September 30, 2023 and December 31, 2022, the largest loan outstanding totaled $40.7 million and $33.4 million, respectively.

For the same periods, the average exposure per issuer was $16.8 million and $17.6 million, respectively.

SLR Credit’s credit facility, which is non-recourse

to the Company, had approximately $216.9 million and $224.3 million of borrowings outstanding at June 30, 2023 and December 31, 2022, respectively.

For the three months ended June 30, 2023 and 2022, SLR Credit had net income of $6.8 million and $1.9 million, respectively, on gross income of $14.6 million and $6.9 million, respectively.

For the six months ended June 30, 2023 and 2022, SLR Credit had net income (loss) of ($2.9) million and $4.7 million, respectively, on gross income of $28.5 million and $13.6 million, respectively.

to the Company, had approximately $284.5 million and $224.3 million of borrowings outstanding at September 30, 2023 and December 31, 2022, respectively.

For the three months ended September 30, 2023 and 2022, SLR Credit had net income of $4.3 million and $3.9 million, respectively, on gross income of $13.9 million and $8.6 million, respectively.

For the nine months ended September 30, 2023 and 2022, SLR Credit had net income of $1.4 million and $8.6 million, respectively, on gross income of $42.4 million and $22.2 million, respectively.

Due to timing and non-cash

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In June 2023, the facility was amended to extend the maturity date to January 31, 2024, with updated commitments totaling $152.1 million, effective August 1, 2023.

As of June 30, 2023, SLR Equipment had 129 funded equipment-backed leases and loans to 54 different customers with a total net investment in leases and loans of approximately $197.7 million on total assets of $246.5 million.

As of September 30, 2023, SLR Equipment had 141 funded equipment-backed leases and loans to 56 different customers with a total net investment in leases and loans of approximately $199.8 million on total assets of $251.0 million.

As of December 31, 2022, SLR Equipment had 131 funded equipment-backed leases and loans to 59 different customers with a total net investment in leases and loans of approximately $190.8 million on total assets of $241.8 million.

As of June 30, 2023 and December 31, 2022, the largest position outstanding totaled $18.2 million and $19.3 million, respectively.

As of September 30, 2023 and December 31, 2022, the largest position outstanding totaled $18.3 million and $19.3 million, respectively.

For the same periods, the average exposure per customer was $3.6 million and $3.2 million, respectively.

SLR Equipment’s credit facility, which is non-recourse

to the Company, had approximately $124.7 million and $115.0 million of borrowings outstanding at June 30, 2023 and December 31, 2022, respectively.

For the three months ended June 30, 2023 and 2022, SLR Equipment had net loss of $2.1 million and $1.8 million, respectively, on gross income of $4.1 million and $4.0 million, respectively.

For the six months ended June 30, 2023 and 2022, SLR Equipment had net loss of $1.0 million and $1.2 million, respectively, on gross income of $10.4 million and $9.2 million, respectively.

to the Company, had approximately $130.6 million and $115.0 million of borrowings outstanding at September 30, 2023 and December 31, 2022,

respectively.

For the three months ended September 30, 2023 and 2022, SLR Equipment had net income (loss) of ($1.2) million and $1.0 million, respectively, on gross income of $4.8 million and $6.5 million, respectively.

For the nine months ended September 30, 2023 and 2022, SLR Equipment had net loss of $2.2 million and $0.1 million, respectively, on gross income of $15.2 million and $15.7 million, respectively.

Due to timing and non-cash

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Following the transaction, the Company owns 87.5% of KBHT equity and the KBH management team owns the remaining 12.5% of KBHT’s equity.

As of June 30, 2023 and December 31, 2022, KBHT had total assets of $797.9 million and $777.2 million, respectively.

As of September 30, 2023 and December 31, 2022, KBHT had total assets of $783.1 million and $777.2 million, respectively.

For the same periods, debt recourse to KBHT totaled $239.5 million and $222.1 million, respectively, and non-recourse

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None of the debt is recourse to the Company.

For the three months ended June 30, 2023 and 2022, KBHT had net income of $3.3 million and $3.7 million, respectively, on gross income of $75.5 million and $77.3 million, respectively.

For the six months ended June 30, 2023 and 2022, KBHT had net income of $5.9 million and $7.1 million, respectively, on gross income of $143.5 million and $143.7 million, respectively.

For the three months ended September 30, 2023 and 2022, KBHT had net income of $2.1 million and $3.3 million, respectively, on gross income of $85.5 million and $71.3 million, respectively.

For the nine months ended September 30, 2023 and 2022, KBHT had net income of $7.2 million and $10.4 million, respectively, on gross income of $229.1 million and $215.1 million, respectively.

Due to timing and non-cash

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in the transaction and continues to lead SLR Healthcare.

As of June 30, 2023, SLR Healthcare’s management team and the Company own approximately 7% and 93% of the equity in SLR Healthcare, respectively.

As of September 30, 2023, SLR Healthcare’s management team and the Company own approximately 7% and 93% of the equity in SLR Healthcare, respectively.

SLRC acquired SLR Healthcare in connection with the Mergers on April 1, 2022.

Concurrent with the closing of the transaction, SLR Healthcare entered into a new, four-year, non-recourse,

$100 million credit facility with non-affiliates,

which was expandable to $150 million under its accordion feature.

Effective March 31, 2014, the credit facility was expanded to $105 million and again on June 27, 2014 to $110 million.

On May 27, 2016, SLR Healthcare entered into a new $125 million credit facility which replaced the previously existing facility.

The new facility has similar terms as compared to the previous facility and includes an accordion feature increase to $200 million and had a maturity date of May 27, 2020.

On June 28, 2019, this $125 million facility was amended, extending the maturity date to June 28, 2023.

On March 31, 2023, the facility was again amended, adjusting capacity to $100 million and extending the maturity date to March 31, 2026.

Effective with an amendment dated August 24, 2023, SLR Healthcare has a $150 million non-recourse

credit facility, which is expandable to $200 million under its accordion facility.

The maturity date of this facility is March 31, 2026.

SLR Healthcare currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments.

As of June 30, 2023, the portfolio totaled approximately $261.6 million of commitments with a total net investment in loans of $99.6 million on total assets of $106.8 million.

As of September 30, 2023, the portfolio totaled approximately $237.0 million of commitments with a total net investment in loans of $106.5 million on total assets of $113.8 million.

As of December 31, 2022, the portfolio totaled approximately $242.1 million of commitments with a total net investment in loans of $92.4 million on total assets of $108.7 million.

At June 30, 2023, the portfolio consisted of 40 issuers with an average balance of approximately $2.5 million versus 41 issuers with an average balance of approximately $2.3 million at December 31, 2022.

At September 30, 2023, the portfolio consisted of 38 issuers with an average balance of approximately $2.8 million versus 41 issuers with an average balance of approximately $2.3 million at December 31, 2022.

All of the commitments in SLR Healthcare’s portfolio are floating-rate, senior-secured, cash-pay

SLR Healthcare’s credit facility, which is non-recourse

to us, had approximately $74.9 million and $77.0 million of borrowings outstanding at June 30, 2023 and December 31, 2022, respectively.

For the three months ended June 30, 2023 and 2022, SLR Healthcare had net income of $1.3 million and $0.8 million, respectively, on gross income of $4.4 million and $2.5 million, respectively.

For the six months ended June 30, 2023 and 2022, SLR Healthcare had net income of $2.4 million and $1.7 million, respectively, on gross income of $8.3 million and $4.9 million, respectively.

to us, had approximately $81.0 million and $77.0 million of borrowings outstanding at September 30, 2023 and December 31, 2022, respectively.

For the three months ended September 30, 2023 and 2022, SLR Healthcare had net income of $1.5 million and $0.8 million, respectively, on gross income of $4.8 million and $3.0 million, respectively.

For the nine months ended September 30, 2023 and 2022, SLR Healthcare had net income of $3.9 million and $2.5 million, respectively, on gross income of $13.1 million and $7.9 million, respectively.

Due to timing and non-cash

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NMC is a leading asset-backed lending commercial finance company that provides senior secured asset-backed financings to U.S.

based small-to-medium-sized

businesses primarily in the manufacturing, services and distribution industries.

based small-to-medium-sized businesses primarily in the manufacturing, services and distribution industries.

SUNS invested approximately $51.0 million to effect the transaction.

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The transaction purchase price of $66.7 million was financed with equity from SUNS of $19.0 million and borrowings on NMC’s credit facility of $47.7 million.

SLRC acquired SLR Business Credit in connection with the Mergers on April 1, 2022.

SLR Business Credit currently manages a highly diverse portfolio of directly-originated and underwritten senior-secured commitments.

As of June 30, 2023, the portfolio totaled approximately $620.2 million of commitments, of which $255.2 million were funded, on total assets of $300.6 million.

As of September 30, 2023, the portfolio totaled approximately $612.4 million of commitments, of which $257.8 million were funded, on total assets of $302.9 million.

As of December 31, 2022, the portfolio totaled approximately $603.4 million of commitments, of which $286.0 million were funded, on total assets of $332.2 million.

At June 30, 2023, the portfolio consisted of 101 issuers with an average balance of approximately $2.5 million versus 108 issuers with an average balance of approximately $2.6 million at December 31, 2022.

At September 30, 2023, the portfolio consisted of 98 issuers with an average balance of approximately $2.6 million versus 108 issuers with an average balance of approximately $2.6 million at December 31, 2022.

NMC has a senior credit facility with a bank lending group for $285.3 million, which expires on November 13, 2025.

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NMC’s credit facility, which is non-recourse

to us, had approximately $198.6 million and $214.4 million of borrowings outstanding at June 30, 2023 and December 31, 2022, respectively.

For the three months ended June 30, 2023 and 2022, SLR Business Credit had net income of $1.4 million and $1.9 million, respectively, on gross income of $8.8 million and $6.6 million, respectively.

For the six months ended June 30, 2023 and 2022, SLR Business Credit had net income of $3.4 million and $3.7 million, respectively, on gross income of $11.1 million and $12.8 million, respectively.

to us, had approximately $199.4 million and $214.4 million of borrowings outstanding at September 30, 2023 and December 31, 2022, respectively.

For the three months ended September 30, 2023 and 2022, SLR Business Credit had net income of $1.8 million and $2.0 million, respectively, on gross income of $9.7 million and $7.6 million, respectively.

For the nine months ended September 30, 2023 and 2022, SLR Business Credit had net income of $5.2 million and $5.7 million, respectively, on gross income of $27.9 million and $20.4 million, respectively.

Due to timing and non-cash

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There are no assurances that we will engage in any repurchases beyond what is reported herein.

For the six months ended June 30, 2023, the Company repurchased 746 shares at an average price of approximately $14.02 per share, inclusive of commissions.

The total dollar amount of shares repurchased for the six months ended June 30, 2023 was $0.01 million.

For the nine months ended September 30, 2023, the Company repurchased 746 shares at an average price of approximately $14.02 per share, inclusive of commissions.

The total dollar amount of shares repurchased for the nine months ended September 30, 2023 was $0.01 million.

During the fiscal year ended December 31, 2022, the Company repurchased 217,271 shares at an average price of approximately $13.98 per share, inclusive of commissions.

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The SSLP Facility also includes usual and customary events of default for credit facilities of this nature.

At June 30, 2023, there were $38.4 million of borrowings outstanding on the SSLP Facility.

As of June 30, 2023 the Company and the Investor had contributed combined equity capital in the amount of $41.5 million.

As of June 30, 2023, the Company and the Investor’s remaining commitments to SSLP totaled $29.25 million and $29.25 million, respectively.

At September 30, 2023, there were $79.2 million of borrowings outstanding on the SSLP Facility.

As of September 30, 2023 the Company and the Investor had contributed combined equity capital in the amount of $57.5 million.

As of September 30, 2023, the Company and the Investor’s remaining commitments to SSLP totaled $21.25 million and $21.25 million, respectively.

The Company, along with the Investor, controls the funding of SSLP, and SSLP may not call the unfunded commitments of the Company or the Investor without approval of both the Company and the Investor.

As of June 30, 2023 and December 31, 2022, SSLP had total assets of $79.4 million and $19.1 million, respectively.

As of September 30, 2023 and December 31, 2022, SSLP had total assets of $137.4 million and $19.1 million, respectively.

For the same periods, SSLP’s portfolio consisted of floating rate senior secured loans to 27 and 7 different borrowers, respectively.

For the three months ended June 30, 2023, SSLP invested $32.6 million in 9 portfolio companies.

Investments prepaid totaled $0.2 million for the three months ended June 30, 2023.

For the three months ended September 30, 2023, SSLP invested $57.5 million in 16 portfolio companies.

Investments prepaid totaled $1.7 million for the three months ended September 30, 2023.

For the period December 1, 2022 (commencement of operations) through December 31, 2022, SSLP invested $18.1 million in 7 portfolio companies.

Investments prepaid totaled $0.1 million for the period December 1, 2022 (commencement of operations) through December 31, 2022.

SSLP Portfolio as of June 30, 2023 (dollar amounts in thousands)

SSLP Portfolio as of September 30, 2023 (dollar amounts in thousands)

Accession Risk Management Group, Inc.

Aegis Toxicology Sciences Corporation (4)

Health Care Providers & Services

Alkeme Intermediary Holdings, LLC (4)

All States Ag Parts, LLC (4)

Trading Companies & Distributors

Atria Wealth Solutions, Inc.

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Health Care Providers & Services

CC SAG Holdings Corp.

Diversified Consumer Services

ENS Holdings III Corp.

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Personal Products

Higginbotham Insurance Agency, Inc.

High Street Buyer, Inc.

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Life Sciences Tools & Services

RSC Acquisition, Inc.

RxSense Holdings LLC (4)

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SunMed Group Holdings, LLC (4)

Health Care Equipment & Supplies

Health Care Equipment &

The Townsend Company, LLC (4)

Commercial Services & Supplies

Tilley Distribution, Inc.

Trading Companies & Distributors

Ultimate Baked Goods Midco LLC (4)

Packaged Foods & Meats

Urology Management Holdings, Inc.

Health Care Providers & Services

Vessco Midco Holdings, LLC (4)

Water Utilities

Floating rate instruments accrue interest at a predetermined spread relative to an index, typically the SOFR.

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Floating rate debt investments typically bear interest at a rate determined by reference to the SOFR (“S”), and which typically reset monthly, quarterly or semi-annually.

For each debt investment we have provided the current interest rate in effect as of June 30, 2023.

For each debt investment we have provided the current interest rate in effect as of September 30, 2023.

Represents the fair value in accordance with ASC Topic 820.

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& ES Opco USA LLC (4)

Trading Companies & Distributors

Trading Companies &

Foundation Consumer Brands, LLC (4)

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The Company also holds this security on its Consolidated Statements of Assets and Liabilities.

Below is certain summarized financial information for SSLP as of June 30, 2023 and December 31, 2022 and for the three and six months ended June 30, 2023 and for the period December 1, 2022 (commencement of operations) through December 31, 2022:

June 30, 2023

Below is certain summarized financial information for SSLP as of September 30, 2023 and December 31, 2022 and for the three and nine months ended September 30, 2023 and for the period December 1, 2022 (commencement of operations) through December 31, 2022:

September 30,

Selected Balance Sheet Information for SSLP (in thousands):

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Debt outstanding

Distributions payable

Interest payable and other credit facility related expenses

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For the three

months ended June

June 30, 2023

September 30, 2023

For the period

December 1, 2022

(commencement

of operations) to

(commencement of

operations) to

December 31, 2022

Selected Income Statement Information for SSLP (in thousands):

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accruals that ultimately may not be realized, but the Investment Adviser will be under no obligation to reimburse the Company for these fees.

For the three and six months ended June 30, 2023, capitalized PIK income totaled $3.0 million and $6.2 million, respectively.

For the three and six months ended June 30, 2022, capitalized PIK income totaled $0.7 million and $1.0 million, respectively.

For the three and nine months ended September 30, 2023, capitalized PIK income totaled $2.7 million and $8.9 million, respectively.

For the three and nine months ended September 30, 2022, capitalized PIK income totaled $0.7 million and $1.7 million, respectively.

Net Realized Gain or Loss and Net Change in Unrealized Gain or Loss

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RESULTS OF OPERATIONS

Results comparisons are for the three and six months ended June 30, 2023 and June 30, 2022:

Results comparisons are for the three and nine months ended September 30, 2023 and September 30, 2022:

Investment Income

For the three and six months ended June 30, 2023, gross investment income totaled $56.3 million and $109.9 million, respectively.

For the three and six months ended June 30, 2022, gross investment income totaled $42.8 million and $75.8 million, respectively.

For the three and nine months ended September 30, 2023, gross investment income totaled $59.6 million and $169.5 million, respectively.

For the three and nine months ended September 30, 2022, gross investment income totaled $47.6 million and $123.4 million, respectively.

The increase in gross investment income for the year over year three month periods was primarily due to net growth of the income producing portfolio as well as an increase in index rates.

Net expenses totaled $33.7 million and $65.1 million, respectively, for the three and six months ended June 30, 2023, of which $13.5 million and $26.7 million, respectively, were base management fees and performance-based incentive fees and $17.8 million and $33.1 million, respectively, were interest and other credit facility expenses.

Administrative services and other general and administrative expenses totaled $2.4 million and $5.4 million, respectively, for the three and six months ended June 30, 2023.

Over the same periods, $0.1 million and $0.2 million of performance-based incentive fees were waived.

Net expenses totaled $22.5 million and $42.0 million, respectively, for the three and six months ended June 30, 2022, of which $11.6 million and $18.9 million, respectively, were base management fees and performance-based incentive fees and $10.4 million and $18.7 million, respectively, were interest and other credit facility expenses.

Administrative services and other general and administrative expenses totaled $1.9 million and $5.8 million, respectively, for the three and six months ended June 30, 2022.

Net expenses totaled $36.3 million and $101.3 million, respectively, for the three and nine months ended September 30, 2023, of which $13.8 million and $40.6 million, respectively, were base management fees and performance-based incentive fees and $19.9 million and $53.0 million, respectively, were interest and other credit facility expenses.

Over the same periods, $0.2 million and $0.4 million of performance-based incentive fees were waived.

Administrative services and other general and administrative expenses totaled $2.7 million and $8.2 million, respectively, for the three and nine months ended September 30, 2023.

Net expenses totaled $27.5 million and $69.5 million, respectively, for the three and nine months ended September 30, 2022, of which $12.9 million and $31.7 million, respectively, were base management fees and gross performance-based incentive fees and $12.8 million and $31.5 million, respectively, were interest and other credit facility expenses.

Over the same periods, $0.2 million and $1.6 million, respectively, of performance-based incentive fees were waived.

Administrative services and other general and administrative expenses totaled $2.1 million and $7.9 million, respectively, for the three and nine months ended September 30, 2022.

Expenses generally consist of management and performance-based incentive fees, interest and other credit facility expenses, administrative services fees, insurance expenses, legal fees, directors’ fees, transfer agency fees, printing and proxy expenses, audit and tax services expenses, and other general and administrative expenses.

Interest and other credit facility expenses generally consist of interest, unused fees, agency fees and loan origination fees, if any, among others.

The increase in expenses for the three and six months ended June 30, 2023 versus the three and six months ended June 30, 2022 was primarily due to higher management fees, incentive fees and interest expense on a larger portfolio resulting from the Mergers.

The increase in expenses for the three and nine months ended September 30, 2023 versus the three and nine months ended September 30, 2022 was primarily due to higher management fees, incentive fees and interest expense on a larger portfolio.

Additionally, there was an increase in index rates on borrowings.

Net Investment Income

The Company’s net investment income totaled $22.7 million and $44.8 million, or $0.42 and $0.82, per average share, respectively, for the three and six months ended June 30, 2023.

The Company’s net investment income totaled $20.3 million and $33.8 million, or $0.37 and $0.70, per average share, respectively, for the three and six months ended June 30, 2022.

Net Realized Gain (Loss)

The Company had investment sales and prepayments totaling approximately $122 million and $267 million, respectively, for the three and six months ended June 30, 2023.

Net realized gains over the same periods were $0.5 million and $1.2 million, respectively.

The Company had investment sales and prepayments totaling approximately $79 million and $180 million, respectively, for the three and six months ended June 30, 2022.

The Company’s net investment income totaled $23.4 million and $68.2 million, or $0.43 and $1.25, per average share, respectively, for the three and nine months ended September 30, 2023.

The Company’s net investment income totaled $20.1 million and $53.8 million, or $0.37 and $1.06, per average share, respectively, for the three and nine months ended September 30, 2022.

Net Realized Loss

The Company had investment sales and prepayments totaling approximately $206 million and $473 million, respectively, for the three and nine months ended September 30, 2023.

Net realized losses over the same periods were $31.0 million and $29.8 million, respectively.

Net realized gain for the three and six months ended June 30, 2023 was primarily due to sales of selected assets.

Net realized losses for the three and six months ended June 30, 2022 were de minimis.

Net Change in Unrealized Loss

For the three and six months ended June 30, 2023, net change in unrealized loss on the Company’s assets totaled $4.2 million and $20.2 million, respectively.

For the three and six months ended June 30, 2022, net change in unrealized loss on the Company’s assets and liabilities totaled $35.8 million and $47.9 million, respectively.

Net unrealized loss for the three months ended June 30, 2023 is primarily due to depreciation in the value of our investments in SLR Credit Solutions, among others, partially offset by appreciation in the value of our investments in World Insurance Associates, LLC, among others.

Net unrealized loss for the six months ended June 30, 2023 is primarily due to depreciation in the value of our investments in SLR Credit Solutions and AmeriMark Intermediate Holdings, LLC and, among others, partially offset by appreciation in the value of our investments in World Insurance Associates, LLC and SLR Business Credit, among others.

Net unrealized loss for the three and six months ended June 30, 2022 is primarily due to depreciation in the value of our investments in PhyMed Management LLC, Rug Doctor LLC, American Teleconferencing Services, Ltd., SLR Credit Solutions and SLR Equipment Finance, among others, partially offset by unrealized appreciation on assets acquired in the Mergers due to the accounting treatment of the purchase discount.

The Company had investment sales and prepayments totaling approximately $81 million and $261 million, respectively, for the three and nine months ended September 30, 2022.

Net realized losses over the same periods were $37.3 million and $37.4 million, respectively.

Net realized losses for the three and nine months ended September 30, 2023 were primarily related to our investment in American Teleconferencing Services, Ltd.

Net realized losses for the three and nine months ended September 30, 2022 were primarily related to our investment in PhyMed Management, LLC.

Net Change in Unrealized Gain (Loss)

For the three and nine months ended September 30, 2023, net change in unrealized gain on the Company’s assets totaled $34.5 million and $14.4 million, respectively.

Net unrealized gain for the three months ended September 30, 2023 is primarily due to the reversal of previously recognized unrealized depreciation on our investment in American Teleconferencing Services, Ltd.

as well as appreciation in the value of our investments in Alimera Sciences, Inc.

and SLR Credit Solutions, among others, partially offset by depreciation in the value of our investments in KBH Topco, LLC, among others.

Net unrealized gain for the nine months ended September 30, 2023 is primarily due to the reversal of previously recognized unrealized depreciation on our investment in American Teleconferencing Services, Ltd.

as well as appreciation in the value of our investments in Alimera Sciences, Inc., among others, partially offset by depreciation in the value of our investments in Oldco AI, LLC (f/k/a AmeriMark), SLR Credit Solutions and KBT Topco, LLC, among others.

For the three and nine months ended September 30, 2022, net change in unrealized gain (loss) on the Company’s assets and liabilities totaled $30.8 million and ($17.1) million, respectively.

Net unrealized gain for the three months ended September 30, 2022 is primarily due to the reversal of previously recognized unrealized depreciation on our investment in PhyMed Management LLC, as well as appreciation in the value of our investments in SLR Business Credit, Alimera Sciences, Inc.

and Kingsbridge Holdings, LLC, among others, partially offset by depreciation in the value of our investments in SLR Equipment Finance, PPT Management Holdings, LLC, KBH Topco, LLC, SLR Healthcare ABL and SLR Credit Solutions, among others.

Net unrealized loss for the nine months ended September 30, 2022 is primarily due to depreciation in the value of our investments in RD Holdco, Inc., American Teleconferencing Services, Ltd., SLR Credit Solutions and SLR Equipment Finance, among others, partially offset by the reversal of previously recognized unrealized depreciation on our investment in PhyMed Management LLC as well as appreciation on the value of our investments in SLR Business Credit and Alimera Sciences, Inc.

in addition to unrealized appreciation on assets acquired in the Mergers due to the accounting treatment of the purchase discount.

Net Increase (Decrease) in Net Assets From Operations

For the three and six months ended June 30, 2023, the Company had a net increase in net assets resulting from operations of $19.0 million and $25.8 million, respectively.

For the three and nine months ended September 30, 2023, the Company had a net increase in net assets resulting from operations of $26.9 million and $52.8 million, respectively.

For the same periods, earnings per average share were $0.49 and $0.97, respectively.

For the three and six months ended June 30, 2022, the Company had a net decrease in net assets resulting from operations of $15.6 million and $14.2 million, respectively.

For the same periods, losses per average share were $0.29 and $0.29, respectively.

For the three and nine months ended September 30, 2022, the Company had a net increase (decrease) in net assets resulting from operations of $13.5 million and ($0.7) million, respectively.

For the same periods, earnings (losses) per average share were $0.25 and ($0.01), respectively.

LIQUIDITY AND CAPITAL RESOURCES

The Company’s liquidity and capital resources are generated and generally available through its Credit Facility and SPV Credit Facility (as defined below), the 2024 Unsecured Notes, the 2025 Unsecured Notes, the 2026 Unsecured Notes, the 2027 Unsecured Notes and the 2027 Series F Unsecured Notes, through cash flows from operations, investment sales, prepayments of senior and subordinated loans, income earned on investments and cash equivalents, and periodic follow-on

The Company’s liquidity and capital resources are generated and generally available through its Credit Facility and SPV Credit Facility (as defined below), the 2024 Unsecured Notes, the 2025 Unsecured Notes, the 2026 Unsecured Notes, the 2027 Unsecured Notes and the 2027 Series F Unsecured Notes (collectively the “Debt Instruments”), through cash flows from operations, investment sales, prepayments of senior and subordinated loans, income earned on investments and cash equivalents, and periodic follow-on

equity and/or debt offerings.

As of June 30, 2023, we had a total of $200.8 million of unused borrowing capacity under the Credit Facility and SPV Credit Facility, subject to borrowing base limits.

As of September 30, 2023, we had a total of $200.8 million of unused borrowing capacity under the Credit Facility and SPV Credit Facility, subject to borrowing base limits.

We may from time to time issue equity and/or debt securities in either public or private offerings.

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The CF Assumption Agreement relates to our assumption of the Revolving Credit Facility, originally entered into on August 26, 2011 (as amended from time to time, the “SPV Credit Facility”), by and among SUNS SPV LLC (the “SUNS SPV”), a wholly-owned subsidiary of SUNS, acting as borrower, Citibank, N.A., acting as administrative agent and collateral agent, and the other parties thereto.

Currently, the commitment under the SPV Credit Facility is $225 million;

Currently, subsequent to an August 29, 2023 amendment, the commitment under the SPV Credit Facility is $275 million;

however, the commitment can also be expanded up to $600 million.

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The SPV Credit Facility also includes usual and customary events of default for credit facilities of this nature.

At September 30, 2023, outstanding USD equivalent borrowings under the SPV Credit Facility totaled $206.3 million.

On April 1, 2022, we entered into an assumption agreement (the “Note Assumption Agreement”), effective as of the closing of the Mergers.

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1 to its August 28, 2019 senior secured credit agreement (the “Credit Facility”).

Following the amendment and a November 2022 upsizing, the Credit Facility is composed of $625 million of revolving credit and $100 million of term loans.

Following the amendment, a $25 million November 2022 upsizing and a $40 million August 2023 commitment expiration, the Credit Facility is composed of $585 million of revolving credit and $100 million of term loans.

Borrowings generally bear interest at a rate per annum equal to the base rate plus a range of 1.75%-2.00%

or the alternate base rate plus 0.75%-1.00%.

The Credit Facility has a 0% floor and matures in December 2026 and includes ratable amortization in the final year.

Credit Facility has a 0% floor and matures in December 2026 and includes ratable amortization in the final year.

The Credit Facility may be increased up to $800 million with additional new lenders or an increase in commitments from current lenders.

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

In addition, the Credit Facility contains certain financial covenants that among other things, require the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio.

At September 30, 2023, outstanding USD equivalent borrowings under the Credit Facility totaled $521.5 million, composed of $421.5 million of revolving credit and $100.0 million of term loans.

On September 14, 2021, the Company closed a private offering of $50 million of the 2027 Unsecured Notes with a fixed interest rate of 2.95% and a maturity date of March 14, 2027.

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The 2023 Unsecured Notes were repaid in full at maturity on January 20, 2023.

Certain covenants on our issued debt may restrict our business activities, including limitations that could hinder our ability to finance additional loans and investments or to make the distributions required to maintain our status as a RIC under Subchapter M of the Code.

At September 30, 2023, the Company was in compliance with all financial and operational covenants required by the Debt Instruments.

Cash Equivalents

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The amount of these transactions or such drawn cash for this purpose is excluded from total assets for purposes of computing the asset base upon which the management fee is determined.

We held approximately $335 million in cash equivalents as of June 30, 2023.

Unsecured Notes

On April 1, 2022, we entered into the Note Assumption Agreement, effective as of the closing of the Mergers.

The Note Assumption Agreement relates to our assumption of $85 million of the 2025 Unsecured Notes and other obligations of SUNS under the Note Purchase Agreement, among SUNS and certain institutional investors.

Interest on the 2025 Unsecured Notes is due semi-annually on March 31 and September 30.

Pursuant to the Note Assumption Agreement, we expressly assumed on behalf of SUNS the due and punctual payment of the principal of (and premium, if any) and interest on all the 2025 Unsecured Notes outstanding, and the due and punctual performance and observance of every covenant and every condition of the Note Purchase Agreement, to be performed or observed by SUNS.

On January 6, 2022, the Company closed a private offering of $135 million of the 2027 Series F Unsecured Notes with a fixed interest rate of 3.33% and a maturity date of January 6, 2027.

Interest on the 2027 Series F Unsecured Notes is due semi-annually on January 6 and July 6.

The 2027 Series F Unsecured Notes were issued in a private placement only to qualified institutional buyers.

On September 14, 2021, the Company closed a private offering of $50 million of the 2027 Unsecured Notes with a fixed interest rate of 2.95% and a maturity date of March 14, 2027.

Interest on the 2027 Unsecured Notes is due semi-annually on March 14 and September 14.

The 2027 Unsecured Notes were issued in a private placement only to qualified institutional buyers.

On December 18, 2019, the Company closed a private offering of $125 million of the 2024 Unsecured Notes with a fixed interest rate of 4.20% and a maturity date of December 15, 2024.

Interest on the 2024 Unsecured Notes is due semi-annually on June 15 and December 15.

The 2024 Unsecured Notes were issued in a private placement only to qualified institutional buyers.

On December 18, 2019, the Company closed a private offering of $75 million of the 2026 Unsecured Notes with a fixed interest rate of 4.375% and a maturity date of December 15, 2026.

Interest on the 2026 Unsecured Notes is due semi-annually on June 15 and December 15.

The 2026 Unsecured Notes were issued in a private placement only to qualified institutional buyers.

On November 22, 2017, we issued $75 million in aggregate principal amount of publicly registered 2023 Unsecured Notes for net proceeds of $73.8 million.

Interest on the 2023 Unsecured Notes is paid semi-annually on January 20 and July 20, at a fixed rate of 4.50% per year, commencing on January 20, 2018.

The 2023 Unsecured Notes were repaid in full at maturity on January 20, 2023.

Revolving & Term Loan Facilities

On April 1, 2022, we entered into the CF Assumption Agreement, effective as of the closing of the Mergers.

The CF Assumption Agreement relates to our assumption of the SPV Credit Facility, by and among SUNS SPV, a wholly-owned subsidiary of SUNS, acting as borrower, Citibank, N.A., acting as administrative agent and collateral agent, and the other parties thereto.

Currently, the commitment under the SPV Credit Facility is $225 million;

however, the commitment can also be expanded up to $600 million.

The stated interest rate on the SPV Credit Facility is LIBOR plus 2.00%-2.50%

with no LIBOR floor requirement and the current final maturity date is June 1, 2026.

The SPV Credit Facility is secured by all of the assets held by SUNS SPV.

Under the terms of the SPV Credit Facility and related transaction documents, we as successor to SUNS, and SUNS SPV, as applicable, have made certain customary representations and warranties, and are required to comply with various covenants, including leverage restrictions, reporting requirements and other customary requirements for similar credit facilities.

The SPV Credit Facility also includes usual and customary events of default for credit facilities of this nature.

At June 30, 2023, outstanding USD equivalent borrowings under the SPV Credit Facility totaled $167.2 million.

On December 28, 2021, the Company closed on Amendment No.

1 to the Credit Facility.

Following the amendment and a November 2022 upsizing, the Credit Facility is composed of $625 million of revolving credit and $100 million of term loans.

Borrowings generally bear interest at a rate per annum equal to the base rate plus a range of 1.75%-2.00%

or the alternate base rate plus 0.75%-1.00%.

The Credit Facility has a 0% floor and matures in December 2026 and includes ratable amortization in the final year.

The Credit Facility may be increased up to $800 million with additional new lenders or an increase in commitments from current lenders.

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

In addition, the Credit Facility contains certain financial covenants that among other things, require the Company to maintain a minimum shareholder’s equity and a minimum asset coverage ratio.

At June 30, 2023, outstanding USD equivalent borrowings under the Credit Facility totaled $582.0 million, composed of $482.0 million of revolving credit and $100.0 million of term loans.

At June 30, 2023, the Company was in compliance with all financial and operational covenants required by the Debt Instruments.

We held a face amount of $335 million in cash equivalents as of September 30, 2023.

Contractual Obligations

A summary of our significant contractual payment obligations is as follows as of June 30, 2023:

A summary of our significant contractual payment obligations is as follows as of September 30, 2023:

Payments Due by Period (in millions)

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Unsecured senior notes

As of June 30, 2023, we had a total of $200.8 million of unused borrowing capacity under our revolving credit facilities, subject to borrowing base limits.

As of September 30, 2023, we had a total of $232.3 million of unused borrowing capacity under our revolving credit facilities, subject to borrowing base limits.

Under the provisions of the 1940 Act, we are permitted, as a BDC, to issue senior securities in amounts such that our asset coverage ratio, as defined in the 1940 Act, equals at least 150% of gross assets less all liabilities and indebtedness not represented by senior securities, after each issuance of senior securities.

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Senior Securities

Information about our senior securities is shown in the following table (in thousands) as of the quarter ended June 30, 2023 and each year ended December 31 for the past ten years, unless otherwise noted.

Information about our senior securities is shown in the following table (in thousands) as of the quarter ended September 30, 2023 and each year ended December 31 for the past ten years, unless otherwise noted.

The “—” indicates information which the SEC expressly does not require to be disclosed for certain types of senior securities.

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Credit Facility

Fiscal 2023 (through June 30, 2023)