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As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
−Removed: As of December 31, 2022, we had 10 investments with an aggregate principal balance of $295.0 million, net of obligations under participation agreements, that provide for interest income at an annual rate of LIBOR plus a spread, eight of which are subject to a LIBOR floor.
−Removed: A decrease of 100 basis points in LIBOR would decrease our annual interest income, net of interest expense on participation agreements, by approximately $2.9 million, and an increase of 100 basis points in LIBOR would increase our annual interest income, net of interest expense on participation agreements, by approximately $2.9 million.
−Removed: Additionally, we had 13 investments with an aggregate principal balance of $247.2 million that provide for interest income at an annual rate of SOFR or Term SOFR, plus a spread, all of which were subject to a SOFR or Term SOFR floor.
−Removed: A decrease of 100 basis points in SOFR or Term SOFR would decrease our annual interest income by $2.5 million, and an increase of 100 basis points in SOFR or Term SOFR would increase our annual interest income by $2.5 million.
−Removed: Additionally, as of December 31, 2022, we had $29.3 million of borrowings outstanding under a mortgage loan payable that bear interest at an annual rate of LIBOR plus a spread that is collateralized by an office building;
−Removed: a revolving line of credit with an outstanding balance of $90.1 million that bears interest at an annual rate of LIBOR plus a spread that is collateralized
−Removed: by $177.4 million of first mortgages;
−Removed: a repurchase agreement with an outstanding balance of $51.1 million that bears interest at an annual rate of LIBOR or Term SOFR, as applicable, plus a spread that is collateralized by $68.1 million of first mortgages;
−Removed: and another repurchase agreement with an outstanding balance of $119.8 million that bears interest at an annual rate of Term SOFR plus a spread that is collateralized by $167.5 million of first mortgages.
−Removed: A decrease of 100 basis points in LIBOR and Term SOFR would decrease our annual interest expense by approximately $2.9 million, and an increase of 100 basis points in LIBOR and Term SOFR would increase our annual interest expense by approximately $2.9 million.
−Removed: In July 2017, the U.K.
−Removed: Financial Conduct Authority, which regulates the LIBOR administrator, IBA, announced that it would cease to compel banks to participate in setting LIBOR as a benchmark by the end of 2021, which has subsequently been delayed to June 30, 2023.
−Removed: The Alternative Reference Rates Committee, a steering committee comprised of large U.S.
−Removed: financial institutions convened by the U.S.
−Removed: Federal Reserve, has recommended SOFR as a more robust reference rate alternative to U.S.
−Removed: dollar LIBOR.
−Removed: SOFR is calculated based on overnight transactions under repurchase agreements, backed by Treasury securities.
−Removed: SOFR is observed and backward looking, which stands in contrast with LIBOR under the current methodology, which is an estimated forward-looking rate and relies, to some degree, on the expert judgment of submitting panel members.
−Removed: Given that SOFR is a secured rate backed by government securities, it will be a rate that does not take into account bank credit risk (as is the case with LIBOR).
−Removed: SOFR is therefore likely to be lower than LIBOR and is less likely to correlate with the funding costs of financial institutions.
−Removed: Whether or not SOFR attains market traction as a LIBOR replacement tool remains in question.
−Removed: As such, the future of LIBOR at this time is uncertain.
−Removed: Potential changes, or uncertainty related to such potential changes, may adversely affect the market for LIBOR-based loans, including our portfolio of LIBOR-indexed, floating-rate loans, or the cost of our borrowings.
−Removed: In addition, changes or reforms to the determination or supervision of LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR, which could have an adverse impact on the market for LIBOR-based loans, including the value of the LIBOR-indexed, floating-rate loans in our portfolio, or the cost of our borrowings.
−Removed: In the event LIBOR is unavailable, our investment documents provide for a substitute index, on a basis generally consistent with market practice, intended to put us in substantially the same economic position as LIBOR.
−Removed: We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts, subject to the requirements of the 1940 Act.
+Added: The following table summarizes the aggregate principal balance of variable rate investments and indebtedness as of:
+Added: December 31, 2023
+Added: Variable rate investments $ 438,839,001
+Added: Variable rate debt $ 253,163,757
+Added: The following table summarizes estimated changes in net investment income on our variable rate investments and indebtedness as of December 31, 2023 assuming hypothetical increases or decreases in Term SOFR or SOFR:
+Added: 1.00% Decrease 1.00% Increase
+Added: Investment income from variable rate investments $ (4,517,751) $ 4,554,622
+Added: Interest expense from variable rate debt 1,913,391 (2,531,638)
+Added: Net investment income from variable rate instruments $ (2,604,360) $ 2,022,984
+Added: We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts.
While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.
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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.