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During the period covered by our financial statements, many of the loans in our portfolio had floating interest rates, and we expect that many of our loans to portfolio companies in the future will also have floating interest rates.
−Removed: These loans are usually based on a floating rate based on LIBOR that resets quarterly to the applicable LIBOR.
+Added: These loans are usually based on a floating rate based on LIBOR or SOFR that resets quarterly to the applicable LIBOR or SOFR.
Interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital.
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In addition, U.S.
−Removed: and global capital markets have experienced a higher level of stress due to the global COVID-19 pandemic which has resulted in an increase in the level of volatility across such markets and a general decline in value of securities held by us.
+Added: capital markets have experienced a higher level of stress due to the global COVID-19 pandemic which has resulted in an increase in the level of volatility across such markets and a general decline in value of securities held by us.
As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
−Removed: Assuming that the consolidated statement of assets and liabilities as of September 30, 2021 was to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (dollars in thousands).
+Added: Assuming that the consolidated statement of assets and liabilities as of March 31, 2022 was to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates (dollars in thousands).
Increase (Decrease)
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in Interest Expense
−Removed: As of September 30, 2021, nearly all of the performing floating rate investments in our portfolio had interest rate floors.
−Removed: Variable-rate investments subject to a floor generally reset periodically to the applicable floor and, in the case of investments in our portfolio, quarterly to a floor based on LIBOR, only if the floor exceeds the index.
+Added: As of March 31, 2022, nearly all of the performing floating rate investments in our portfolio had interest rate floors.
+Added: Variable-rate investments subject to a floor generally reset periodically to the applicable floor and, in the case of investments in our portfolio, quarterly to a floor based on LIBOR or SOFR, only if the floor exceeds the index.
Under these loans, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor.
For a discussion of the risks associated with the discontinuation of LIBOR, see “Item 1A.
−Removed: Risk Factors — Risks Relating to Our Business and Structure — Since we are using debt to finance our investments, and we may use additional debt or preferred stock financing going forward, changes in interest rates may affect our cost of capital, net investment income, value of our common stock and our rate of return on invested capital” in our annual report on Form 10-K for the year ended December 31, 2020.
−Removed: Although management believes that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit markets, the size, credit quality or composition of the assets in our portfolio and other business developments, including borrowing, that could affect net increase in net assets resulting from operations or net income.
+Added: Risk Factors — Risks Relating to Our Business and Structure — Since we are using debt to finance our investments, and we may use additional debt or preferred stock financing going forward, changes in interest rates may affect our cost of capital, net investment income, value of our common stock and our rate of return on invested capital” in our most recent Annual Report on Form 10-K.
+Added: Although management believes that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for changes in the credit markets, the size, credit quality or composition of the assets in our portfolio and other business developments, including borrowing, that could affect a net increase in net assets resulting from operations or net income.
It also does not adjust for the effect of the time-lag between a change in the relevant interest rate index and the rate adjustment under the applicable loan.
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While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in the benefits of lower interest rates with respect to the investments in our portfolio with fixed interest rates.
−Removed: We may enter into foreign currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to hedge economically the impact that an adverse change in foreign exchange rates would have on the value of our investments denominated in foreign currencies.
+Added: We may enter into foreign currency forward contracts from time to time to facilitate settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of our investments denominated in foreign currencies.
We currently utilize forward foreign currency exchange contracts to protect ourselves against fluctuations in exchange rates.
−Removed: During the three and nine months ended September 30, 2021, we recognized a realized gain of $1,000 and realized loss of $3,000, respectively and during the three and nine months ended September 30, 2021, we recognized an unrealized gain of $187,000 and $186,000, respectively , in the statement of operations relating to forward currency exchange contracts held during the year.
−Removed: During the three and nine months ended September 30, 2020, we recognized a realized loss of $25,000 and during the three months ended September 30, 2020, we recognized an unrealized gain of 3,000, respectively, in the statement of operations relating to forward currency exchange contracts held during the year.
−Removed: See Note 3 to our Notes to consolidated financial statements.
+Added: During the three months ended March 31, 2022 and 2021, we recognized unrealized losses of $4,000, and $1,000 respectively, in the statement of operations relating to forward currency exchange contracts held during the year.
+Added: See Note 3 to our consolidated financial statements.
In addition, the COVID-19 pandemic has resulted in a decrease in LIBOR and a general reduction of certain interest rates by the U.S.
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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.