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FAIR VALUE OF FINANCIAL INSTRUMENTS
 12 Months Ended
Dec. 31, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUE OF FINANCIAL INSTRUMENTS
8. FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company follows ASC 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities (“ASC 825-10”), which provides companies the option to report selected financial assets and liabilities at fair value. ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect of the company’s choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet. The Company has not elected the ASC 825-10 option to report selected financial assets and liabilities at fair value. With the exception of the line items entitled “other assets” and “debt,” which are reported at amortized cost, the carrying value of all other assets and liabilities approximate fair value.
 
The Company also follows ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”), which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in
accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires the Company to assume that the portfolio investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820-10, the Company has considered its principal market as the market in which the Company exits its portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

•Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access.

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

•Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
 
In addition to using the above inputs in investment valuations, the Company continues to employ the net asset valuation policy approved by the Company’s board of directors that is consistent with ASC 820-10 (see Note 2 for more information). Consistent with the Company’s valuation policy, the Company’s investment adviser evaluates the source of inputs, including any markets in which the Company’s investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. The Company’s valuation policy considers the fact that because there is not a readily available market value for most of the investments in the Company’s portfolio, the fair value of the investments must typically be determined using unobservable inputs.
 
    The Company’s portfolio investments (other than as described below in the following paragraph) are typically valued using two different valuation techniques. The first valuation technique is an analysis of the enterprise value (“EV”) of the portfolio company. Enterprise value means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The primary method for determining EV uses a multiple analysis whereby appropriate multiples are applied to the portfolio company’s EBITDA (generally defined as net income before net interest expense, income tax expense, depreciation and amortization). EBITDA multiples are typically determined based upon review of market comparable transactions and publicly traded comparable companies, if any. The Company’s investment adviser also may employ other valuation multiples to determine EV, such as revenues or, in the case of certain portfolio companies in the power generation industry, kilowatt capacity. The second method for determining EV uses a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions). The EV analysis is performed to determine the value of equity investments, the value of debt investments in portfolio companies where the Company has control or could gain control through an option or warrant security, and to determine if there is credit impairment for debt investments. If debt investments are credit impaired, an EV analysis may be used to value such debt investments; however, in addition to the methods outlined above, other methods such as a liquidation or wind-down analysis may be utilized to estimate enterprise value. The second valuation technique is a yield analysis, which is typically performed for non-credit impaired debt investments in portfolio companies where the Company does not own a controlling equity position. To determine fair value using a yield analysis, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the yield analysis, the investment adviser considers the current contractual interest rate, the maturity and other terms of the investment relative to risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the enterprise value of the portfolio company. As debt investments held by the Company are substantially illiquid with no active transaction market, the Company’s investment adviser depends on primary market data, including newly funded transactions, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
 
For other portfolio investments such as investments in the SDLP Certificates and IHAM, discounted cash flow analysis is the primary technique utilized to determine fair value. Expected future cash flows associated with the investment are discounted to determine a present value using a discount rate that reflects estimated market return requirements.
 
The following tables summarize the significant unobservable inputs the Company used to value the majority of its investments categorized within Level 3 as of December 31, 2022 and 2021. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

 As of December 31, 2022 
Unobservable Input
Asset CategoryFair ValuePrimary Valuation TechniquesInputEstimated Range
Weighted Average(1)
First lien senior secured loans$9,165 Yield analysisMarket yield
7.6% - 26.1%
12.3%
Second lien senior secured loans3,841 Yield analysisMarket yield
11.0% - 32.4%
14.9%
Subordinated certificates of the SDLP1,249 Discounted cash flow analysisDiscount rate
12.4% - 14.8%
13.5%
Senior subordinated loans1,021 Yield analysisMarket yield
8.0% - 16.3%
12.9%
Preferred equity2,023 EV market multiple analysisEBITDA multiple
2.6x - 40.6x
15.7x
Ivy Hill Asset Management, L.P.(2)2,201 Discounted cash flow analysisDiscount rate
12.9% - 25.7%
14.2%
Other equity1,861 EV market multiple analysisEBITDA multiple
2.1x - 52.1x
15.6x
Total investments$21,361 
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(1)Unobservable inputs were weighted by the relative fair value of the investments.

(2)Includes the Company’s equity and subordinated loan investments in IHAM, as applicable.

 As of December 31, 2021 
Unobservable Input
Asset CategoryFair ValuePrimary Valuation TechniquesInputEstimated Range
Weighted Average(1)
First lien senior secured loans$9,456 Yield analysisMarket yield
2.0% - 16.5%
7.6%
Second lien senior secured loans4,432 Yield analysisMarket yield
6.8% - 22.9%
9.5%
Subordinated certificates of the SDLP987 Discounted cash flow analysisDiscount rate
8.8% - 9.7%
9.3%
Senior subordinated loans889 Yield analysisMarket yield
7.1% - 27.8%
11.5%
Preferred equity1,561 EV market multiple analysisEBITDA multiple
3.2x - 64.4x
16.5x
Ivy Hill Asset Management, L.P.(2)936 Discounted cash flow analysisDiscount rate
9.9% - 27.9%
16.3%
Other equity1,647 EV market multiple analysisEBITDA multiple
4.9x - 32.1x
14.9x
Total investments$19,908 
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(1)Unobservable inputs were weighted by the relative fair value of the investments.

(2)Includes the Company’s equity and subordinated loan investments in IHAM, as applicable.

Changes in market yields, discount rates or EBITDA multiples, each in isolation, may change the fair value of certain of the Company’s investments. Generally, an increase in market yields or discount rates or decrease in EBITDA multiples may result in a decrease in the fair value of certain of the Company’s investments.
 
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of the Company’s investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that the Company may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If the
Company was required to liquidate a portfolio investment in a forced or liquidation sale, it could realize significantly less than the value at which the Company has recorded it.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.
 
The following table presents fair value measurements of cash and cash equivalents, restricted cash, investments, derivatives and unfunded revolving and delayed draw loan commitments as of December 31, 2022:

 Fair Value Measurements Using
TotalLevel 1Level 2Level 3
Cash and cash equivalents$303 $303 $— $— 
Restricted cash$34 $34 $— $— 
Investments not measured at net asset value$21,775 $54 $360 $21,361 
Investments measured at net asset value(1)5 
 Total investments$21,780 
Derivatives$(21)$— $(21)$— 
Unfunded revolving and delayed draw loan commitments(2)$(57)$— $— $(57)
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(1)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(2)The fair value of unfunded revolving and delayed draw loan commitments is included in “accounts payable and other liabilities” in the accompanying consolidated balance sheet.

The following table presents fair value measurements of cash and cash equivalents, restricted cash, investments, derivatives and unfunded revolving and delayed draw loan commitments as of December 31, 2021:

 Fair Value Measurements Using
TotalLevel 1Level 2Level 3
Cash and cash equivalents$372 $372 $— $— 
Restricted cash$114 $114 $— $— 
Investments not measured at net asset value$20,004 $— $96 $19,908 
Investments measured at net asset value (1)5 
  Total investments$20,009 
Derivatives$(12)$— $(12)$— 
Unfunded revolving and delayed draw loan commitments(2)$(20)$— $— $(20)
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(1)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

(2)The fair value of unfunded revolving and delayed draw loan commitments is included in “accounts payable and other liabilities” in the accompanying consolidated balance sheet.

The following table presents changes in investments that use Level 3 inputs as of and for the year ended December 31, 2022:
 As of and For the Year Ended December 31, 2022
Balance as of December 31, 2021$19,908 
Net realized gains24 
Net unrealized losses(461)
Purchases9,341 
Sales(4,685)
Repayments(3,009)
PIK interest and dividends312 
Net accretion of discount on securities12 
Net transfers in and/or out of Level 3(81)
Balance as of December 31, 2022$21,361 

Investments were transferred into and out of Level 3 during the year ended December 31, 2022. Transfers into and out of Level 3 were generally as a result of changes in the observability of significant inputs or available market data for certain portfolio companies.

As of December 31, 2022, the net unrealized depreciation on the investments that use Level 3 inputs was $216.

For the year ended December 31, 2022, the total amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to the Company’s Level 3 assets still held as of December 31, 2022, and reported within the net unrealized gains (losses) on investments, foreign currency and other transactions in the Company’s consolidated statement of operations was $(471).
The following table presents changes in investments that use Level 3 inputs as of and for the year ended December 31, 2021:
As of and For the Year Ended December 31, 2021
Balance as of December 31, 2020$15,506 
Net realized gains258 
Net unrealized gains597 
Purchases13,704 
Sales(5,573)
Repayments(4,894)
PIK interest and dividends250 
Net accretion of discount on securities16 
Net transfers in and/or out of Level 344 
Balance as of December 31, 2021$19,908 

Investments were transferred into and out of Level 3 during the year ended December 31, 2021. Transfers into and out of Level 3 were generally as a result of changes in the observability of significant inputs or available market data for certain portfolio companies.

As of December 31, 2021, the net unrealized appreciation on the investments that use Level 3 inputs was $165.

For the year ended December 31, 2021, the total amount of gains (losses) for the period included in earnings attributable to the change in unrealized gains (losses) relating to the Company’s Level 3 assets still held as of December 31, 2021, and reported within the net unrealized gains (losses) on investments, foreign currency and other transactions in the Company’s consolidated statement of operations was $649.
The following are the carrying and fair values of the Company’s debt obligations as of December 31, 2022 and 2021. Fair value is estimated by discounting remaining payments using applicable current market rates, which take into account changes in the Company’s marketplace credit ratings, or market quotes, if available.

 As of December 31,
 20222021
Carrying value(1)Fair value(4)Carrying value(1)Fair value(4)
Revolving Credit Facility$2,246 $2,246 $1,507 $1,507 
Revolving Funding Facility800 800 762 762 
SMBC Funding Facility451 451 401 401 
BNP Funding Facility245 245 — — 
2022 Convertible Notes (principal amount outstanding of $0 and $388, respectively)
— — 388 (2)433 
2024 Convertible Notes (principal amount outstanding of $403)
399 (2)428 395 (2)457 
2023 Notes (principal amount outstanding of $750)
750 (2)749 748 (2)768 
2024 Notes (principal amount outstanding of $900)
898 (2)873 897 (2)952 
March 2025 Notes (principal amount outstanding of $600)
597 (2)570 596 (2)637 
July 2025 Notes (principal amount outstanding of $1,250)
1,258 (2)1,157 1,260 (2)1,297 
January 2026 Notes (principal amount outstanding of $1,150)
1,144 (2)1,059 1,143 (2)1,213 
July 2026 Notes (principal amount outstanding of $1,000)
991 (2)850 988 (2)989 
2027 Notes (principal amount outstanding of $500 and $0, respectively)
494 (2)427 — (2)— 
2028 Notes (principal amount outstanding of $1,250)
1,247 (2)1,007 1,246 (2)1,248 
2031 Notes (principal amount outstanding of $700)
690 (2)516 689 (2)687 
Total$12,210 (3)$11,378 $11,020 (3)$11,351 
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(1)The Revolving Credit Facility, the Revolving Funding Facility, the SMBC Funding Facility and the BNP Funding Facility carrying values are the same as the principal amounts outstanding.

(2)Represents the aggregate principal amount outstanding, less unamortized debt issuance costs and the net unaccreted/amortized discount or premium recorded upon issuance.

(3)Total principal amount of debt outstanding totaled $12,245 and $11,061 as of December 31, 2022 and 2021, respectively.

(4)The fair value of these debt obligations would be categorized as Level 2 under ASC 820-10.