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FAIR VALUE OF FINANCIAL INSTRUMENTS | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
FAIR VALUE OF FINANCIAL INSTRUMENTS | 8. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company follows ASC 825-10, R ecognition 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 a better understanding of 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’s investment adviser, as its valuation designee, continues to employ the net asset valuation policy and procedures approved by the Company’s board of directors that are consistent with the provisions of Rule 2a-5 under the Investment Company Act and ASC 820-10 (see Note 2 for more information). Consistent with its valuation policies and procedures, 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. 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 may also 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 Company’s 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 table presents fair value measurements of cash and cash equivalents, restricted cash, investments, derivatives and unfunded revolving and delayed draw loan commitments as of September 30, 2023:
| Fair Value Measurements Using
| Total |  | Level 1 |  | Level 2 |  | Level 3
Cash and cash equivalents | $ | 527 |  |  | $ | 527 |  |  | $ | — |  |  | $ | — |
Restricted cash | $ | 78 |  |  | $ | 78 |  |  | $ | — |  |  | $ | — |
Investments not measured at net asset value | $ | 21,924 |  |  | $ | 56 |  |  | $ | 670 |  |  | $ | 21,198 |
Investments measured at net asset value(1) | 5 |  |  |  |  |  |  |
Total investments | $ | 21,929 |  |  |  |  |  |  |
Derivatives: |  |  |  |  |  |  |
Foreign currency forward contracts | $ | 23 |  |  | $ | — |  |  | $ | 23 |  |  | $ | — |
Interest rate swap | $ | (5) |  |  | $ | — |  |  | $ | (5) |  |  | $ | — |
Unfunded revolving and delayed draw loan commitments(2) | $ | (30) |  |  | $ | — |  |  | $ | — |  |  | $ | (30) |
________________________________________ (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, 2022:
| Fair Value Measurements Using
| Total |  | Level 1 |  | Level 2 |  | Level 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 - Foreign currency forward contracts | $ | (21) |  |  | $ | — |  |  | $ | (21) |  |  | $ | — |
Unfunded revolving and delayed draw loan commitments(2) | $ | (57) |  |  | $ | — |  |  | $ | — |  |  | $ | (57) |
________________________________________ (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 tables summarize the significant unobservable inputs the Company’s investment adviser used to value the majority of the Company’s investments categorized within Level 3 as of September 30, 2023 and December 31, 2022. The tables are not intended to be all-inclusive, but instead to capture the significant unobservable inputs relevant to the investment adviser’s determination of fair values.
|  | As of September 30, 2023 |
|  |  |  |  |  | Unobservable Input |
Asset Category |  | Fair Value |  | Primary Valuation Techniques |  | Input |  | Estimated Range |  | Weighted Average(1) |
First lien senior secured loans |  | $ | 9,003 |  |  | Yield analysis |  | Market yield |  | 7.4% - 25.3% |  | 12.7% |
Second lien senior secured loans |  | 3,561 |  |  | Yield analysis |  | Market yield |  | 10.0% - 22.1% |  | 14.6% |
Subordinated certificates of the SDLP |  | 1,216 |  |  | Discounted cash flow analysis |  | Discount rate |  | 12.6% - 14.9% |  | 13.5% |
Senior subordinated loans |  | 997 |  |  | Yield analysis |  | Market yield |  | 8.0% - 18.2% |  | 14.7% |
Preferred equity |  | 2,343 |  |  | EV market multiple analysis |  | EBITDA multiple |  | 4.7x - 40.0x |  | 16.5x |
Ivy Hill Asset Management, L.P.(2) |  | 2,020 |  |  | Discounted cash flow analysis |  | Discount rate |  | 12.9% - 31.4% |  | 14.6% |
Other equity |  | 2,058 |  |  | EV market multiple analysis |  | EBITDA multiple |  | 4.8x - 32.7x |  | 14.3x |
Total investments |  | $ | 21,198 |  |  |  |  |  |  |  |  |  |
________________________________________ (1)Unobservable inputs were weighted by the relative fair value of the investments. (2)Includes the Company’s subordinated loan and equity investments in IHAM, as applicable.
|  | As of December 31, 2022 |
|  |  |  |  |  | Unobservable Input |
Asset Category |  | Fair Value |  | Primary Valuation Techniques |  | Input |  | Estimated Range |  | Weighted Average(1) |
First lien senior secured loans |  | $ | 9,165 |  |  | Yield analysis |  | Market yield |  | 7.6% - 26.1% |  | 12.3% |
Second lien senior secured loans |  | 3,841 |  |  | Yield analysis |  | Market yield |  | 11.0% - 32.4% |  | 14.9% |
Subordinated certificates of the SDLP |  | 1,249 |  |  | Discounted cash flow analysis |  | Discount rate |  | 12.4% - 14.8% |  | 13.5% |
Senior subordinated loans |  | 1,021 |  |  | Yield analysis |  | Market yield |  | 8.0% - 16.3% |  | 12.9% |
Preferred equity |  | 2,023 |  |  | EV market multiple analysis |  | EBITDA multiple |  | 2.6x - 40.6x |  | 15.7x |
Ivy Hill Asset Management, L.P.(2) |  | 2,201 |  |  | Discounted cash flow analysis |  | Discount rate |  | 12.9% - 25.7% |  | 14.2% |
Other equity |  | 1,861 |  |  | EV market multiple analysis |  | EBITDA multiple |  | 2.1x - 52.1x |  | 15.6x |
Total investments |  | $ | 21,361 |  |  |  |  |  |  |  |  |  |
________________________________________ (1)Unobservable inputs were weighted by the relative fair value of the investments. (2)Includes the Company’s subordinated loan and equity 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 a 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 tables present changes in investments that use Level 3 inputs as of and for the three and nine months ended September 30, 2023:
| As of and For the Three Months Ended September 30, 2023
Balance as of June 30, 2023 | $ | 20,757 |
Net realized losses | (86) |
Net unrealized gains | 246 |
Purchases | 1,395 |
Sales | (136) |
Repayments | (1,029) |
PIK interest and dividends | 74 |
Net accretion of discount on securities | 1 |
Net transfers in and/or out of Level 3 | (24) |
Balance as of September 30, 2023 | $ | 21,198 |
| As of and For the Nine Months Ended September 30, 2023
Balance as of December 31, 2022 | $ | 21,361 |
Net realized losses | (174) |
Net unrealized gains | 329 |
Purchases | 3,634 |
Sales | (993) |
Repayments | (3,024) |
PIK interest and dividends | 255 |
Net accretion of discount on securities | 7 |
Net transfers in and/or out of Level 3 | (197) |
Balance as of September 30, 2023 | $ | 21,198 |
Investments were transferred into and out of Level 3 during the three and nine months ended September 30, 2023. 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 September 30, 2023, the net unrealized appreciation on the investments that use Level 3 inputs was $110. For the three and nine months ended September 30, 2023, 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 September 30, 2023, and reported within the net unrealized gains (losses) on investments, foreign currency and other transactions in the Company’s consolidated statement of operations was $215 and $354, respectively. The following tables present changes in investments that use Level 3 inputs as of and for the three and nine months ended September 30, 2022:
| As of and For the Three Months Ended September 30, 2022
Balance as of June 30, 2022 | $ | 21,012 |
Net realized losses | (22) |
Net unrealized losses | (194) |
Purchases | 2,059 |
Sales | (1,099) |
Repayments | (777) |
PIK interest and dividends | 71 |
Net accretion of discount on securities | 3 |
Net transfers in and/or out of Level 3 | (76) |
Balance as of September 30, 2022 | $ | 20,977 |
| As of and For the Nine Months Ended September 30, 2022
Balance as of December 31, 2021 | $ | 19,908 |
Net realized gains | 23 |
Net unrealized losses | (346) |
Purchases | 6,730 |
Sales | (3,305) |
Repayments | (2,183) |
PIK interest and dividends | 218 |
Net accretion of discount on securities | 8 |
Net transfers in and/or out of Level 3 | (76) |
Balance as of September 30, 2022 | $ | 20,977 |
Investments were transferred into and out of Level 3 during the three and nine months ended September 30, 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 September 30, 2022, the net unrealized depreciation on the investments that use Level 3 inputs was $179. For the three and nine months ended September 30, 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 September 30, 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 $(197) and $(302), respectively. The following are the carrying and fair values of the Company’s debt obligations as of September 30, 2023 and December 31, 2022. 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
| September 30, 2023 |  | December 31, 2022
| Carrying Value(1) |  | Fair Value(5) |  | Carrying Value(1) |  | Fair Value(5)
Revolving Credit Facility | $ | 1,392 |  |  | $ | 1,392 |  |  | $ | 2,246 |  |  | $ | 2,246 |
Revolving Funding Facility | 887 |  |  | 887 |  |  | 800 |  |  | 800 |
SMBC Funding Facility | 401 |  |  | 401 |  |  | 451 |  |  | 451 |
BNP Funding Facility | 525 |  |  | 525 |  |  | 245 |  |  | 245 |
2024 Convertible Notes (principal amount outstanding of $403) | 401 |  | (2) | 411 |  |  | 399 |  | (2) | 428 |
2023 Notes (principal amount outstanding of $0 and $750, respectively) | — |  |  | — |  |  | 750 |  | (2) | 749 |
2024 Notes (principal amount outstanding of $900) | 899 |  | (2) | 886 |  |  | 898 |  | (2) | 873 |
March 2025 Notes (principal amount outstanding of $600) | 598 |  | (2) | 577 |  |  | 597 |  | (2) | 570 |
July 2025 Notes (principal amount outstanding of $1,250) | 1,255 |  | (2) | 1,171 |  |  | 1,258 |  | (2) | 1,157 |
January 2026 Notes (principal amount outstanding of $1,150) | 1,146 |  | (2) | 1,075 |  |  | 1,144 |  | (2) | 1,059 |
July 2026 Notes (principal amount outstanding of $1,000) | 993 |  | (2) | 878 |  |  | 991 |  | (2) | 850 |
January 2027 Notes (principal amount outstanding of $600 and $0, respectively) | 587 |  | (2)(3) | 601 |  |  | — |  |  | — |
June 2027 Notes (principal amount outstanding of $500) | 495 |  | (2) | 436 |  |  | 494 |  | (2) | 427 |
2028 Notes (principal amount outstanding of $1,250) | 1,247 |  | (2) | 1,046 |  |  | 1,247 |  | (2) | 1,007 |
2031 Notes (principal amount outstanding of $700) | 691 |  | (2) | 535 |  |  | 690 |  | (2) | 516 |
Total | $ | 11,517 |  | (4) | $ | 10,821 |  |  | $ | 12,210 |  | (4) | $ | 11,378 |
________________________________________ (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)The carrying value of the January 2027 Notes as of September 30, 2023 includes a $5 reduction as a result of an effective hedge accounting relationship. See Note 6 for additional information. (4)Total principal amount of debt outstanding totaled $11,558 and $12,245 as of September 30, 2023 and December 31, 2022, respectively. (5)The fair value of these debt obligations would be categorized as Level 2 under ASC 820-10.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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