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DERIVATIVE INSTRUMENTS

3 Months Ended

Mar. 31, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS

MVC Credit Support Agreement

In connection with the MVC Acquisition on December 23, 2020, promptly following the closing of the Company’s merger with MVC, the Company and the Adviser entered into the MVC Credit Support Agreement, pursuant to which the Adviser has agreed to provide credit support to the Company in the amount of up to $23.0 million relating to the net cumulative realized and unrealized losses on the acquired MVC investment portfolio over a 10-year period. See “Note 2 – Agreements and Related Party Transactions” for additional information regarding the MVC Credit Support Agreement. Net unrealized appreciation or depreciation on the MVC Credit Support Agreement is included in “Net unrealized appreciation (depreciation) - credit support agreements” in the Company’s Unaudited Consolidated Statements of Operations.

The following tables present the fair value and aggregate unrealized appreciation (depreciation) of the MVC Credit Support Agreement as of March 31, 2023 and December 31, 2022:

As of March 31, 2023 Description ($ in thousands)									Counterparty												Settlement Date						Notional Amount						Value						Unrealized Appreciation (Depreciation)
MVC Credit Support Agreement									Barings LLC												01/01/31						$	23,000					$	13,272					$	(328)
Total MVC Credit Support Agreement																																							$	(328)

As of December 31, 2022 Description ($ in thousands)									Counterparty												Settlement Date						Notional Amount						Value						Unrealized Appreciation (Depreciation)
MVC Credit Support Agreement									Barings LLC												01/01/31						$	23,000					$	12,386					$	(1,214)
Total MVC Credit Support Agreement																																							$	(1,214)

As of March 31, 2023 and December 31, 2022, the fair value of the MVC Credit Support Agreement was $13.3 million and $12.4 million, respectively, and is included in “Credit support agreements” in the accompanying Unaudited and Audited Consolidated Balance Sheets. The fair value of the MVC Credit Support Agreement was determined based on an income approach, with the primary input being the discount rate which is a Level 3 input.

The following tables summarize the significant unobservable inputs the Adviser used in the valuation of the Company’s Level 3 MVC Credit Support Agreement as of March 31, 2023 and December 31, 2022. The weighted average range of unobservable inputs is based on fair value of the MVC Credit Support Agreement.

March 31, 2023: ($ in thousands)

Fair Value

Valuation Model

Level 3 Input

Range of Inputs

Weighted Average

Impact to Valuation from an Increase in Input

MVC Credit Support Agreement

$

13,272

Income Approach

Discount Rate

6.5% - 7.5%

7.0%

Decrease

December 31, 2022: ($ in thousands)

Fair Value

Valuation Model

Level 3 Input

Range of Inputs

Weighted Average

Impact to Valuation from an Increase in Input

MVC Credit Support Agreement

$

12,386

Income Approach

Discount Rate

7.1% - 8.1%

7.6%

Decrease

Sierra Credit Support Agreement

In connection with the Sierra Merger on February 25, 2022, promptly following the closing of the Company’s merger with Sierra, the Company and the Adviser entered into the Sierra Credit Support Agreement, pursuant to which the Adviser has agreed to provide credit support to the Company in the amount of up to $100.0 million relating to the net cumulative realized and unrealized losses on the acquired Sierra investment portfolio over a 10-year period. See “Note 2 – Agreements and Related Party Transactions” for additional information regarding the Sierra Credit Support Agreement. Net unrealized appreciation or depreciation on the Sierra Credit Support Agreement is included in “Net unrealized appreciation (depreciation) - credit support agreements” in the Company’s Unaudited Consolidated Statements of Operations.

The following tables present the fair value and aggregate unrealized appreciation (depreciation) of the Sierra Credit Support Agreement as of March 31, 2023 and December 31, 2022:

As of March 31, 2023 Description ($ in thousands)									Counterparty												Settlement Date						Notional Amount						Value						Unrealized Appreciation (Depreciation)
Sierra Credit Support Agreement									Barings LLC												04/01/32						$	100,000					$	45,400					$	1,000
Total Sierra Credit Support Agreement																																							$	1,000

As of December 31, 2022 Description ($ in thousands)									Counterparty												Settlement Date						Notional Amount						Value						Unrealized Appreciation (Depreciation)
Sierra Credit Support Agreement									Barings LLC												04/01/32						$	100,000					$	40,700					$	(3,700)
Total Sierra Credit Support Agreement																																							$	(3,700)

As of March 31, 2023 and December 31, 2022, the fair value of the Sierra Credit Support Agreement was $45.4 million and $40.7 million, respectively, and is included in “Credit support agreements” in the accompanying Unaudited and Audited Consolidated Balance Sheets. The fair value of the Sierra Credit Support Agreement was determined based on a simulation analysis, with the primary inputs being the enterprise value, a measure of expected asset volatility, the expected time until an exit event for each portfolio company in the Sierra Reference Portfolio and the Recovery Rate, which are all Level 3 inputs.

The following tables summarize the significant unobservable inputs the Adviser used in the valuation of the Company’s Level 3 Sierra Credit Support Agreement as of March 31, 2023 and December 31, 2022. The weighted average range of unobservable inputs is based on fair value of the Sierra Credit Support Agreement.

March 31, 2023: ($ in thousands)

Fair Value

Valuation Model

Level 3 Input

Range of Inputs

Weighted Average

Impact to Valuation from an Increase in Input

Sierra Credit Support Agreement

$

45,400

Simulation Analysis

Enterprise Value

$100 - $141,100

$70,600

Decrease

Asset Volatility

40.0% - 70.0%

55.0%

Increase

Time Until Exit (years)

0.0 - 8.8

4.4

Decrease

Recovery Rate

0.0% - 70.0%

35.0%

Decrease

December 31, 2022: ($ in thousands)

Fair Value

Valuation Model

Level 3 Input

Range of Inputs

Weighted Average

Impact to Valuation from an Increase in Input

Sierra Credit Support Agreement

$

40,700

Simulation Analysis

Enterprise Value

$100 - $403,500

$201,800

Decrease

Asset Volatility

37.5% - 70.0%

53.8%

Increase

Time Until Exit (years)

0.0 - 9.1

4.6

Decrease

Recovery Rate

0.0% - 70.0%

35.0%

Decrease

Foreign Currency Forward Contracts

The Company enters into forward currency contracts from time to time to primarily help mitigate the impact that an adverse change in foreign exchange rates would have on net interest income from the Company’s investments and related borrowings denominated in foreign currencies. Forward currency contracts are considered undesignated derivative instruments.

The following tables present the Company’s foreign currency forward contracts as of March 31, 2023 and December 31, 2022:

As of March 31, 2023 Description ($ in thousands)

Notional Amount to be Purchased

Notional Amount to be Sold

Maturity Date

Gross Amount of Recognized Assets (Liabilities)

Balance Sheet Location of Net Amounts

Foreign currency forward contract (AUD)

A$3,983

$2,681

04/11/23

$

(12)

Derivative liabilities

Foreign currency forward contract (AUD)

$912

A$1,348

04/11/23

9

Derivative assets

Foreign currency forward contract (AUD)

$47,386

A$70,419

04/11/23

210

Derivative assets

Foreign currency forward contract (CAD)

$130

C$178

04/11/23

(2)

Derivative liabilities

Foreign currency forward contract (CAD)

$6,865

C$9,339

04/11/23

(37)

Derivative liabilities

Foreign currency forward contract (DKK)

63kr.

$9

04/11/23

—

Derivative assets

Foreign currency forward contract (DKK)

$336

2,332kr.

04/11/23

(5)

Derivative liabilities

Foreign currency forward contract (EUR)

€30,414

$32,551

04/11/23

505

Derivative assets

Foreign currency forward contract (EUR)

€109,735

€102,649

04/11/23

(1,831)

Derivative liabilities

Foreign currency forward contract (EUR)

$5,655

€5,268

04/11/23

(70)

Derivative liabilities

Foreign currency forward contract (NZD)

NZ$2,500

$1,562

04/11/23

2

Derivative assets

Foreign currency forward contract (NZD)

$168

NZ$267

04/11/23

1

Derivative assets

Foreign currency forward contract (NZD)

$9,644

NZ$15,333

04/11/23

50

Derivative assets

Foreign currency forward contract (NOK)

kr896

$82

04/11/23

3

Derivative assets

Foreign currency forward contract (NOK)

$4,050

kr39,732

04/11/23

255

Derivative assets

Foreign currency forward contract (NOK)

$65

kr645

04/11/23

4

Derivative assets

Foreign currency forward contract (GBP)

£1,500

$1,852

04/11/23

3

Derivative assets

Foreign currency forward contract (GBP)

£7,000

$8,436

04/11/23

220

Derivative assets

Foreign currency forward contract (GBP)

$47,147

£38,899

04/11/23

(957)

Derivative liabilities

Foreign currency forward contract (SEK)

$217

2,247kr

04/11/23

—

Derivative assets

Foreign currency forward contract (CHF)

$4,194

3,841Fr.

04/11/23

(14)

Derivative liabilities

Foreign currency forward contract (CHF)

$437

400Fr.

04/11/23

(1)

Derivative liabilities

Total

$

(1,667)

As of December 31, 2022 Description ($ in thousands)

Notional Amount to be Purchased

Notional Amount to be Sold

Maturity Date

Gross Amount of Recognized Assets (Liabilities)

Balance Sheet Location of Net Amounts

Foreign currency forward contract (AUD)

A$72,553

$48,701

01/09/23

$

511

Derivative assets

Foreign currency forward contract (AUD)

$47,177

A$72,553

01/09/23

(2,035)

Derivative liabilities

Foreign currency forward contract (AUD)

$47,055

A$69,919

04/11/23

(548)

Derivative liabilities

Foreign currency forward contract (CAD)

C$225

$165

01/09/23

1

Derivative assets

Foreign currency forward contract (CAD)

C$9,285

$6,819

01/09/23

34

Derivative assets

Foreign currency forward contract (CAD)

$4,578

C$6,207

01/09/23

(3)

Derivative liabilities

Foreign currency forward contract (CAD)

$2,415

C$3,303

01/09/23

(22)

Derivative liabilities

Foreign currency forward contract (CAD)

$6,865

C$9,339

04/11/23

(34)

Derivative liabilities

Foreign currency forward contract (DKK)

2,260kr.

$323

01/09/23

2

Derivative assets

Foreign currency forward contract (DKK)

$300

2,260kr.

01/09/23

(24)

Derivative liabilities

Foreign currency forward contract (DKK)

$329

2,290kr.

04/11/23

(2)

Derivative liabilities

Foreign currency forward contract (EUR)

€106,443

$113,101

01/09/23

541

Derivative assets

Foreign currency forward contract (EUR)

€1,511

$1,500

01/09/23

113

Derivative assets

Foreign currency forward contract (EUR)

$106,563

€107,954

01/09/23

(8,692)

Derivative liabilities

Foreign currency forward contract (EUR)

$109,735

€102,649

04/11/23

(547)

Derivative liabilities

Foreign currency forward contract (NZD)

NZ$4,000

$2,581

01/09/23

(51)

Derivative liabilities

Foreign currency forward contract (NZD)

NZ$15,175

$9,538

01/09/23

60

Derivative assets

Foreign currency forward contract (NZD)

$208

NZ$351

01/09/23

(14)

Derivative liabilities

Foreign currency forward contract (NZD)

$10,767

NZ$18,824

01/09/23

(1,139)

Derivative liabilities

Foreign currency forward contract (NZD)

$9,644

NZ$15,333

04/11/23

(62)

Derivative liabilities

Foreign currency forward contract (NOK)

kr37,773

$3,835

01/09/23

—

Derivative liabilities

Foreign currency forward contract (NOK)

$3,538

kr37,773

01/09/23

(297)

Derivative liabilities

Foreign currency forward contract (NOK)

$4,050

kr39,732

04/11/23

(1)

Derivative liabilities

Foreign currency forward contract (GBP)

£37,951

$45,898

01/09/23

(240)

Derivative liabilities

Foreign currency forward contract (GBP)

$39,500

£34,951

01/09/23

(2,549)

Derivative liabilities

Foreign currency forward contract (GBP)

$3,396

£3,000

01/09/23

(213)

Derivative liabilities

Foreign currency forward contract (GBP)

$47,147

£38,899

04/11/23

243

Derivative assets

Foreign currency forward contract (SEK)

2,182kr.

$210

01/09/23

—

Derivative liabilities

Foreign currency forward contract (SEK)

$197

2,182kr.

01/09/23

(13)

Derivative liabilities

Foreign currency forward contract (SEK)

$217

2,247kr.

04/11/23

—

Derivative assets

Foreign currency forward contract (CHF)

3,803Fr.

$4,110

01/09/23

3

Derivative assets

Foreign currency forward contract (CHF)

$618

600Fr.

01/09/23

(31)

Derivative liabilities

Foreign currency forward contract (CHF)

$3,305

3,203Fr.

01/09/23

(158)

Derivative liabilities

Foreign currency forward contract (CHF)

$4,194

3,841Fr.

04/11/23

(2)

Derivative liabilities

Total

$

(15,169)

As of March 31, 2023 and December 31, 2022, the total fair value of the Company’s foreign currency forward contracts was $(1.7) million and $(15.2) million, respectively. The fair values of the Company’s foreign currency forward contracts are based on unadjusted prices from independent pricing services and independent indicative broker quotes, which are Level 2 inputs.

Net realized gains or losses on forward currency contracts are included in “Net realized gains (losses) - foreign currency transactions” in the Company’s Unaudited Consolidated Statements of Operations. Net realized gains or losses on forward contracts recognized by the Company for the three months ended March 31, 2023 and 2022 are shown in the following table:

			Three Months Ended						Three Months Ended
($ in thousands)			March 31, 2023						March 31, 2022
Forward currency contracts			$	(14,218)					$	438

Net unrealized appreciation or depreciation on forward currency contracts are included in “Net unrealized appreciation (depreciation) - foreign currency transactions” in the Company’s Unaudited Consolidated Statements of Operations. Net unrealized appreciation or depreciation on forward contracts recognized by the Company for the three months ended March 31, 2023 and 2022 are shown in the following table:

			Three Months Ended						Three Months Ended
($ in thousands)			March 31, 2023						March 31, 2022
Forward currency contracts			$	13,502					$	(903)

X

- References

No definition available.

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X

- Definition

The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-URI https://asc.fasb.org/topic&trid=2229140

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 815
-SubTopic 40
-Section 50
-Paragraph 5
-Subparagraph (f)
-URI https://asc.fasb.org/extlink&oid=126731327&loc=d3e90205-114008

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