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DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 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 June 30, 2023 and December 31, 2022:

As of June 30, 2023 Description ($ in thousands)									Counterparty												Settlement Date						Notional Amount						Value						Unrealized Appreciation (Depreciation)
MVC Credit Support Agreement									Barings LLC												01/01/31						$	23,000					$	15,650					$	2,050
Total MVC Credit Support Agreement																																							$	2,050

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 June 30, 2023 and December 31, 2022, the fair value of the MVC Credit Support Agreement was $15.7 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 inputs being the discount rate and the expected time until an exit event for each portfolio company in the MVC Reference Portfolio, 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 MVC Credit Support Agreement as of June 30, 2023 and December 31, 2022. The average range of unobservable inputs is based on fair value of the MVC Credit Support Agreement.

June 30, 2023: ($ in thousands)

Fair Value

Valuation Model

Level 3 Input

Range of Inputs

Average

Impact to Valuation from an Increase in Input

MVC Credit Support Agreement

$

15,650

Income Approach

Discount Rate

6.8% - 7.8%

7.3%

Decrease

Time Until Exit (years)

2.5 - 5.5

4.0

Decrease

December 31, 2022: ($ in thousands)

Fair Value

Valuation Model

Level 3 Input

Range of Inputs

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 June 30, 2023 and December 31, 2022:

As of June 30, 2023 Description ($ in thousands)									Counterparty												Settlement Date						Notional Amount						Value						Unrealized Appreciation (Depreciation)
Sierra Credit Support Agreement									Barings LLC												04/01/32						$	100,000					$	45,000					$	600
Total Sierra Credit Support Agreement																																							$	600

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 June 30, 2023 and December 31, 2022, the fair value of the Sierra Credit Support Agreement was $45.0 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 June 30, 2023 and December 31, 2022. The average range of unobservable inputs is based on fair value of the Sierra Credit Support Agreement.

June 30, 2023: ($ in thousands)

Fair Value

Valuation Model

Level 3 Input

Range of Inputs

Average

Impact to Valuation from an Increase in Input

Sierra Credit Support Agreement

$

45,000

Simulation Analysis

Enterprise Value

$12 - $138,800

$69,406

Decrease

Asset Volatility

40.0% - 70.0%

55.0%

Increase

Time Until Exit (years)

0.0 - 8.6

4.3

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

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 June 30, 2023 and December 31, 2022:

As of June 30, 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$70,055

$46,804

07/07/23

$

(169)

Derivative liabilities

Foreign currency forward contract (AUD)

$917

A$1,333

07/07/23

30

Derivative assets

Foreign currency forward contract (AUD)

$46,799

A$68,722

07/07/23

1,052

Derivative assets

Foreign currency forward contract (AUD)

$47,086

A$70,298

10/10/23

167

Derivative assets

Foreign currency forward contract (CAD)

C$9,154

$6,943

07/07/23

(26)

Derivative liabilities

Foreign currency forward contract (CAD)

C$392

$292

07/07/23

4

Derivative assets

Foreign currency forward contract (CAD)

$127

C$169

07/07/23

(1)

Derivative liabilities

Foreign currency forward contract (CAD)

$6,992

C$9,376

07/07/23

(94)

Derivative liabilities

Foreign currency forward contract (CAD)

$7,011

C$9,229

10/10/23

26

Derivative assets

Foreign currency forward contract (DKK)

2,283kr.

$336

07/07/23

(2)

Derivative liabilities

Foreign currency forward contract (DKK)

$329

2,241kr.

07/07/23

1

Derivative assets

Foreign currency forward contract (DKK)

$6

43kr.

07/07/23

—

Derivative assets

Foreign currency forward contract (DKK)

$336

2,267kr.

10/10/23

2

Derivative assets

Foreign currency forward contract (EUR)

€7,000

$7,672

07/07/23

(34)

Derivative liabilities

Foreign currency forward contract (EUR)

€75,712

$83,046

07/07/23

(437)

Derivative liabilities

Foreign currency forward contract (EUR)

€2,000

$2,203

10/10/23

(10)

Derivative liabilities

Foreign currency forward contract (EUR)

$4,560

€4,217

07/07/23

(41)

Derivative liabilities

Foreign currency forward contract (EUR)

$81,540

€74,495

07/07/23

258

Derivative assets

Foreign currency forward contract (EUR)

$4,405

€4,000

07/07/23

40

Derivative assets

Foreign currency forward contract (EUR)

$86,143

€78,162

10/10/23

451

Derivative assets

Foreign currency forward contract (NZD)

NZ$13,550

$8,358

07/07/23

(57)

Derivative liabilities

Foreign currency forward contract (NZD)

$8,512

NZ$13,550

07/07/23

211

Derivative assets

Foreign currency forward contract (NZD)

$8,331

NZ$13,512

10/10/23

56

Derivative assets

Foreign currency forward contract (NOK)

kr40,715

$3,784

07/07/23

17

Derivative assets

Foreign currency forward contract (NOK)

$3,897

kr39,996

07/07/23

164

Derivative assets

Foreign currency forward contract (NOK)

$68

kr720

07/07/23

1

Derivative assets

Foreign currency forward contract (NOK)

$3,851

kr41,308

10/10/23

(17)

Derivative liabilities

Foreign currency forward contract (GBP)

£33,110

$42,221

07/07/23

(126)

Derivative liabilities

Foreign currency forward contract (GBP)

$41,121

£33,110

07/07/23

(974)

Derivative liabilities

Foreign currency forward contract (GBP)

$44,368

£34,790

10/10/23

132

Derivative assets

Foreign currency forward contract (GBP)

$3,189

£2,500

10/10/23

10

Derivative assets

Foreign currency forward contract (SEK)

2,344kr

$219

07/07/23

(2)

Derivative liabilities

Foreign currency forward contract (SEK)

$227

2,344kr

07/07/23

10

Derivative assets

Foreign currency forward contract (SEK)

$226

2,407kr

10/10/23

2

Derivative assets

Foreign currency forward contract (CHF)

5,150Fr.

$5,766

07/07/23

(8)

Derivative liabilities

Foreign currency forward contract (CHF)

$839

750Fr.

07/07/23

1

Derivative assets

Foreign currency forward contract (CHF)

$4,868

4,400Fr.

07/07/23

(51)

Derivative liabilities

Foreign currency forward contract (CHF)

$5,690

5,031Fr.

10/10/23

9

Derivative assets

Total

$

595

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 June 30, 2023 and December 31, 2022, the total fair value of the Company’s foreign currency forward contracts was $0.6 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 and six months ended June 30, 2023 and 2022 are shown in the following table:

			Three Months Ended						Three Months Ended						Six Months Ended						Six Months Ended
($ in thousands)			June 30, 2023						June 30, 2022						June 30, 2023						June 30, 2022
Forward currency contracts			$	(2,692)					$	(435)					$	(16,911)					$	2

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 and six months ended June 30, 2023 and 2022 are shown in the following table:

			Three Months Ended						Three Months Ended						Six Months Ended						Six Months Ended
($ in thousands)			June 30, 2023						June 30, 2022						June 30, 2023						June 30, 2022
Forward currency contracts			$	2,262					$	12,685					$	15,764					$	11,782

X

- References

No definition available.

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- 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://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 5
-Subparagraph (f)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480237/815-40-50-5

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 5C
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480434/815-10-50-5C

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 815
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//815/tableOfContent

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