DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2023

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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 September 30, 2023 and December 31, 2022:


As of September 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	$	16,800	$	3,200

Total MVC Credit Support Agreement							$	3,200


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 September 30, 2023 and December 31, 2022, the fair value of the MVC Credit Support Agreement was $16.8 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 September 30, 2023 and December 31, 2022. The average range of unobservable inputs is based on fair value of the MVC Credit Support Agreement.

September 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

16,800

Income Approach

Discount Rate

7.0% - 8.0%

7.5%

Decrease

Time Until Exit (years)

2.8 - 5.8

4.3

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 September 30, 2023 and December 31, 2022:


As of September 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	$	37,400	$	(7,000)

Total Sierra Credit Support Agreement							$	(7,000)


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 September 30, 2023 and December 31, 2022, the fair value of the Sierra Credit Support Agreement was $37.4 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, the Discount Rate 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 September 30, 2023 and December 31, 2022. The average range of unobservable inputs is based on fair value of the Sierra Credit Support Agreement.

September 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

37,400

Simulation Analysis

Enterprise Value

$91 - $150,800

$75,446

Decrease

Asset Volatility

35.0% - 70.0%

52.5%

Increase

Time Until Exit (years)

0.0 - 8.3

4.2

Decrease

Discount Rate

7.1%

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 September 30, 2023 and December 31, 2022:

As of September 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$4,471

$3,035

10/10/23

(149)

Derivative liabilities

Foreign currency forward contract (AUD)

A$2,000

$1,281

10/10/23

Derivative assets

Foreign currency forward contract (AUD)

$47,086

A$70,298

10/10/23

1,706

Derivative assets

Foreign currency forward contract (CAD)

$7,011

C$9,229

10/10/23

184

Derivative assets

Foreign currency forward contract (CAD)

$130

C$176

10/10/23

—

Derivative assets

Foreign currency forward contract (DKK)

$13

89kr.

10/10/23

—

Derivative assets

Foreign currency forward contract (DKK)

$342

2,312kr.

10/10/23

Derivative assets

Foreign currency forward contract (EUR)

€5,000

$5,289

10/10/23

Derivative assets

Foreign currency forward contract (EUR)

€2,000

$2,203

10/10/23

(85)

Derivative liabilities

Foreign currency forward contract (EUR)

$86,143

€78,162

10/10/23

3,366

Derivative assets

Foreign currency forward contract (NZD)

$8,491

NZ$13,780

10/10/23

212

Derivative assets

Foreign currency forward contract (NZD)

$160

NZ$257

10/10/23

Derivative assets

Foreign currency forward contract (NOK)

$3,918

kr42,019

10/10/23

(32)

Derivative liabilities

Foreign currency forward contract (GBP)

£4,000

$4,879

10/02/23

Derivative assets

Foreign currency forward contract (GBP)

£1,000

$1,216

10/10/23

Derivative assets

Foreign currency forward contract (GBP)

$52,028

£41,019

10/10/23

1,960

Derivative assets

Foreign currency forward contract (GBP)

$1,464

£1,200

10/10/23

—

Derivative liabilities

Foreign currency forward contract (GBP)

$8,965

£6,976

10/10/23

450

Derivative assets

Foreign currency forward contract (GBP)

$3,152

£2,500

10/10/23

101

Derivative assets

Foreign currency forward contract (SEK)

$226

2,407kr

10/10/23

Derivative assets

Foreign currency forward contract (CHF)

$79

68Fr.

10/10/23

Derivative assets

Foreign currency forward contract (CHF)

$5,690

5,031Fr.

10/10/23

187

Derivative assets

Foreign currency forward contract (CHF)

$305

260Fr.

10/10/23

Derivative assets

Total

7,974

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

Derivative assets

Foreign currency forward contract (CAD)

C$9,285

$6,819

01/09/23

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

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

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

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 September 30, 2023 and December 31, 2022, the total fair value of the Company’s foreign currency forward contracts was $8.0 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.