DERIVATIVE INSTRUMENTS

9 Months Ended

Sep. 30, 2024

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, 2024 and December 31, 2023:


As of September 30, 2024 Description ($ in thousands)	Counterparty	Settlement Date	Notional Amount		Value		Unrealized Appreciation (Depreciation)
MVC Credit Support Agreement	Barings LLC	01/01/31	$	23,000	$	19,000	$	5,400
Total MVC Credit Support Agreement							$	5,400


As of December 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	$	17,300	$	3,700

Total MVC Credit Support Agreement							$	3,700

As of September 30, 2024 and December 31, 2023, the fair value of the MVC Credit Support Agreement was $19.0 million and $17.3 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, 2024 and December 31, 2023. The average range of unobservable inputs is based on fair value of the MVC Credit Support Agreement.

September 30, 2024:

($ 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

19,000

Income Approach

Discount Rate

5.4% - 6.4%

5.9%

Decrease

Time Until Exit (years)

1.8 - 4.8

3.3

Decrease

December 31, 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

17,300

Income Approach

Discount Rate

6.7% - 7.7%

7.2%

Decrease

Time Until Exit
(years)

2.3 - 5.3

3.8

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, 2024 and December 31, 2023:


As of September 30, 2024 Description ($ in thousands)	Counterparty	Settlement Date	Notional Amount		Value		Unrealized Appreciation (Depreciation)
Sierra Credit Support Agreement	Barings LLC	04/01/32	$	100,000	$	32,200	$	(12,200)
Total Sierra Credit Support Agreement							$	(12,200)


As of December 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	$	40,500	$	(3,900)
Total Sierra Credit Support Agreement							$	(3,900)

As of September 30, 2024 and December 31, 2023, the fair value of the Sierra Credit Support Agreement was $32.2 million and $40.5 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, 2024 and December 31, 2023. The average range of unobservable inputs is based on fair value of the Sierra Credit Support Agreement.

September 30, 2024:

($ 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

32,200

Simulation Analysis

Enterprise/Equity Value

$14 - $376,000

$188,007

Decrease

Asset Volatility

30.0% - 55.0%

42.5%

Increase

Time Until Exit (years)

0.0 - 7.3

3.7

Decrease

Discount Rate

5.8%

Decrease

Recovery Rate

5.0% - 60.0%

32.5%

Increase

December 31, 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

40,500

Simulation Analysis

Enterprise/Equity Value

$91 - $159,700

$79,900

Decrease

Asset Volatility

35.0% - 50.0%

42.5%

Increase

Time Until Exit (years)

0.0 - 8.1

4.1

Decrease

Discount Rate

5.7%

Decrease

Recovery Rate

0.0% - 70.0%

35.0%

Increase

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, 2024 and December 31, 2023:

As of September 30, 2024

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$3,500

$2,369

10/08/24

Derivative assets

Foreign currency forward contract (AUD)

A$68,596

$46,917

10/08/24

676

Derivative assets

Foreign currency forward contract (AUD)

$48,403

A$72,096

10/08/24

(1,618)

Derivative liabilities

Foreign currency forward contract (AUD)

$965

A$1,411

01/08/25

(14)

Derivative liabilities

Foreign currency forward contract (AUD)

$46,948

A$68,596

01/08/25

(678)

Derivative liabilities

Foreign currency forward contract (CAD)

C$625

$459

10/07/24

Derivative assets

Foreign currency forward contract (CAD)

C$8,709

$6,446

10/07/24

Derivative assets

Foreign currency forward contract (CAD)

$6,839

C$9,334

10/07/24

(72)

Derivative liabilities

Foreign currency forward contract (CAD)

$6,461

C$8,709

01/08/25

(2)

Derivative liabilities

Foreign currency forward contract (DKK)

2,518kr.

$376

10/07/24

Derivative assets

Foreign currency forward contract (DKK)

$369

2,518kr.

10/07/24

(8)

Derivative liabilities

Foreign currency forward contract (DKK)

$385

2,570kr.

01/08/25

(1)

Derivative liabilities

Foreign currency forward contract (EUR)

€94,494

$105,135

10/07/24

346

Derivative assets

Foreign currency forward contract (EUR)

€3,193

$3,471

10/07/24

Derivative assets

Foreign currency forward contract (EUR)

$2,431

€2,190

10/07/24

(13)

Derivative liabilities

Foreign currency forward contract (EUR)

$103,034

€94,497

10/07/24

(2,449)

Derivative liabilities

Foreign currency forward contract (EUR)

$1,119

€1,000

10/07/24

Derivative assets

Foreign currency forward contract (EUR)

$105,509

€94,494

01/08/25

(368)

Derivative liabilities

Foreign currency forward contract (EUR)

$671

€600

01/08/25

(1)

Derivative liabilities

Foreign currency forward contract (NZD)

NZ$15,226

$9,537

10/07/24

150

Derivative assets

Foreign currency forward contract (NZD)

$9,464

NZ$15,226

10/07/24

(223)

Derivative liabilities

Foreign currency forward contract (NZD)

$198

NZ$312

01/08/25

(1)

Derivative liabilities

Foreign currency forward contract (NZD)

$9,538

NZ$15,226

01/08/25

(151)

Derivative liabilities

Foreign currency forward contract (NOK)

44,849kr

$4,272

10/07/24

(14)

Derivative liabilities

Foreign currency forward contract (NOK)

$4,281

44,849kr

10/07/24

Derivative assets

Foreign currency forward contract (NOK)

$4,273

44,849kr

01/08/25

Derivative assets

Foreign currency forward contract (GBP)

£1,310

$1,712

10/07/24

Derivative assets

Foreign currency forward contract (GBP)

£62,759

$83,647

10/07/24

535

Derivative assets

Foreign currency forward contract (GBP)

$6,455

£4,984

10/07/24

(231)

Derivative liabilities

Foreign currency forward contract (GBP)

$75,927

£59,086

10/07/24

(3,328)

Derivative liabilities

Foreign currency forward contract (GBP)

$83,616

£62,759

01/08/25

(536)

Derivative liabilities

Foreign currency forward contract (SEK)

16,153kr

$1,585

10/07/24

Derivative assets

Foreign currency forward contract (SEK)

$1,578

16,153kr

10/07/24

(16)

Derivative liabilities

Foreign currency forward contract (SEK)

$34

339kr

01/08/25

—

Derivative assets

Foreign currency forward contract (SEK)

$1,593

16,153kr

01/08/25

(9)

Derivative liabilities

Foreign currency forward contract (CHF)

5,622Fr.

$6,638

10/07/24

Derivative assets

Foreign currency forward contract (CHF)

$6,392

5,622Fr.

10/07/24

(276)

Derivative liabilities

Foreign currency forward contract (CHF)

$6,706

5,622Fr.

01/08/25

(30)

Derivative liabilities

Total

(8,051)

As of December 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)

$830

A$1,264

01/10/24

(33)

Derivative liabilities

Foreign currency forward contract (AUD)

$41,568

A$64,984

01/10/24

(2,784)

Derivative liabilities

Foreign currency forward contract (CAD)

$126

C$173

01/10/24

(4)

Derivative liabilities

Foreign currency forward contract (CAD)

$7,032

C$9,597

01/10/24

(247)

Derivative liabilities

Foreign currency forward contract (DKK)

65kr.

01/10/24

—

Derivative liabilities

Foreign currency forward contract (DKK)

47kr.

01/10/24

—

Derivative liabilities

Foreign currency forward contract (DKK)

$333

2,354kr.

01/10/24

(16)

Derivative liabilities

Foreign currency forward contract (EUR)

$86,266

€81,489

01/10/24

(3,775)

Derivative liabilities

Foreign currency forward contract (NZD)

$159

NZ$271

01/10/24

(12)

Derivative liabilities

Foreign currency forward contract (NZD)

$170

NZ$270

01/10/24

(1)

Derivative liabilities

Foreign currency forward contract (NZD)

$8,287

NZ$13,912

01/10/24

(522)

Derivative liabilities

Foreign currency forward contract (NOK)

$72

740kr

01/10/24

(1)

Derivative liabilities

Foreign currency forward contract (NOK)

$3,920

42,309kr

01/10/24

(247)

Derivative liabilities

Foreign currency forward contract (GBP)

$60,925

£50,203

01/10/24

(3,077)

Derivative liabilities

Foreign currency forward contract (SEK)

$24

261kr.

01/10/24

(2)

Derivative liabilities

Foreign currency forward contract (SEK)

$1,190

12,500kr.

01/10/24

(51)

Derivative liabilities

Foreign currency forward contract (SEK)

$203

2,228kr.

01/10/24

(18)

Derivative liabilities

Foreign currency forward contract (CHF)

$124

104Fr.

01/10/24

Derivative assets

Foreign currency forward contract (CHF)

$5,966

5,418Fr.

01/10/24

(475)

Derivative liabilities

Total

(11,264)

As of September 30, 2024 and December 31, 2023, the total fair value of the Company’s foreign currency forward contracts was $(8.1) million and $(11.3) 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.