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Investments | 9 Months Ended
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Sep. 30, 2022
Investments, Debt and Equity Securities [Abstract] |
Investments | 4. INVESTMENTS The following table shows the Company’s portfolio by security type at September 30, 2022 and December 31, 2021:
($ in thousands) |  | September 30, 2022 (Unaudited) |  |  | December 31, 2021 |
Security Type |  | Cost/Amortized Cost |  |  | Fair Value |  |  | %(¹) |  |  | Cost/Amortized Cost |  |  | Fair Value |  |  | %(¹) |
Senior Secured Loan |  | $ | 426,052 |  |  | $ | 415,819 |  |  |  | 73 |  |  | $ | 361,556 |  |  | $ | 364,701 |  |  |  | 66 |
Junior Secured Loan |  |  | 65,672 |  |  |  | 61,535 |  |  |  | 11 |  |  |  | 82,996 |  |  |  | 70,549 |  |  |  | 13 |
Senior Unsecured Bond |  |  | 416 |  |  |  | 43 |  |  |  | 0 |  |  |  | 416 |  |  |  | 43 |  |  |  | 0 |
Equity Securities |  |  | 27,679 |  |  |  | 24,487 |  |  |  | 4 |  |  |  | 26,680 |  |  |  | 22,586 |  |  |  | 4 |
CLO Fund Securities |  |  | 37,411 |  |  |  | 24,623 |  |  |  | 4 |  |  |  | 51,561 |  |  |  | 31,632 |  |  |  | 6 |
Asset Manager Affiliates(2) |  |  | 17,791 |  |  |  | - |  |  |  | - |  |  |  | 17,791 |  |  |  | - |  |  |  | - |
Joint Ventures |  |  | 55,139 |  |  |  | 45,141 |  |  |  | 8 |  |  |  | 64,365 |  |  |  | 60,474 |  |  |  | 11 |
Derivatives |  |  | 31 |  |  |  | 8 |  |  |  | 0 |  |  |  | 31 |  |  |  | (2,412 | ) |  |  | - |
Total |  | $ | 630,191 |  |  | $ | 571,656 |  |  |  | 100 | % |  | $ | 605,396 |  |  | $ | 547,573 |  |  |  | 100 | %
(1) Represents percentage of total portfolio at fair value. (2) Represents the equity investment in the Asset Manager Affiliates. The industry concentrations based on the fair value of the Company’s investment portfolio as of September 30, 2022 and December 31, 2021 were as follows:
($ in thousands) |  | September 30, 2022 (Unaudited) |  |  | December 31, 2021 |
Industry Classification |  | Cost/Amortized Cost |  |  | Fair Value |  |  | %(¹) |  |  | Cost/Amortized Cost |  |  | Fair Value |  |  | %(¹) |
Aerospace and Defense |  | $ | 10,764 |  |  | $ | 10,522 |  |  |  | 2 |  |  | $ | 11,730 |  |  | $ | 11,692 |  |  |  | 2 |
Asset Management Company(2) |  |  | 17,791 |  |  |  | - |  |  |  | - |  |  |  | 17,791 |  |  |  | - |  |  |  | - |
Automotive |  |  | 12,007 |  |  |  | 11,803 |  |  |  | 2 |  |  |  | 11,331 |  |  |  | 11,487 |  |  |  | 2 |
Banking, Finance, Insurance & Real Estate |  |  | 72,192 |  |  |  | 74,457 |  |  |  | 13 |  |  |  | 41,487 |  |  |  | 42,858 |  |  |  | 8 |
Beverage, Food and Tobacco |  |  | 12,381 |  |  |  | 12,237 |  |  |  | 2 |  |  |  | 5,511 |  |  |  | 5,625 |  |  |  | 1 |
Capital Equipment |  |  | 10,679 |  |  |  | 6,915 |  |  |  | 1 |  |  |  | 14,387 |  |  |  | 10,620 |  |  |  | 2 |
Chemicals, Plastics & Rubber |  |  | 10,496 |  |  |  | 10,379 |  |  |  | 2 |  |  |  | 12,692 |  |  |  | 12,969 |  |  |  | 2 |
CLO Fund Securities |  |  | 37,411 |  |  |  | 24,623 |  |  |  | 4 |  |  |  | 51,561 |  |  |  | 31,632 |  |  |  | 6 |
Construction & Building |  |  | 10,481 |  |  |  | 10,530 |  |  |  | 2 |  |  |  | 8,966 |  |  |  | 9,501 |  |  |  | 2 |
Consumer goods: Durable |  |  | 16,804 |  |  |  | 13,852 |  |  |  | 2 |  |  |  | 25,151 |  |  |  | 24,831 |  |  |  | 5 |
Consumer goods: Non-durable |  |  | 2,187 |  |  |  | 2,197 |  |  |  | 0 |  |  |  | 4,162 |  |  |  | 4,197 |  |  |  | 1 |
Containers, Packaging and Glass |  |  | 2,761 |  |  |  | 2,661 |  |  |  | 1 |  |  |  | 2,780 |  |  |  | 2,570 |  |  |  | 1 |
Electronics |  |  | 10,809 |  |  |  | 10,917 |  |  |  | 2 |  |  |  | 10,623 |  |  |  | 11,089 |  |  |  | 2 |
Energy: Electricity |  |  | 671 |  |  |  | 671 |  |  |  | 0 |  |  |  | - |  |  |  | - |  |  |  | - |
Energy: Oil & Gas |  |  | 6,718 |  |  |  | 1,388 |  |  |  | 0 |  |  |  | 7,921 |  |  |  | 2,355 |  |  |  | 0 |
Environmental Industries |  |  | 4,315 |  |  |  | 6,200 |  |  |  | 1 |  |  |  | 4,315 |  |  |  | 4,200 |  |  |  | 1 |
Finance |  |  | 7,759 |  |  |  | 7,757 |  |  |  | 1 |  |  |  | 10,916 |  |  |  | 10,912 |  |  |  | 2 |
Forest Products & Paper |  |  | 1,587 |  |  |  | 1,376 |  |  |  | 0 |  |  |  | 1,583 |  |  |  | 1,271 |  |  |  | 0 |
Healthcare, Education and Childcare |  |  | 9,740 |  |  |  | 9,613 |  |  |  | 2 |  |  |  | 9,783 |  |  |  | 9,752 |  |  |  | 2 |
Healthcare & Pharmaceuticals |  |  | 49,296 |  |  |  | 48,667 |  |  |  | 9 |  |  |  | 71,696 |  |  |  | 62,275 |  |  |  | 11 |
High Tech Industries |  |  | 79,358 |  |  |  | 73,154 |  |  |  | 13 |  |  |  | 58,803 |  |  |  | 58,715 |  |  |  | 11 |
Hotel, Gaming & Leisure |  |  | 10,128 |  |  |  | 8,823 |  |  |  | 2 |  |  |  | 4,906 |  |  |  | 4,898 |  |  |  | 1 |
Joint Ventures |  |  | 55,139 |  |  |  | 45,141 |  |  |  | 8 |  |  |  | 64,365 |  |  |  | 60,474 |  |  |  | 11 |
Machinery (Non-Agrclt/Constr/Electr) |  |  | 9,524 |  |  |  | 9,716 |  |  |  | 2 |  |  |  | 7,748 |  |  |  | 8,967 |  |  |  | 2 |
Media: Advertising, Printing & Publishing |  |  | 150 |  |  |  | 281 |  |  |  | - |  |  |  | 150 |  |  |  | 246 |  |  |  | 0 |
Media: Broadcasting & Subscription |  |  | 13,081 |  |  |  | 13,848 |  |  |  | 2 |  |  |  | 12,407 |  |  |  | 13,255 |  |  |  | 2 |
Media: Diversified & Production |  |  | 7,160 |  |  |  | 7,175 |  |  |  | 1 |  |  |  | 6,272 |  |  |  | 6,365 |  |  |  | 1 |
Metals & Mining |  |  | 15,763 |  |  |  | 15,052 |  |  |  | 3 |  |  |  | 15,342 |  |  |  | 13,647 |  |  |  | 3 |
Retail |  |  | 10,748 |  |  |  | 10,787 |  |  |  | 2 |  |  |  | 6,144 |  |  |  | 6,775 |  |  |  | 1 |
Services: Business |  |  | 72,599 |  |  |  | 73,124 |  |  |  | 13 |  |  |  | 76,071 |  |  |  | 77,798 |  |  |  | 14 |
Services: Consumer |  |  | 8,347 |  |  |  | 7,980 |  |  |  | 1 |  |  |  | 990 |  |  |  | 990 |  |  |  | 0 |
Telecommunications |  |  | 9,473 |  |  |  | 8,541 |  |  |  | 2 |  |  |  | 7,521 |  |  |  | 6,675 |  |  |  | 1 |
Textiles and Leather |  |  | 12,640 |  |  |  | 12,408 |  |  |  | 2 |  |  |  | 12,496 |  |  |  | 11,095 |  |  |  | 2 |
Transportation: Cargo |  |  | 11,566 |  |  |  | 11,484 |  |  |  | 2 |  |  |  | - |  |  |  | - |  |  |  | - |
Transportation: Consumer |  |  | 7,666 |  |  |  | 7,377 |  |  |  | 1 |  |  |  | 7,795 |  |  |  | 7,837 |  |  |  | 1 |
Total |  | $ | 630,191 |  |  | $ | 571,656 |  |  |  | 100 | % |  | $ | 605,396 |  |  | $ | 547,573 |  |  |  | 100 | %
(1) Calculated as a percentage of total portfolio at fair value. (2) Represents the equity investment in the Asset Manager Affiliates. The Company may invest up to 30% of the investment portfolio in “non-qualifying” opportunistic investments, including investments in debt and equity securities of CLO Funds, distressed debt or debt and equity securities of large cap public companies. Within this 30% of the portfolio, the Company also may invest in debt of middle market companies located outside of the United States. At September 30, 2022 and December 31, 2021, the total amount of non-qualifying assets was approximately 15.3% and 15.8% of total assets, respectively. The majority of non-qualifying assets are the Company’s investments in joint ventures which were approximately 7.2% and 9.3% respectively, of the total assets and the Company’s investments in CLO Funds, which are typically domiciled outside the U.S. and represented approximately 3.9% and 4.9% of its total assets on such dates, respectively. Investments in CLO Fund Securities The Company has made non-controlling investments in the most junior class of securities (typically preferred shares or subordinated securities) of CLO Funds. These securities also are entitled to recurring distributions which generally equal the net remaining cash flow of the payments made by the underlying CLO Funds securities less contractual payments to senior bond holders, management fees and CLO Fund expenses. CLO Funds invest primarily in broadly syndicated non-investment grade loans, high-yield bonds and other credit instruments of corporate issuers. The underlying assets in each of the CLO Funds in which the Company has an investment are generally diversified secured or unsecured corporate debt. The CLO Funds are leveraged funds and any excess cash flow or “excess spread” (interest earned by the underlying securities in the CLO Funds less payments made to senior bond holders, fund expenses and management fees) is paid to the holders of the CLO Fund’s subordinated securities or preferred shares. In January 2021, the Company sold $10.1 million notional amount of the subordinated notes of Catamaran 2016-1 for $3.3 million. In July 2022, the Company received a final cash distribution from Catamaran 2013-1, and the Company's investment in Catamaran 2013-1 was redeemed in full. Affiliate Investments: The following table details investments in affiliates at September 30, 2022 (unaudited):
($ in thousands) | Industry Classification | Fair Value as of December 31, 2021 |  | Purchases/ (Sales) of or Advances/ (Distributions) |  | Net Accretion |  | Transfers In/(Out) of Affiliates |  | Net Change in Unrealized Gain/(Loss) |  | Realized Gain/(Loss) |  | Fair Value as of September 30, 2022 |  | Principal / Shares at September 30, 2022 |  | Interest Income |  | Dividend Income |
Asset Manager Affiliates(1)(2)(3) | Asset Management Company | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  | $ | - |  |  | - |  | $ | - |  | $ | - |
Tank Partners Equipment Holdings, LLC(1)(2)(3)(6) | Energy: Oil & Gas |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 49,000 |  |  | - |  |  | - |
Tank Partners Equipment Holdings, LLC(1)(2)(3) | Energy: Oil & Gas |  | 43 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 43 |  |  | 511 |  |  | - |  |  | - |
Flight Lease VII (1)(2)(4)(6) | Aerospace and Defense |  | 256 |  |  | - |  |  | - |  |  | - |  |  | (6 | ) |  | - |  |  | 250 |  |  | 1,938 |  |  | - |  |  | - |
ProAir, LLC(1)(2)(3)(6) | Capital Equipment |  | - |  |  | - |  |  | - |  |  | 4,261 |  |  | (2,783 | ) |  | - |  |  | 1,478 |  |  | 2,749,997 |  |  | - |  |  | - |
ProAir, LLC(1)(2)(3) | Capital Equipment |  | - |  |  | 1,931 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 1,931 |  |  | 1,931 |  |  | 181 |  |  | - |
KCAP Freedom 3, LLC (1)(3) | Joint Venture |  | 23,062 |  |  | - |  |  | - |  |  | - |  |  | (4,872 | ) |  | - |  |  | 18,190 |  |  | 27,220 |  |  | - |  |  | 3,262 |
Total controlled affiliates |  | $ | 23,361 |  | $ | 1,931 |  | $ | - |  | $ | 4,261 |  | $ | (7,661 | ) | $ | - |  | $ | 21,892 |  |  |  | $ | 181 |  | $ | 3,262 |
BCP Great Lakes Holdings LP(5)(7) | Joint Venture | $ | 37,412 |  | $ | 1,700 |  | $ | - |  | $ | (38,124 | ) | $ | (461 | ) | $ | (527 | ) | $ | - |  |  | - |  | $ | - |  |  | 3,099 |
Series A-Great Lakes Funding II LLC(5)(6)(8) | Joint Venture |  | - |  |  | (10,399 | ) |  | - |  |  | 38,124 |  |  | (774 | ) |  | - |  |  | 26,951 |  |  | 27,724,363 |  |  | - |  |  | - |
Flight Lease XII(1)(2)(5)(6) | Aerospace and Defense |  | 677 |  |  | (742 | ) |  | - |  |  | - |  |  | (147 | ) |  | 212 |  |  | - |  |  | - |  |  | - |  |  | - |
GreenPark Infrastructure, LLC(1)(2)(5)(6) | Energy: Electricity |  | - |  |  | 500 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 500 |  |  | 1,000 |  |  | - |  |  | - |
GreenPark Infrastructure, LLC(1)(2)(5)(6)(8) | Energy: Electricity |  | - |  |  | 171 |  |  | - |  |  | - |  |  | - |  |  | - |  |  | 171 |  |  | 500 |  |  | - |  |  | - |
GreenPark Infrastructure, LLC(5)(8) | Energy: Electricity |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |  |  | - |
Kleen-Tech Acquisition, LLC (1)(2)(5)(6) | Services: Business |  | 1,612 |  |  | - |  |  | - |  |  | - |  |  | (322 | ) |  | - |  |  | 1,290 |  |  | 250,000 |  |  | - |  |  | - |
Northeast Metal Works LLC (1)(2)(5) | Metals & Mining |  | 12,280 |  |  | 401 |  |  | (10 | ) |  | - |  |  | 577 |  |  | - |  |  | 13,248 |  |  | 14,477 |  |  | 1,089 |  |  | - |
Northeast Metal Works LLC (1)(2)(5)(6) | Metals & Mining |  | - |  |  | - |  |  | - |  |  | - |  |  | 460 |  |  | - |  |  | 460 |  |  | 2,368 |  |  | - |  |  | - |
BMP Slappey Holdco, LLC (1)(2)(5)(6) | Telecommunications |  | 492 |  |  | - |  |  | - |  |  | - |  |  | 60 |  |  | - |  |  | 552 |  |  | 200,000 |  |  | - |  |  | - |
BMP Slappey Investment II (1)(2)(5)(6) | Telecommunications |  | 219 |  |  | - |  |  | - |  |  | - |  |  | 27 |  |  | - |  |  | 246 |  |  | 88,946 |  |  | - |  |  | - |
Surge Hippodrome Partners LP(1)(2)(5)(6) | Services: Business |  | 336 |  |  | - |  |  | - |  |  | - |  |  | 387 |  |  | - |  |  | 723 |  |  | 185 |  |  | - |  |  | - |
Surge Hippodrome Holdings LLC(1)(2)(5)(6) | Services: Business |  | 201 |  |  | - |  |  | - |  |  | - |  |  | 230 |  |  | - |  |  | 431 |  |  | 10 |  |  | - |  |  | - |
Surge Hippodrome Holdings LLC(1)(2)(5) | Services: Business |  | 5,160 |  |  | - |  |  | 155 |  |  | - |  |  | (226 | ) |  | - |  |  | 5,089 |  |  | 5,460 |  |  | 375 |  |  | - |
VTK Acquisition, Inc.(1)(2)(5) | Capital Equipment |  | 1,531 |  |  | (1,536 | ) |  | 33 |  |  | - |  |  | (28 | ) |  | - |  |  | - |  |  | - |  |  | 57 |  |  | - |
VTK Acquisition, Inc.(1)(2)(5) | Capital Equipment |  | 2,598 |  |  | (2,628 | ) |  | 110 |  |  | - |  |  | (80 | ) |  | - |  |  | - |  |  | - |  |  | 107 |  |  | - |
VTK Acquisition, Inc.(1)(2)(5)(6) | Capital Equipment |  | 535 |  |  | (369 | ) |  | - |  |  | - |  |  | (284 | ) |  | 118 |  |  | - |  |  | - |  |  | - |  |  | - |
Navex Topco, Inc.(1)(2)(5) | Electronics |  | 7,609 |  |  | - |  |  | 63 |  |  | - |  |  | (202 | ) |  | - |  |  | 7,470 |  |  | 7,700 |  |  | 470 |  |  | - |
Zest Acquisition Corp.(1)(2)(5) | Healthcare, Education and Childcare |  | 3,480 |  |  | - |  |  | 2 |  |  | - |  |  | (91 | ) |  | - |  |  | 3,391 |  |  | 3,500 |  |  | 223 |  |  | - |
Total Non-controlled affiliates |  | $ | 74,142 |  | $ | (12,902 | ) | $ | 353 |  | $ | - |  | $ | (874 | ) | $ | (197 | ) | $ | 60,522 |  |  |  | $ | 2,321 |  | $ | 3,099 |
Total Affiliated Investments |  | $ | 97,503 |  | $ | (10,971 | ) | $ | 353 |  | $ | 4,261 |  | $ | (8,535 | ) | $ | (197 | ) | $ | 82,414 |  |  |  | $ | 2,502 |  | $ | 6,361 |
(1) Fair value of this investment was determined using significant unobservable inputs. (2) Qualified asset for purposes of section 55(a) of the Investment Company Act of 1940. (3) As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). Other than for purposes of the 1940 Act, the Company does not believe that it has control over this portfolio company. (4) As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. (5) Under the 1940 Act, the Company is deemed to be an “Affiliated Person” of, as defined in the 1940 Act, this portfolio company as the Company owns at least 5% of the portfolio company’s outstanding voting securities or is under common control with such portfolio company. (6) Number of shares held. (7) Ownership of LP interest held through the holding company BCP Great Lakes Fund, L.P, a non-U.S. company or principal place of business outside the U.S. (8) Security has an unfunded commitment in addition to the amounts shown in the Consolidated Schedule of Investments. See Note 8 for additional information on the Company’s commitments and contingencies. The following table details investments in affiliates at December 31, 2021:
($ in thousands) |  | Industry Classification |  | Fair Value of December 31, 2020 |  |  | Purchases/ (Sales) of or Advances/ (Distributions) |  |  | Net Accretion |  |  | Transfers In/(Out) of Affiliates |  |  | Net Change in Unrealized Gain/(Loss) |  |  | Realized Gain/(Loss) |  |  | Fair Value of December 31, 2021 |  |  | Principal / Shares at December 31, 2021 |  |  | Interest Income |  |  | Dividend Income |
Asset Manager Affiliates(1)(2)(3) |  | Asset Management Company |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  | $ | — |  |  | $ | — |
Tank Partners Equipment Holdings, LLC(1)(2)(3)(6) |  | Energy: Oil & Gas |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 49,000 |  |  |  | — |  |  |  | — |
Tank Partners Equipment Holdings, LLC(1)(2)(3) |  | Energy: Oil & Gas |  |  | 208 |  |  |  | 0 |  |  |  | — |  |  |  | — |  |  |  | (164 | ) |  |  | — |  |  |  | 43 |  |  |  | 511 |  |  |  | — |  |  |  | — |
Flight Lease VII (1)(2)(4)(6) |  | Aerospace and Defense |  |  | — |  |  |  | 280 |  |  |  | — |  |  |  | — |  |  |  | (24 | ) |  |  | — |  |  |  | 256 |  |  |  | 1,938 |  |  |  | — |  |  |  | — |
KCAP Freedom 3, LLC (1)(3) |  | Joint Venture |  |  | 19,749 |  |  |  | 2,500 |  |  |  | — |  |  |  | — |  |  |  | 813 |  |  |  | — |  |  |  | 23,062 |  |  |  | 27,220 |  |  |  | — |  |  |  | 5,170 |
Total controlled affiliates |  |  |  |  | 19,957 |  |  |  | 2,780 |  |  |  | — |  |  |  | — |  |  |  | 625 |  |  |  | — |  |  |  | 23,361 |  |  |  | 27,782 |  |  |  | — |  |  |  | 5,170 |
BCP Great Lakes Holdings LP(5)(7) |  | Joint Venture |  |  | 29,600 |  |  |  | 6,933 |  |  |  | — |  |  |  | — |  |  |  | 879 |  |  |  | — |  |  |  | 37,412 |  |  |  | 36,950 |  |  |  | — |  |  |  | 4,006 |
Flight Lease XII(1)(2)(5)(6) |  | Aerospace and Defense |  |  | — |  |  |  | 530 |  |  |  | — |  |  |  | — |  |  |  | 147 |  |  |  | — |  |  |  | 677 |  |  |  | 1,000 |  |  |  | — |  |  |  | — |
Kleen-Tech Acquisition, LLC (1)(2)(5)(6) |  | Services: Business |  |  | — |  |  |  | 1,264 |  |  |  | — |  |  |  | — |  |  |  | 347 |  |  |  | — |  |  |  | 1,612 |  |  |  | 250,000 |  |  |  | — |  |  |  | — |
Northeast Metal Works LLC (1)(2)(5) |  | Metals & Mining |  |  | — |  |  |  | 11,944 |  |  |  | 2,141 |  |  |  | — |  |  |  | (1,805 | ) |  |  | — |  |  |  | 12,280 |  |  |  | 14,074 |  |  |  | 802 |  |  |  | — |
Northeast Metal Works LLC (1)(2)(5)(6) |  | Metals & Mining |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,368 |  |  |  | — |  |  |  | — |
BMP Slappey Holdco, LLC (1)(2)(5)(6) |  | Telecommunications |  |  | — |  |  |  | 467 |  |  |  | — |  |  |  | — |  |  |  | 25 |  |  |  | — |  |  |  | 492 |  |  |  | 200,000 |  |  |  | — |  |  |  | — |
BMP Slappey Holdco, LLC (1)(2)(5)(6) |  | Telecommunications |  |  | — |  |  |  | 208 |  |  |  | — |  |  |  | — |  |  |  | 11 |  |  |  | — |  |  |  | 219 |  |  |  | 88,946 |  |  |  | — |  |  |  | — |
Surge Hippodrome Holdings LLC(1)(2)(5)(6) |  | Services: Business |  |  | — |  |  |  | 425 |  |  |  | — |  |  |  | — |  |  |  | (89 | ) |  |  | — |  |  |  | 336 |  |  |  | 185 |  |  |  | — |  |  |  | — |
Surge Hippodrome Holdings LLC(1)(2)(5)(6) |  | Services: Business |  |  | — |  |  |  | 159 |  |  |  | — |  |  |  | — |  |  |  | 42 |  |  |  | — |  |  |  | 201 |  |  |  | 10 |  |  |  | — |  |  |  | — |
Surge Hippodrome Holdings LLC(1)(2)(5) |  | Services: Business |  |  | — |  |  |  | 4,809 |  |  |  | 117 |  |  |  | — |  |  |  | 235 |  |  |  | — |  |  |  | 5,160 |  |  |  | 5,460 |  |  |  | 422 |  |  |  | — |
VTK Acquisition, Inc.(1)(2)(5) |  | Capital Equipment |  |  | — |  |  |  | 1,429 |  |  |  | 75 |  |  |  | — |  |  |  | 28 |  |  |  | — |  |  |  | 1,531 |  |  |  | 1,536 |  |  |  | 59 |  |  |  | — |
VTK Acquisition, Inc.(1)(2)(5) |  | Capital Equipment |  |  | — |  |  |  | 2,259 |  |  |  | 259 |  |  |  | — |  |  |  | 80 |  |  |  | — |  |  |  | 2,598 |  |  |  | 2,625 |  |  |  | 130 |  |  |  | — |
VTK Acquisition, Inc.(1)(2)(5)(6) |  | Capital Equipment |  |  | — |  |  |  | 251 |  |  |  | — |  |  |  | — |  |  |  | 284 |  |  |  | — |  |  |  | 535 |  |  |  | 90 |  |  |  | — |  |  |  | — |
Navex Topco, Inc.(2)(5) |  | Electronics |  |  | 7,488 |  |  |  | — |  |  |  | 84 |  |  |  | — |  |  |  | 36 |  |  |  | — |  |  |  | 7,609 |  |  |  | 7,700 |  |  |  | 555 |  |  |  | — |
Zest Acquisition Corp.(1)(2)(5) |  | Healthcare, Education and Childcare |  |  | 3,291 |  |  |  | — |  |  |  | 3 |  |  |  | — |  |  |  | 185 |  |  |  | — |  |  |  | 3,480 |  |  |  | 3,500 |  |  |  | 294 |  |  |  | — |
GIG Rooster Holdings I, LLC (2)(5) |  | Energy: Oil & Gas |  |  | 123 |  |  |  | (139 | ) |  |  | — |  |  |  | — |  |  |  | (123 | ) |  |  | 139 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Non-controlled affiliates |  |  |  |  | 40,503 |  |  |  | 30,539 |  |  |  | 2,679 |  |  |  | - |  |  |  | 282 |  |  |  | 139 |  |  |  | 74,142 |  |  |  | 72,387 |  |  |  | 2,262 |  |  |  | 4,006 |
Total Affiliated Investments |  |  |  | $ | 60,460 |  |  | $ | 33,319 |  |  | $ | 2,679 |  |  | $ | - |  |  | $ | 907 |  |  | $ | 139 |  |  | $ | 97,503 |  |  | $ | 100,169 |  |  | $ | 2,262 |  |  | $ | 9,176 |
(1) Fair value of this investment was determined using significant unobservable inputs. (2) Qualified asset for purposes of section 55(a) of the Investment Company Act of 1940. (3) As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company securities or has the power to exercise control over management or policies of such portfolio company (including through a management agreement). Other than for purposes of the 1940 Act, the Company does not believe that it has control over this portfolio company. (4) As defined in the 1940 Act, the Company is deemed to be both an “Affiliated Person” and has “Control” of this portfolio company as the Company owns more than 25% of the portfolio company’s outstanding voting securities or has the power to exercise control over management or policies of such portfolio company. (5) Under the 1940 Act, the Company is deemed to be an “Affiliated Person” of, as defined in the 1940 Act, this portfolio company as the Company owns at least 5% of the portfolio company’s outstanding voting securities or is under common control with such portfolio company. (6) Number of shares held. (7) Ownership of LP interest held through the holding company BCP Great Lakes Fund, L.P, a non-U.S. company or principal place of business outside the U.S. Investments in Joint Ventures For the three months ended September 30, 2022 and 2021, the Company recognized $2.2 million and $2.4 million, respectively, in investment income from its investments in Joint Ventures. For the nine months ended September 30, 2022 and 2021, the Company recognized $6.4 million and $7.0 million, respectively, in investment income from its investments in Joint Ventures. As of September 30, 2022 and December 31, 2021, the aggregate fair value of the Company’s investments in Joint Ventures was approximately $45.1 million and $60.5 million, respectively. KCAP Freedom 3 LLC During the third quarter of 2017, the Company and Freedom 3 Opportunities LLC (“Freedom 3 Opportunities”), an affiliate of Freedom 3 Capital LLC, entered into an agreement to create KCAP Freedom 3 LLC (the “F3C Joint Venture”). The fund capitalized by the F3C Joint Venture invests primarily in middle-market loans and the F3C Joint Venture partners may source middle-market loans from time-to-time for the fund. The Company owns a 62.8% equity investment in the F3C Joint Venture. The F3C Joint Venture is structured as an unconsolidated Delaware limited liability company. All portfolio and other material decisions regarding the F3C Joint Venture must be submitted to its board of managers, which is comprised of four members, two of whom were selected by the Company and two of whom were selected by Freedom 3 Opportunities, and must be approved by at least one member appointed by the Company and one appointed by Freedom 3 Opportunities. In addition, certain matters may be approved by the F3C Joint Venture’s investment committee, which is comprised of one member appointed by the Company and one member appointed by Freedom 3 Opportunities. The Company has determined that the F3C Joint Venture is an investment company under Accounting Standards Codification (“ASC”), Financial Services — Investment Companies (“ASC 946”), however, in accordance with such guidance, the Company will generally not consolidate its investment in a company other than a wholly owned investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. The Company does not consolidate its interest in the F3C Joint Venture because the Company does not control the F3C Joint Venture due to allocation of the voting rights among the F3C Joint Venture partners. KCAP Freedom 3 LLC Summarized Statements of Financial Condition ($ in thousands)
|  | As of September 30, 2022 (Unaudited) |  |  | As of December 31, 2021 |
Cash |  | $ | — |  |  | $ | — |
Investment at fair value |  |  | 28,703 |  |  |  | 35,841 |
Total Assets |  | $ | 28,703 |  |  | $ | 35,841 |
Total Liabilities |  | $ | 164 |  |  | $ | 164 |
Total Equity |  | $ | 28,539 |  |  | $ | 35,677 |
Total Liabilities and Equity |  | $ | 28,703 |  |  | $ | 35,841 |
KCAP Freedom 3 LLC Summarized Statements of Operations ($ in thousands) (Unaudited)
|  | For the Three Months Ended September 30, | For the Nine Months Ended September 30, |
|  | 2022 |  |  | 2021 |  |  | 2022 |  |  | 2021 |
Investment income |  | $ | 2,542 |  |  | $ | 1,620 |  |  | $ | 6,938 |  |  | $ | 4,919 |
Operating expenses |  |  | 2 |  |  |  | 36 |  |  |  | 5 |  |  |  | 52 |
Net investment income |  | $ | 2,540 |  |  | $ | 1,584 |  |  | $ | 6,933 |  |  | $ | 4,867 |
Unrealized appreciation on investments |  | $ | (4,199 | ) |  | $ | (766 | ) |  | $ | (9,282 | ) |  | $ | 564 |
Net income |  | $ | (1,659 | ) |  | $ | 818 |  |  | $ | (2,349 | ) |  | $ | 5,431 |
KCAP Freedom 3 LLC Schedule of Investments September 30, 2022 ($ in thousands) (Unaudited)
Portfolio Company |  | Investment |  | Percentage Ownership by Joint Venture |  |  | Amortized Cost |  |  | Fair Value |
Great Lakes KCAP F3C Senior, LLC(1)(2) |  | Subordinated Securities, effective interest 23.7%, 12/29 maturity |  |  | 100.0 | % |  | $ | 42,990 |  |  | $ | 28,703 |
Total Investments |  |  |  |  |  |  | $ | 42,990 |  |  | $ | 28,703 |
(1) CLO Subordinated Investments are entitled to periodic distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s investments less contractual payments to debt holders and fund expenses. The estimated annualized effective yield indicated is based upon a current projection of the amount and timing of these distributions. Such projections are updated on a quarterly basis and the estimated effective yield is adjusted prospectively. (2) Fair value of this investment was determined using significant unobservable inputs, including default rates, prepayment rates, spreads, and the discount rate by which to value the resulting cash flows. KCAP Freedom 3 LLC Schedule of Investments December 31, 2021 ($ in thousands)
Portfolio Company |  | Investment |  | Percentage Ownership by Joint Venture |  |  | Amortized Cost |  |  | Fair Value |
Great Lakes KCAP F3C Senior, LLC(1)(2) |  | Subordinated Securities, effective interest 21.3%, 12/29 maturity |  |  | 100.0 | % |  | $ | 40,847 |  |  | $ | 35,841 |
Total Investments |  |  |  |  |  |  | $ | 40,847 |  |  | $ | 35,841 |
(1) CLO Subordinated Investments are entitled to periodic distributions which are generally equal to the remaining cash flow of the payments made by the underlying fund’s investments less contractual payments to debt holders and fund expenses. The estimated annualized effective yield indicated is based upon a current projection of the amount and timing of these distributions. Such projections are updated on a quarterly basis and the estimated effective yield is adjusted prospectively. (2) Fair value of this investment was determined using significant unobservable inputs, including default rates, prepayment rates, spreads, and the discount rate by which to value the resulting cash flows. Series A – Great Lakes Funding II LLC In August 2022, the Company invested in Series A – Great Lakes Funding II LLC (the “Great Lakes II Joint Venture,” collectively with the F3C Joint Venture the “Joint Ventures”), a joint venture with an investment strategy to underwrite and hold senior, secured unitranche loans made to middle-market companies. The Company treats its investment in the Great Lakes II Joint Venture as a joint venture since an affiliate of the Adviser controls a 50% voting interest in the Great Lakes II Joint Venture. In connection with the launch of the Great Lakes II Joint Venture, the Company entered into a series of transactions pursuant to which the Company’s prior investment in BCP Great Lakes Holdings LP, a vehicle formed as a co-investment vehicle to facilitate the participation of certain co-investors to invest, directly or indirectly, in BCP Great Lakes Funding, LLC (the “Prior Great Lakes Joint Venture”), and the corresponding assets held by the Prior Great Lakes Joint Venture in respect of the Company’s investment in BCP Great Lakes Holdings LP, were transferred to the Great Lakes II Joint Venture in complete redemption of the Company’s investment in BCP Great Lakes Holdings LP. The Great Lakes II Joint Venture is a Delaware series limited liability company, and pursuant to the terms of the Great Lakes Funding II LLC Limited Liability Company Agreement (the “Great Lakes II LLC Agreement”), prior to the end of the investment period with respect to each series established under the Great Lakes II LLC Agreement, each member of the predecessor series would be offered the opportunity to roll its interests into any subsequent series of the Great Lakes II Joint Venture. The Company does not pay any advisory fees in connection with its investment in the Great Lakes II Joint Venture. Certain other funds managed by the Adviser or its affiliates have also invested in the Great Lakes II Joint Venture. The fair value of the Company’s investment in the Great Lakes II Joint Venture at September 30, 2022 was $27.0 million. The fair value of the Company’s investment in the Prior Great Lakes Joint Venture at December 31, 2021 was $37.4 million. Fair value has been determined utilizing the practical expedient pursuant to ASC 820-10. Pursuant to the terms of the Great Lakes II LLC Agreement, the Company generally may not effect any direct or indirect sale, transfer, assignment, hypothecation, pledge or other disposition of or encumbrance upon its interests in the Great Lakes II Joint Venture, except that the Company may sell or otherwise transfer its interests with the consent of the managing members of the Great Lakes II Joint Venture or to an affiliate or a successor to substantially all of the assets of the Company. As of September 30, 2022, the Company has a $21.7 million unfunded commitment to the Great Lakes II Joint Venture. As of December 31, 2021, the Company had a $13.0 million unfunded commitment to the Prior Great Lakes Joint Venture. Fair Value Measurements The Company follows the provisions of ASC 820: Fair Value, which among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. This standard defines fair value and establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value and expands disclosures about assets and liabilities measured at fair value. ASC 820: Fair Value defines “fair value” as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This fair value definition focuses on an exit price in the principle, or most advantageous market, and prioritizes, within a measurement of fair value, the use of market-based inputs (which may be weighted or adjusted for relevance, reliability and specific attributes relative to the subject investment) over entity-specific inputs. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. ASC 820: Fair Value establishes the following three-level hierarchy, based upon the transparency of inputs to the fair value measurement of an asset or liability as of the measurement date: Level I – Unadjusted quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level I include listed equities and listed securities. As required by ASC 820: Fair Value, the Company does not adjust the quoted price for these investments, even in situations where the Company holds a large position and a sale could reasonably affect the quoted price. Level II – Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. Such inputs may be quoted prices for similar assets or liabilities, quoted markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or inputs that are derived principally from, or corroborated by, observable market information. Investments which are generally included in this category include illiquid debt securities and less liquid, privately held or restricted equity securities for which some level of recent trading activity has been observed. Level III – Pricing inputs are unobservable for the investment and includes situations where there is little, if any, market activity for the investment. The inputs may be based on the Company’s own assumptions about how market participants would price the asset or liability or may use Level II inputs, as adjusted, to reflect specific investment attributes relative to a broader market assumption. These inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data for comparable performance or valuation measures (earnings multiples, discount rates, other financial/valuation ratios, etc.) are available, such investments are grouped as Level III if any significant data point that is not also market observable (private company earnings, cash flows, etc.) is used in the valuation methodology. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and the Company considers factors specific to the investment. A majority of the Company’s investments are classified as Level III. The Company evaluates the source of inputs, including any markets in which its investments are trading, in determining fair value. Inputs that are highly correlated to the specific investment being valued and those derived from reliable or knowledgeable sources will tend to have a higher weighting in determining fair value. The Company’s fair value determinations may include factors such as an assessment of each underlying investment, its current and prospective operating and financial performance, consideration of financing and sale transactions with third parties, expected cash flows and market-based information, including comparable transactions, performance factors, and other investment or industry specific market data, among other factors. The following table summarizes the fair value of investments by fair value hierarchy levels provided by ASC 820: Fair Value as of September 30, 2022 (unaudited) and December 31, 2021, respectively:
| As of September 30, 2022 |
($ in thousands) | Level I |  | Level II |  | Level III |  | NAV |  | Total |
Debt securities | $ | - |  | $ | 65,152 |  | $ | 412,245 |  | $ | - |  | $ | 477,397 |
Equity securities |  | 1,317 |  |  | - |  |  | 23,170 |  |  | - |  |  | 24,487 |
CLO Fund securities |  | - |  |  | - |  |  | 24,623 |  |  | - |  |  | 24,623 |
Joint Ventures |  | - |  |  | - |  |  | 18,190 |  |  | 26,951 |  |  | 45,141 |
Derivatives |  | - |  |  | - |  |  | 8 |  |  | - |  |  | 8 |
Total | $ | 1,317 |  | $ | 65,152 |  | $ | 478,236 |  | $ | 26,951 |  | $ | 571,656 |
|  | As of December 31, 2021 |
($ in thousands) |  | Level I |  |  | Level II |  |  | Level III |  |  | NAV |  |  | Total |
Debt securities |  |  | — |  |  |  | 42,861 |  |  |  | 392,432 |  |  |  | — |  |  |  | 435,293 |
CLO Fund securities |  |  | — |  |  |  | — |  |  |  | 31,632 |  |  |  | — |  |  |  | 31,632 |
Equity securities |  |  | 1,594 |  |  |  | — |  |  |  | 20,992 |  |  |  | — |  |  |  | 22,586 |
Joint Ventures |  |  | — |  |  |  | — |  |  |  | 23,062 |  |  |  | 37,412 |  |  |  | 60,474 |
Derivatives |  |  | — |  |  |  | — |  |  |  | (2,412 | ) |  |  | — |  |  |  | (2,412 | )
Total |  | $ | 1,594 |  |  | $ | 42,861 |  |  | $ | 465,706 |  |  | $ | 37,412 |  |  | $ | 547,573 |
As a BDC, the Company is required to invest primarily in the debt and equity of non-public companies for which there is little, if any, market-observable information. As a result, a significant portion of the Company’s investments at any given time will likely be deemed Level III investments. Investment values derived by a third-party pricing service are generally deemed to be Level III values. For those that have observable trades, the Company considers them to be Level II. The fair value of the Company’s investment in the Great Lakes II Joint Venture at September 30, 2022 was $27.0 million. The fair value of the Company's investment in the Prior Great Lakes Joint Venture at December 31, 2021 was $37.4 million. Fair value has been determined utilizing the practical expedient pursuant to ASC 820-10. Subject to the limitations noted above, values derived for debt and equity securities using comparable public/private companies generally utilize market-observable data from such comparables and specific, non-public and non-observable financial measures (such as earnings or cash flows) for the private, underlying company/issuer. Such non-observable company/issuer data is typically provided on a monthly or quarterly basis, is certified as correct by the management of the company/issuer and/or audited by an independent accounting firm on an annual basis. Since such private company/issuer data is not publicly available it is not deemed market-observable data and, as a result, such investment values are grouped as Level III assets. The Company’s policy for determining transfers between levels is based solely on the previously defined three-level hierarchy for fair value measurement. Transfers between the levels of the fair value hierarchy are separately noted in the tables below and the reason for such transfer described in each table’s respective footnotes. Certain information relating to investments measured at fair value for which the Company has used unobservable inputs to determine fair value is as follows:
|  | Nine Months Ended September 30, 2022 |
($ in thousands) |  | Debt Securities |  |  | Equity Securities |  |  | CLO Fund Securities |  |  | Joint Ventures |  |  | Derivatives |  |  | Total |
Balance, December 31, 2021 |  | $ | 392,432 |  |  | $ | 20,992 |  |  | $ | 31,632 |  |  | $ | 23,062 |  |  | $ | (2,412 | ) |  | $ | 465,706 |
Transfers out of Level III¹ |  |  | (13,988 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (13,988 | )
Transfers into Level III² |  |  | 5,351 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,351 |
Net accretion |  |  | 7,810 |  |  |  | - |  |  |  | 3,476 |  |  |  | - |  |  |  | - |  |  |  | 11,286 |
Purchases |  |  | 153,420 |  |  |  | 3,817 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 157,237 |
Sales/Paydowns/Return of Capital |  |  | (120,378 | ) |  |  | (4,092 | ) |  |  | (5,571 | ) |  |  | - |  |  |  | 2,075 |  |  |  | (127,966 | )
Total realized gain (loss) included in earnings |  |  | (14,624 | ) |  |  | 1,271 |  |  |  | (12,054 | ) |  |  | - |  |  |  | (2,095 | ) |  |  | (27,502 | )
Change in unrealized gain (loss) included in earnings |  |  | 2,222 |  |  |  | 1,182 |  |  |  | 7,140 |  |  |  | (4,872 | ) |  |  | 2,440 |  |  |  | 8,112 |
Balance, September 30, 2022 |  | $ | 412,245 |  |  | $ | 23,170 |  |  | $ | 24,623 |  |  | $ | 18,190 |  |  | $ | 8 |  |  | $ | 478,236 |
Changes in unrealized gains (losses) included in earnings related to investments still held at reporting date |  | $ | (10,299 | ) |  | $ | 1,613 |  |  | $ | 4,722 |  |  | $ | (4,872 | ) |  | $ | (2 | ) |  | $ | (8,838 | )
(1) Transfers out of Level III represent a transfer of $14.0 million relating to debt securities and equity securities for which pricing inputs, other than their quoted prices in active markets were observable as of September 30, 2022. (2) Transfers into Level III represent a transfer of $5.4 million relating to debt securities for which pricing inputs, other than their quoted prices in active markets were unobservable as of September 30, 2022.
|  | Nine Months Ended September 30, 2021 |
($ in thousands) |  | Debt Securities |  |  | Equity Securities |  |  | CLO Fund Securities |  |  | Joint Ventures |  |  | Derivatives |  |  | Total |
Balance, December 31, 2020 |  | $ | 334,245 |  |  | $ | 12,537 |  |  | $ | 19,583 |  |  | $ | 19,749 |  |  | $ | (1,109 | ) |  | $ | 385,005 |
Transfers out of Level III¹ |  |  | (13,819 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (13,819 | )
Transfers into Level III² |  |  | 20,127 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 20,127 |
Net accretion |  |  | 23,180 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 23,180 |
Purchases |  |  | 443,996 |  |  |  | 8,755 |  |  |  | - |  |  |  | 2,500 |  |  |  | - |  |  |  | 455,251 |
Sales/Paydowns/Return of Capital |  |  | (409,189 | ) |  |  | (4,481 | ) |  |  | (6,441 | ) |  |  | - |  |  |  | (880 | ) |  |  | (420,991 | )
Total realized gain (loss) included in earnings |  |  | (7,209 | ) |  |  | 174 |  |  |  | (5,323 | ) |  |  | - |  |  |  | 880 |  |  |  | (11,478 | )
Change in unrealized gain (loss) included in earnings |  |  | (8,067 | ) |  |  | 3,767 |  |  |  | 9,355 |  |  |  | 1,697 |  |  |  | (873 | ) |  |  | 5,879 |
Balance, September 30, 2021 |  | $ | 383,264 |  |  | $ | 20,752 |  |  | $ | 17,174 |  |  | $ | 23,946 |  |  | $ | (1,982 | ) |  | $ | 443,154 |
Changes in unrealized gains (losses) included in earnings related to investments still held at reporting date |  | $ | 7,905 |  |  | $ | 3,068 |  |  | $ | 4,031 |  |  | $ | 1,697 |  |  | $ | - |  |  | $ | 16,701 |
(1) Transfers out of Level III represent a transfer of $13.8 million relating to debt securities for which pricing inputs, other than their quoted prices in active markets were observable as of September 30, 2021. (2) Transfers into Level III represent a transfer of $20.1 million relating to debt securities for which pricing inputs, other than their quoted prices in active markets were unobservable as of September 30, 2021. As of September 30, 2022 and December 31, 2021, the Company’s Level II portfolio investments were valued by a third party pricing services for which the prices are not adjusted and for which inputs are observable or can be corroborated by observable market data for substantially the full character of the financial instrument, or by inputs that are derived principally from, or corroborated by, observable market information. The fair value of the Company’s Level II portfolio investments was $65.2 million and $42.9 million as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 the Company’s Level III portfolio investments had the following valuation techniques and significant inputs:
Type |  | Fair Value |  |  | Primary Valuation Techniques |  | Unobservable Inputs |  | Range of Inputs (Weighted Average)
|  | $ | 4,939 |  |  | Enterprise Value |  | Average EBITDA Multiple |  | 0.4 x-6.4 x (4.0 x)
Debt Securities |  |  |  |  |  |  | Recovery Rate Multiple |  | 0.1 x-0.1 x (0.1 x)
|  |  | 374,672 |  |  | Income Approach |  | Implied Discount Rate |  | 5.1%-44.9% (13.3%)
|  |  | 32,634 |  |  | Recent Transaction |  | Implied Discount Rate |  | 7.0%-14.0% (9.5%)
|  |  | 20,626 |  |  | Enterprise Value |  | Average EBITDA Multiple / WACC |  | 0.0 x-15.5 x (6.8 x)
Equity Securities |  |  |  |  |  |  | Recovery Rate |  | 0.9 x-0.9 x (0.9 x)
|  |  | 1,800 |  |  | Income Approach |  | Implied Discount Rate |  | 14.0%-15.0% (14.8%)
|  |  | 744 |  |  | Recent Transaction |  | Implied Discount Rate |  | 12.4%-18.7% (13.0%)
|  |  |  |  |  |  | Discount Rate |  | 19.4%-25.6% (22.5%)
|  |  |  |  |  |  | Probability of Default |  | 1.5%-2.0% (1.8%)
CLO Fund Securities |  |  | 24,623 |  |  | Discounted Cash Flow |  | Loss Severity |  | 25.0%-35.0% (30.0%)
|  |  |  |  |  |  | Recovery Rate |  | 65.0%-75.0% (70.0%)
|  |  |  |  |  |  | Prepayment Rate |  | 15.0%-25.0% (20.0%)
|  |  |  |  |  |  | Discount Rate |  | 21.6%-23.2% (22.4%)
|  |  |  |  |  |  | Probability of Default |  | 2.5%-3.0% (2.8%)
Joint Ventures |  |  | 18,190 |  |  | Discounted Cash Flow |  | Loss Severity |  | 25.0%-35.0% (30.0%)
|  |  |  |  |  |  | Recovery Rate |  | 65.0%-75.0% (70.0%)
|  |  |  |  |  |  | Prepayment Rate |  | 15.0%-25.0% (20.0%)
Derivatives |  |  | 8 |  |  | Market Approach |  | Transacted Value/Contractual Financing Rate |  |
Total Level III Investments |  | $ | 478,236 |  |  |  |  |  |  |
(1) The qualitative inputs used in the fair value measurements of Equity Securities include estimates of the distressed liquidation value of the pledged collateral. In cases where Portman Ridge’s analysis ascribes no residual value to a portfolio company’s equity, Portman Ridge typically elects to mark its position at a nominal amount to account for the investment’s option value. (2) The qualitative inputs used in the fair value measurements include the value of the pledged collateral. As of December 31, 2021, the Company’s Level III portfolio investments had the following valuation techniques and significant inputs:
Type |  | Fair Value |  |  | Primary Valuation Techniques |  | Unobservable Inputs |  | Range of Inputs (Weighted Average)
|  | $ | 24,513 |  |  | Enterprise Value |  | Average EBITDA Multiple |  | 0.0 x-8.0 x (4.3 x)
Debt Securities |  |  |  |  |  |  | Recovery Rate Multiple |  | 0.1 x-0.1 x (0.1 x)
|  |  | 367,919 |  |  | Income Approach |  | Implied Discount Rate |  | 0%-26.8% (8.9%)
|  | $ | 12,874 |  |  | Enterprise Value |  | Average EBITDA Multiple / WACC |  | 0.0 x-12.5 x (8.7 x)
Equity Securities |  |  |  |  |  |  | Recovery Rate Multiple |  | 0.0 x-0.0 x (0.0 x)
|  |  | 8,118 |  |  | Income Approach |  | Implied Discount Rate |  | 10.7%-18.8% (17.2%)
|  |  |  |  |  |  | Discount Rate |  | 13.0%-20.1% (16.6%)
|  |  |  |  |  |  | Probability of Default |  | 1.5%-2.0% (1.8%)
CLO Fund Securities |  |  | 31,632 |  |  | Discounted Cash Flow |  | Loss Severity |  | 25.0%-35.0% (30.0%)
|  |  |  |  |  |  | Recovery Rate |  | 65.0%-75.0% (70.0%)
|  |  |  |  |  |  | Prepayment Rate |  | 15.0%-25.0% (20.0%)
|  |  |  |  |  |  | Discount Rate |  | 14.5%-16.0% (15.3%)
|  |  |  |  |  |  | Probability of Default |  | 2.5%-3.0% (2.8%)
Joint Ventures |  |  | 23,062 |  |  | Discounted Cash Flow |  | Loss Severity |  | 25.0%-35.0% (30.0%)
|  |  |  |  |  |  | Recovery Rate |  | 65.0%-75.0% (70.0%)
|  |  |  |  |  |  | Prepayment Rate |  | 15.0%-25.0% (20.0%)
Derivatives |  |  | (2,412 | ) |  | Market Approach |  | Transacted Value/Contractual Financing Rate |  |
Total Level III Investments |  | $ | 465,706 |  |  |  |  |  |  |
(1) The qualitative inputs used in the fair value measurements of Equity Securities include estimates of the distressed liquidation value of the pledged collateral. In cases where Portman Ridge’s analysis ascribes no residual value to a portfolio company’s equity, Portman Ridge typically elects to mark its position at a nominal amount to account for the investment’s option value. (2) The qualitative inputs used in the fair value measurements include the value of the pledged collateral. The significant unobservable inputs used in the fair value measurement of the Company’s debt securities may include, among other things, broad market indices, the comparable yields of similar investments in similar industries, effective discount rates, average EBITDA multiples, and weighted average cost of capital. Significant increases or decreases in such comparable yields would result in a significantly lower or higher fair value measurement, respectively. The significant unobservable inputs used in the fair value measurement of the Company’s equity securities include the EBITDA multiple of similar investments in similar industries and the weighted average cost of capital. Significant increases or decreases in such inputs would result in a significantly lower or higher fair value measurement. Significant unobservable inputs used in the fair value measurement of the Company’s CLO Fund Securities include default rates, recovery rates, prepayment rates, spreads, and the discount rate by which to value the resulting underlying cash flows. Such assumptions can vary significantly, depending on market data sources which often vary in depth and level of analysis, understanding of the CLO market, detailed or broad characterization of the CLO market and the application of such data to an appropriate framework for analysis. The application of data points are based on the specific attributes of each individual CLO Fund Security’s underlying assets, historic, current and prospective performance, vintage, and other quantitative and qualitative factors that would be evaluated by market participants. The Company evaluates the source of market data for reliability as an indicative market input, consistency amongst other inputs and results and also the context in which such data is presented. Significant increases or decreases in probability of default and loss severity inputs in isolation would result in a significantly lower or higher fair value measurement, respectively. In general, a change in the assumption of the probability of default is accompanied by a directionally similar change in the assumption used for the loss severity in an event of default. Significant increases or decreases in the discount rate in isolation would result in a significantly lower or higher fair value measurement. The Company’s investment in the F3C Joint Venture is carried at fair value based upon the fair value of the investments held by the F3C Joint Venture. The Company values derivative contracts using various pricing models that take into account the terms of the contract (including notional amount and contract maturity) and observable and unobservable inputs such as interest rates and changes in fair value of the reference asset. The following table details derivative investments at September 30, 2022 and December 31, 2021:
($ in thousands) |  | September 30, 2022 |
Types of contracts |  | Notional amounts |  |  | Derivative assets (liabilities) |  |  | Realized gain(loss) |  |  | Unrealized gain(loss) |
Call option(2) |  | $ | 8 |  |  | $ | 8 |  |  | $ | - |  |  | $ | (2 | )
Put option(2) |  |  | 150 |  |  |  | - |  |  |  | - |  |  |  | - |
Securities Swap and Option Agreement(1) |  |  | - |  |  |  | - |  |  |  | (2,095 | ) |  |  | 2,442 |
Total |  | $ | 158 |  |  | $ | 8 |  |  | $ | (2,095 | ) |  | $ | 2,440 |
(1) Net amount included in the derivative caption on the consolidated balance sheets |
(2) Net amount included in non-controlled/non- affiliated investments on the consolidated balance sheets |
($ in thousands) |  | December 31, 2021 |
Types of contracts |  | Notional amounts |  |  | Derivative assets (liabilities) (1) |  |  | Realized gain(loss) |  |  | Unrealized gain(loss) |
Call option |  | $ | 8 |  |  | $ | 10 |  |  | $ | - |  |  | $ | (2 | )
Put option |  |  | 150 |  |  |  | - |  |  |  | - |  |  |  | - |
Securities Swap and Option Agreement |  |  | 5,500 |  |  |  | (2,422 | ) |  |  | 880 |  |  |  | (1,301 | )
Total |  | $ | 5,658 |  |  | $ | (2,412 | ) |  | $ | 880 |  |  | $ | (1,303 | )
(1) Net amount included in the derivative caption on the consolidated balance sheets |

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- Definition The entire disclosure for investments in certain debt and equity securities. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 942 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2209399 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 946 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2324412 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 320 -URI https://asc.fasb.org/topic&trid=2196928 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 940 -SubTopic 320 -URI https://asc.fasb.org/subtopic&trid=2176304 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher SEC -Name Regulation S-K (SK) -Number 229 -Section 1403 -Paragraph (b) + Details
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