The following table shows the Company’s portfolio by security type at June 30, 2024 and December 31, 2023:


($ in thousands)	June 30, 2024							December 31, 2023
Security Type	Cost/Amortized Cost		Fair Value		Fair Value Percentage of Total Portfolio			Cost/Amortized Cost		Fair Value		Fair Value Percentage of Total Portfolio
First Lien Debt	$	343,264	$	320,815		72.1	%	$	351,858	$	336,599		71.9	%
Second Lien Debt		48,750		36,386		8.2	%		50,814		41,254		8.8	%
Subordinated Debt		8,055		1,693		0.4	%		7,990		1,224		0.3	%
Collateralized Loan Obligations		8,423		7,354		1.7	%		9,103		8,968		1.9	%
Joint Ventures		65,775		54,292		12.2	%		71,415		59,287		12.7	%
Equity		30,594		23,830		5.4	%		31,280		20,533		4.4	%
Asset Manager Affiliates(1)		17,791		—		—			17,791		—		—
Derivatives		31		—		—			31		—		—
Total	$	522,683	$	444,370		100.0	%	$	540,282	$	467,865		100.0	%

(1)

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 June 30, 2024 and December 31, 2023 were as follows:


($ in thousands)	June 30, 2024							December 31, 2023
Industry Classification	Cost/Amortized Cost		Fair Value		Fair Value Percentage of Total Portfolio			Cost/Amortized Cost		Fair Value		Fair Value Percentage of Total Portfolio
Aerospace and Defense	$	11,137	$	11,255		2.5	%	$	11,130	$	11,256		2.4	%
Alternative Carriers		—		—		0.0	%		971		937		0.2	%
Application Software		1,165		1,153		0.3	%		—		—		0.0	%
Asset Management Company(2)		17,791		—		0.0	%		17,791		—		0.0	%
Banking, Finance, Insurance & Real Estate		48,313		49,325		11.1	%		51,486		53,918		11.5	%
Beverage, Food and Tobacco		12,547		11,775		2.6	%		12,220		11,444		2.4	%
Capital Equipment		10,806		1,435		0.3	%		10,684		1,203		0.3	%
Chemicals, Plastics and Rubber		9,705		9,704		2.2	%		9,738		9,836		2.1	%
CLO Fund Securities		8,423		7,354		1.7	%		9,103		8,968		1.9	%
Construction & Building		7,701		7,344		1.7	%		7,737		7,441		1.6	%
Consumer goods: Durable		24,447		22,093		5.0	%		16,431		13,898		3.0	%
Containers, Packaging and Glass		2,731		2,679		0.6	%		2,734		2,665		0.6	%
Diversified Financial Services		2,733		2,756		0.6	%		—		—		0.0	%
Energy: Electricity		671		671		0.2	%		671		671		0.1	%
Energy: Oil & Gas		76		—		0.0	%		6,721		100		0.0	%
Finance		19,059		19,135		4.3	%		18,884		18,972		4.1	%
Healthcare & Pharmaceuticals		56,541		55,044		12.4	%		59,189		57,224		12.2	%
Healthcare, Education and Childcare		6,143		6,133		1.4	%		6,175		6,163		1.3	%
High Tech Industries		69,749		52,766		11.9	%		84,676		73,430		15.7	%
Hotel, Gaming & Leisure		7,006		2,543		0.6	%		8,358		3,948		0.8	%
Interactive Media & Services		2,596		2,606		0.6	%		2,663		2,662		0.6	%
IT Consulting & Other Services		2,213		2,320		0.5	%		2,213		2,259		0.5	%
Joint Venture		65,775		54,292		12.2	%		71,415		59,287		12.7	%
Machinery (Non-Agrclt/Constr/Electr)		11,609		12,257		2.7	%		9,836		10,097		2.2	%
Media: Broadcasting & Subscription		17,528		13,294		3.0	%		16,665		14,618		3.1	%
Media: Diversified & Production		374		375		0.1	%		1,121		1,125		0.2	%
Metals & Mining		9,951		5,992		1.3	%		9,000		7,742		1.7	%
Retail		9,518		8,399		1.9	%		9,334		8,732		1.9	%
Services: Business		63,842		60,817		13.7	%		58,997		57,168		12.2	%
Services: Consumer		2,639		2,639		0.6	%		—		—		0.0	%
Telecommunications		5,303		4,629		0.9	%		5,268		4,389		0.9	%
Transportation: Cargo		7,153		6,075		1.4	%		11,606		10,303		2.2	%
Transportation: Consumer		7,438		7,510		1.7	%		7,465		7,409		1.6	%
Total	$	522,683	$	444,370		100.0	%	$	540,282	$	467,865		100.0	%

(1)

Not used.

(2)

Represents the equity investment in the Asset Manager Affiliates.

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 Fund's 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.

The following table details investments in affiliates at June 30, 2024 (dollars in thousands):


Company (1)	Type of Investment	Industry Classification	Fair Value as of December 31, 2023		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 June 30, 2024			Principal / Shares at June 30, 2024		Interest and Fee Income		Dividend Income
Controlled investments(3)
Asset Management Company(2)	Asset Manager Affiliates	Asset Management Company	$	—	$	—		$	—	$	—	$	—		$	—		$	—		$	—	$	—	$	—
Tank Partners Equipment Holdings, LLC - Class A Units(6)	Common Stock and Membership Units	Energy: Oil & Gas		—		—			—		—		6,228			(6,228	)		—			—		—		—
Tank Partners Equipment Holdings, LLC	Subordinated Debt	Energy: Oil & Gas		43		—			—		—		373			(416	)		—			—		—		—
ProAir Holdco, LLC(6)	Common Stock and Membership Units	Capital Equipment		—		—			—		—		—			—			—			2,749,997		—		—
ProAir, LLC	Subordinated Debt	Capital Equipment		—		—			—		—		—			—			—			2,020		—		—
KCAP Freedom 3, LLC(2)	Joint Ventures	Joint Venture		14,275		(969	)		—		—		241			—			13,547			27,220		—		—
Total Controlled investments			$	14,318	$	(969	)	$	—	$	—	$	6,842		$	(6,644	)	$	13,547				$	—	$	—
Non-controlled affiliated investments(5)
Series A-Great Lakes Funding II LLC(2)(6)(7)	Joint Ventures	Joint Venture	$	45,012	$	(4,671	)	$	—	$	—	$	404		$	—		$	40,745		$	39,329	$	—	$	3,453
GreenPark Infrastructure, LLC - Series A(6)	Preferred Stock and Units	Energy: Electricity		500		—			—		—		—			—			500			1,000		—		—
GreenPark Infrastructure, LLC - Series M-1(6)	Common Stock and Membership Units	Energy: Electricity		171		—			—		—		—			—			171			500		—		—
Kleen-Tech Acquisition, LLC (6)	Common Stock	Services: Business		998		—			—		—		335			—			1,333			250,000		—		—
Northeast Metal Works LLC - Preferred(6)	Preferred Stock and Units	Metals & Mining		—		—			—		—		—			—			—			2,368		—		—
Northeast Metal Works LLC - Class O Preferred(6)	Preferred Stock and Units	Metals & Mining		4,182		450			—		—		(2,592	)		—			2,040			4,950,000		235		—
Northeast Metal Works LLC	Subordinated Debt	Metals & Mining		3,560		—			—		—		(108	)		—			3,452			4,500		182		—
Northeast Metal Works LLC	Subordinated Debt	Metals & Mining		—		500			—		—		—			—			500			500		15		—
BMP Slappey Holdco, LLC(6)	Preferred Stock and Units	Telecommunications		553		—			—		—		32			—			585			200,000		—		—
BMP Slappey Investment II(6)	Preferred Stock and Units	Telecommunications		246		—			—		—		14			—			260			88,946		—		—
Princeton Medspa Partners, LLC(6)	Preferred Stock and Units	Healthcare & Pharmaceuticals		—		1,000			—		—		—			—			1,000			1,000,000		11		—
Princeton Medspa Partners, LLC - Warrant(6)	Common Stock and Membership Units	Healthcare & Pharmaceuticals		—		—			—		—		—			—			—			0		—		—
Princeton Medspa Partners, LLC - Put Option(2)(6)	Derivatives	Healthcare & Pharmaceuticals		—		—			—		—		—			—			—			1,000,000		—		—
PMP OPCO, LLC ((Princeton Medspa Partners, LLC)(8)	First Lien/Senior Secured Debt	Healthcare & Pharmaceuticals		—		1,643			—		—		—			—			1,643			1,688		21		—
PMP OPCO, LLC (Princeton Medspa Partners, LLC) (Revolver)(8)	First Lien/Senior Secured Debt	Healthcare & Pharmaceuticals		—		(4	)		—		—		—			—			(4	)		—		—		—
EBSC Holdings LLC (Riddell, Inc.)(6)	Preferred Stock and Units	Consumer goods: Durable		—		2,023			—		—		5			—			2,028			2,049,315		50		—
Riddell, Inc.(8)	First Lien/Senior Secured Debt	Consumer goods: Durable		—		6,211			5		—		(5	)		—			6,211			6,324		188		—
Total non-controlled affiliated investments			$	55,222	$	7,152		$	5	$	—	$	(1,915	)	$	—		$	60,464				$	702	$	3,453

Total non-controlled affiliated and controlled investments			$	69,540	$	6,183		$	5	$	—	$	4,927		$	(6,644	)	$	74,011				$	702	$	3,453

(1)

Fair value of this investment was determined using significant unobservable inputs, unless otherwise noted.

(2)

Non-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.

(4)

Not used.

(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)

The investment is valued at the NAV of the underlying fund.

(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, 2023 (dollars in thousands):


Company(1)	Industry Classification	Fair Value as of December 31, 2022		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 December 31, 2023		Principal / Shares at December 31, 2023		Interest and Fee Income		Dividend Income
Controlled investments(3)
Asset Manager Affiliates(2)	Asset Management Company	$	—	$	—		$	—	$	—		$	—		$	—		$	—	$	—	$	—	$	—
Tank Partners Equipment Holdings, LLC - Class A Units(6)	Energy: Oil & Gas		—		—			—		—			—			—			—		49,000		—		—
Tank Partners Equipment Holdings, LLC	Energy: Oil & Gas		43		—			—		—			—			—			43		511		—		—
Flight Lease VII (4)(6)	Aerospace and Defense		242		(248	)		—		—			39			(33	)		—		—		—		—
ProAir, LLC(6)	Capital Equipment		—		—			—		—			—			—			—		2,749,997		—		—
ProAir, LLC	Capital Equipment		—		—			—		—			—			—			—		2,020		—		—
KCAP Freedom 3, LLC(2)	Joint Venture		18,668		—			—		—			(4,393	)		—			14,275		27,220		—		2,184
Total controlled investments		$	18,953	$	(248	)	$	—	$	—		$	(4,354	)	$	(33	)	$	14,318			$	—	$	2,184
Non-controlled affiliated investments(5)
Series A-Great Lakes Funding II LLC(2)(6)(7)	Joint Venture	$	40,287	$	2,565		$	—	$	—		$	2,160		$	—		$	45,012	$	44,000	$	—	$	6,764
GreenPark Infrastructure, LLC - Series A(6)	Energy: Electricity		500		—			—		—			—			—			500		1,000		—		—
GreenPark Infrastructure, LLC - Series M-1(6)	Energy: Electricity		171		—			—		—			—			—			171		500		—		—
Kleen-Tech Acquisition, LLC(6)	Services: Business		1,300		—			—		—			(302	)		—			998		250,000		—		—
Northeast Metal Works LLC	Metals & Mining		13,445		(4,428	)		—		(9,000	)		1,107			(1,124	)		—		—		377		—
Northeast Metal Works LLC - Preferred(6)	Metals & Mining		—		—			—		—			—			—			—		2,368		—		—
Northeast Metal Works LLC - Class O Preferred(6)	Metals & Mining		—		—			—		4,500			(318	)		—			4,182		4,500,000		333		—
Northeast Metal Works LLC	Metals & Mining		—		—			—		4,500			(940	)		—			3,560		4,500		270		—
BMP Slappey Holdco, LLC(6)	Telecommunications		464		—			—		—			89			—			553		200,000		—		—
BMP Slappey Investment II(6)	Telecommunications		206		—			—		—			40			—			246		88,946		—		—
Surge Hippodrome Partners LP(6)	Services: Business		811		(813	)		—		—			(386	)		388			—		—		—		—
Surge Hippodrome Holdings LLC(6)	Services: Business		484		(496	)		—		—			(325	)		337			—		—		—		—
Surge Hippodrome Holdings LLC	Services: Business		5,165		(5,460	)		328		—			(33	)		—			—		—		675		—
Navex Topco, Inc.	Electronics		7,604		(7,700	)		310		—			(214	)		—			—		—		804		—
Zest Acquisition Corp.	Healthcare, Education and Childcare		3,390		(3,501	)		9		—			102			—			—		—		42		—
Total non-controlled affiliated investments		$	73,827	$	(19,833	)	$	647	$	—		$	980		$	(399	)	$	55,222			$	2,501	$	6,764

Total non-controlled affiliated and controlled investments		$	92,780	$	(20,081	)	$	647	$	—		$	(3,374	)	$	(432	)	$	69,540			$	2,501	$	8,948

(1)

Fair value of this investment was determined using significant unobservable inputs, unless otherwise noted.

(2)

Non-qualified asset for purposes of section 55(a) of the Investment Company Act of 1940.

(3)

(4)

(5)

(6)

Number of shares held.

(7)

The investment is valued at the NAV of the underlying fund.

(8)

Security has an unfunded commitment in addition to the amounts shown in consolidated schedule of investments. See Note 8 for additional information on the Company's commitments and contingencies

For the three months ended June 30, 2024 and 2023, the Company recognized $1.8 million and $2.3 million, respectively, in investment income from its investments in Joint Ventures. For the six months ended June 30, 2024 and 2023, the Company recognized $3.5 million and $4.8 million, respectively, in investment income from its investments in Joint Ventures. As of June 30, 2024 and December 31, 2023, the aggregate fair value of the Company’s investments in Joint Ventures was approximately $54.3 million and $59.3 million, respectively.

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.

The fair value of the Company’s investment in the F3C Joint Venture at June 30, 2024 was $13.5 million. The fair value of the Company’s investment in the F3C Joint Venture at December 31, 2023 was $14.3 million.

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 June 30, 2024 was $40.7 million. The fair value of the Company’s investment in the Great Lakes II Joint Venture at December 31, 2023 was $45.0 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 June 30, 2024, the Company had a $10.1 million unfunded commitment to the Great Lakes II Joint Venture. As of December 31, 2023, the Company had a $5.5 million unfunded commitment to the Great Lakes II Joint Venture.

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 June 30, 2024 (unaudited) and December 31, 2023, respectively:


	As of June 30, 2024
($ in thousands)	Level I		Level II		Level III		NAV		Total
First Lien Debt	$	—	$	28,954	$	291,861	$	—	$	320,815
Second Lien Debt		—		13,988		22,398		—		36,386
Subordinated Debt		—		—		1,693		—		1,693
Equity		—		—		23,830		—		23,830
Collateralized Loan Obligations		—		—		7,354		—		7,354
Joint Ventures		—		—		13,547		40,745		54,292
Derivatives		—		—		—		—		—
Total	$	—	$	42,942	$	360,683	$	40,745	$	444,370


	As of December 31, 2023
($ in thousands)	Level I		Level II		Level III		NAV		Total
First Lien Debt	$	—	$	47,303	$	289,295	$	—	$	336,598
Second Lien Debt		—		18,022		23,232		—		41,254
Subordinated Debt		—		—		1,225		—		1,225
Equity		—		—		20,533		—		20,533
Collateralized Loan Obligations		—		—		8,968		—		8,968
Joint Ventures		—		—		14,275		45,012		59,287
Derivatives		—		—		—		—		—
Total	$	—	$	65,325	$	357,528	$	45,012	$	467,865

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 June 30, 2024 was $40.7 million. The fair value of the Company's investment in the Prior Great Lakes Joint Venture at December 31, 2023 was $45.0 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:


	Six Months Ended June 30, 2024
($ in thousands)	First Lien Debt			Second Lien Debt			Subordinated Debt			Equity			Collateral Loan Obligations			Joint Ventures			Derivatives		Total
Balance, December 31, 2023	$	289,295		$	23,232		$	1,225		$	20,533		$	8,968		$	14,275		$	—	$	357,528
Transfers out of Level III¹		(7,018	)		—			—			—			—			—			—		(7,018	)
Transfers into Level III²		8,034			—			—			—			—			—			—		8,034
Net accretion		1,268			19			—			—			1,081			—			—		2,368
Purchases		51,684			934			944			5,543			—			—			—		59,105
Sales/Paydowns/Return of Capital		(46,292	)		(1,976	)		(459	)		(817	)		(938	)		(969	)		—		(51,451	)
Total realized gain (loss) included in earnings		(1,301	)		—			(419	)		(5,411	)		(823	)		—			—		(7,954	)
Change in unrealized gain (loss) included in earnings		(3,809	)		189			402			3,982			(934	)		241			—		71
Balance, June 30, 2024	$	291,861		$	22,398		$	1,693		$	23,830		$	7,354		$	13,547		$	—	$	360,683
Changes in unrealized gains (losses) included in earnings related to investments still held at reporting date	$	(10,588	)	$	(2,503	)	$	(1,974	)	$	(2,124	)	$	(935	)	$	241		$	—	$	(17,882	)

(1)

Transfers out of Level III represent a transfer of $7.0 million relating to debt securities for which pricing inputs, other than their quoted prices in active markets were observable as of June 30, 2024.

(2)

Transfers into Level III represent a transfer of $8.0 million relating to debt securities for which pricing inputs, other than their quoted prices in active markets were unobservable as of June 30, 2024.


	Six Months Ended June 30, 2023
($ in thousands)	First Lien Debt			Second Lien Debt			Subordinated Debt			Equity			Collateral Loan Obligations			Joint Ventures			Derivatives		Total
Balance, December 31, 2022	$	359,648		$	50,453		$	43		$	21,905		$	20,453		$	18,668		$	—	$	471,170
Transfers out of Level III¹		(10,599	)		—			—			—			—			—			—		(10,599	)
Transfers into Level III²		8,278			2,008			—			—			—			—			—		10,286
Net accretion		3,366			269			—			—			1,377			—			—		5,012
Purchases		17,850			448			—			404			—			—			—		18,702
Sales/Paydowns/Return of Capital		(45,320	)		(26,707	)		5,567			(1,526	)		(973	)		—			—		(68,959	)
Total realized gain (loss) included in earnings		(68	)		(1,123	)		—			1,175			(9,476	)		—			—		(9,492	)
Change in unrealized gain (loss) included in earnings		(1,867	)		(1,138	)		(4,115	)		(1,945	)		1,615			(2,094	)		—		(9,544	)
Balance, June 30, 2023	$	331,288		$	24,210		$	1,495		$	20,013		$	12,996		$	16,574		$	—	$	406,576
Changes in unrealized gains (losses) included in earnings related to investments still held at reporting date	$	(6,573	)	$	(2,178	)	$	(4,116	)	$	(933	)	$	1,615		$	(2,094	)	$	—	$	(14,280	)

(1)

Transfers out of Level III represent a transfer of $10.6 million relating to debt securities for which pricing inputs, other than their quoted prices in active markets were observable as of June 30, 2023.

(2)

Transfers into Level III represent a transfer of $10.3 million relating to debt securities for which pricing inputs, other than their quoted prices in active markets were unobservable as of June 30, 2023.

As of June 30, 2024 and December 31, 2023, 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 $42.9 million and $65.3 million as of June 30, 2024 and December 31, 2023, respectively.

As of June 30, 2024, the Company’s Level III portfolio investments had the following valuation techniques and significant inputs (dollars in thousands):

        Type

        Fair Value

        Primary Valuation 
Techniques

        Unobservable
Inputs

        Range of Inputs
(Weighted Average)

First Lien Debt

41,153

Enterprise Value

Average EBITDA Multiple

6.1x - 8.0x (5.3x)

         
        Expected Sale Proceeds

        90.3x

         
        Average Settlement Value

        0.4x - 1.3x (0.2x)

         
        Takeback Paper Price

        $105.0

241,004

Income Approach

Implied Discount Rate

0.9% - 24.5% (9.3%)

9,704

Near-term Repayment - Refinancing

Current Payment Terms (Par)

100.0

Second Lien Debt

178

Enterprise Valuation

Takeback Paper Price

10.80

22,220

Income Approach

Implied Discount Rate

8.2% - 20.8% (13.8%)

Subordinated Debt

483

Income Approach

Implied Discount Rate

15.4% - 15.4% (15.4%)

1,210

Recovery analysis

Average Settlement Value

47.10

Equity

18,753

Enterprise Value

Average EBITDA Multiple

1.4x - 18.0x (4.1x)

         
        Average EBITDA Multiple / WACC

        0.4x - 3.7x (1.2x)

         
        Expected Sale Proceeds

        90.3x

4,405

Income Approach

Implied Discount Rate

12.5% - 21.4% (17.1%)

672

Recent Transaction

Implied Discount Rate

12.4% - 12.4% (12.4%)

Collateralized Loan Obligations

7,354

Discounted Cash Flow

Discount Rate

17.2% - 24.1% (20.4%)

         
        Probability of Default

        1.8% - 2.5% (2.0%)

         
        Recovery Rate

        65.0% - 75.0% (70.0%)

         
        Prepayment Rate

        15.0% - 25.0% (20.0%)

Joint Ventures

13,547

Discounted Cash Flow

Discount Rate

19.3% - 20.9% (20.1%)

         
        Probability of Default

        2.8% - 3.3% (3.0%)

         
        Recovery Rate

        65.0% - 75.0% (70.0%)

         
        Prepayment Rate

        15.0% - 25.0% (20.0%)

Derivatives

—

Enterprise Value

Average EBITDA Multiple

2.5x - 2.5x (2.5x)

Total Level III Investments

360,683

As of December 31, 2023, the Company’s Level III portfolio investments had the following valuation techniques and significant inputs (dollars in thousands):


Type	Fair Value		Primary Valuation Techniques	Unobservable Inputs	Range of Inputs (Weighted Average)
First Lien Debt	$	8,846	Enterprise Value	Average EBITDA Multiple	0.4x - 0.4x (0.1x)
				Expected Sale Proceeds	97.6x
		275,179	Income Approach	Implied Discount Rate	5.3% - 40.7% (12.4%)
		5,270	Recent Transaction	Implied Discount Rate	13.8% - 14.2% (14.0%)
Second Lien Debt		300	Enterprise Value	Implied Discount Rate	9.5x - 9.5x (9.5x)
		22,932	Income approach	Implied Discount Rate	13.8% - 14.2% (14.0%)
Subordinated Debt		1,225	Enterprise Value	Average Settlement Value	61.0x - 61.0x (61.0x)
				Recovery Rate Multiple	0.1x - 0.1x (0.1x)
Collateralized Loan Obligations		8,968	Discounted Cash Flow	Discount Rate	18.4% - 25.2% (21.1%)
				Probability of Default	1.8% - 2.5% (2.0%)
				Recovery Rate	65.0% - 75.0% (70.0%)
				Prepayment Rate	15.0% - 25.0% (20.0%)
Joint Ventures		14,275	Discounted Cash Flow	Discount Rate	20.5% - 22.1% (21.3%)
				Probability of Default	2.8% - 3.3% (3.0%)
				Recovery Rate	65.0% - 75.0% (70.0%)
				Prepayment Rate	15.0% - 25.0% (20.0%)
Equity		19,805	Enterprise Value	Average EBITDA Multiple	5.0x - 18.0x (6.9x)
				Average EBITDA Multiple / WACC	0.4x - 3.7x (1.1x)
				Book Value of Equity	1.0x - 1.6x (1.6x)
		57	Income Approach	Implied Discount Rate	15.0% - 15.0% (15.0%)
		671	Recent Transaction	Implied Discount Rate	12.4% - 12.4% (12.4%)
Derivatives		—	Enterprise Value	Average EBITDA Multiple	2.5x - 2.5x (2.5x)
Total Level III Investments	$	357,528

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.