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LRFC Acquisition
 9 Months Ended
Sep. 30, 2025
Business Combination [Abstract]  
LRFC Acquisition

11. LRFC ACQUISITION

On July 15, 2025, the Company completed its previously announced acquisition of LRFC. In accordance with the LRFC Merger Agreement, at the effective time of the LRFC Acquisition, each share of LRFC common stock issued and outstanding was converted into the right to receive 1.500 newly-issued shares of common stock of the Company with cash paid (without interest) in lieu of fractional shares.

As a result of the LRFC Acquisition and pursuant to the terms of the LRFC Merger Agreement, the Company issued an aggregate of approximately 3,984,078 shares, par value of $0.01 per share, of its common stock to former LRFC stockholders.

As additional consideration funded by LRFC’s investment adviser, LRFC shareholders of record as of May 6, 2025 received a cash payment of $0.47 per share. In addition, LRFC shareholders of record as of July 14, 2025 received a tax distribution of $0.38 per share from LRFC.

The LRFC Acquisition was accounted for as an asset acquisition in accordance with ASC 805-50, Business Combinations — Related Issues. The consideration paid to LRFC’s shareholders was less than the aggregate fair values of the assets acquired and liabilities assumed, which resulted in a purchase discount (the “purchase discount”). The purchase discount was allocated to the cost of LRFC investments acquired by the Company on a pro-rata basis based on their relative fair values as of the closing date. Immediately following the LRFC Acquisition, the Company marked the investments to their respective fair values and, as a result, the purchase discount allocated to the cost basis of the investments acquired was immediately recognized as unrealized appreciation on the Company’s Consolidated Statements of Operations. The purchase discount allocated to the loan investments acquired will amortize over the life of each respective loan through interest income with a corresponding adjustment recorded as unrealized depreciation on such loans acquired through their ultimate disposition. The purchase discount allocated to equity investments acquired will not amortize over the life of such investments through interest income and, assuming no subsequent change to the fair value of the equity investments acquired and disposition of such equity investments at fair value, the Company will recognize a realized gain with a corresponding reversal of the unrealized appreciation on disposition of such equity investments acquired.

The LRFC Acquisition was considered a tax-free reorganization and the Company has elected to carry forward the historical cost basis of the LRFC investments for tax purposes.

The following table summarizes the allocation of the purchase price to the assets acquired and liabilities assumed as a result of the LRFC Acquisition immediately prior to consummation:

 

($ in thousands)

 

July 15, 2025

 

Common stock issued by the Company (net of offering costs of $404)(1)

 

$

49,596

 

Cash paid for fractional shares

 

 

0

 

Transaction costs

 

 

3,192

 

Total purchase consideration

 

 

52,788

 

Assets acquired:

 

 

 

Investments, at fair value (amortized cost of $153,392)

 

 

174,274

 

Cash and cash equivalents

 

 

7,085

 

Interest receivable

 

 

1,601

 

Other assets

 

 

1,644

 

Total assets acquired

 

 

184,604

 

Liabilities assumed:

 

 

 

Debt

 

 

103,181

 

Other liabilities

 

 

7,754

 

Total liabilities assumed

 

 

110,935

 

Net assets acquired

 

 

73,669

 

Total purchase discount

 

$

(20,881

)

 

(1) Based on the share price defined in the LRFC Merger Agreement of $12.55 and the approximate 3,984,078 shares of common stock issued by the Company in connection with the LRFC Acquisition, net of offering costs of $0.4 million.