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Fair Value of Financial Instruments (Tables) | 9 Months Ended
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Sep. 30, 2023
Fair Value Disclosures [Abstract] |
Transfers between levels, change in investments measured at fair value using Level 3 inputs, and unrealized appreciation (depreciation) for assets still held | The following table presents the Company’s transfers of Level 2 and Level 3 debt investments for the three and nine months ended September 30, 2023 and 2022:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2023 |  | 2022 |  | 2023 |  | 2022
Transfers from Level 2 to Level 3 | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,252 |
Transfers from Level 3 to Level 2 | 5,957 |  |  | 6,403 |  |  | 7,491 |  |  | 6,403 |
The following tables present changes in investments measured at fair value using Level 3 inputs for the nine months ended September 30, 2023 and September 30, 2022:
| Nine Months Ended September 30, 2023
| Senior Secured Debt Investments |  | Subordinated Debt Investments |  | Preferred Equity |  | Common Equity, Warrants and Other |  | Structured Finance Securities |  | Total
Level 3 assets, December 31, 2022 | $ | 280,813 |  |  | $ | 1,226 |  |  | $ | 8,196 |  |  | $ | 91,000 |  |  | $ | 88,518 |  |  | $ | 469,753 |
Net realized loss on investments | (140) |  |  | (9,210) |  |  | — |  |  | (6,642) |  |  | — |  |  | (15,992) |
Net unrealized appreciation (depreciation) on investments | (3,110) |  |  | 8,084 |  |  | 2,461 |  |  | (844) |  |  | (3,416) |  |  | 3,175 |
Amortization of Net Loan Fees | 994 |  |  | — |  |  | — |  |  | — |  |  | 170 |  |  | 1,164 |
Accretion of interest income on Structured Finance Securities | — |  |  | — |  |  | — |  |  | — |  |  | 8,534 |  |  | 8,534 |
Capitalized PIK interest and dividends | 687 |  |  | — |  |  | 804 |  |  | — |  |  | — |  |  | 1,491 |
Amendment fees received | (166) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (166) |
Purchase and origination of portfolio investments | 26,378 |  |  | — |  |  | 345 |  |  | 356 |  |  | 7,642 |  |  | 34,721 |
Proceeds from principal payments on portfolio investments | (37,777) |  |  | — |  |  | — |  |  | — |  |  | (8,511) |  |  | (46,288) |
Sale and redemption of portfolio investments | (2,710) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,710) |
Proceeds from distributions received from portfolio investments | — |  |  | — |  |  | — |  |  | (962) |  |  | (9,648) |  |  | (10,610) |
Transfers out of Level 3 | (7,491) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (7,491) |
Level 3 assets, September 30, 2023 | $ | 257,478 |  |  | $ | 100 |  |  | $ | 11,806 |  |  | $ | 82,908 |  |  | $ | 83,289 |  |  | $ | 435,581 |
| Nine Months Ended September 30, 2022
| Senior Secured Debt Investments |  | Subordinated Debt Investments |  | Preferred Equity |  | Common Equity, Warrants and Other |  | Structured Finance Securities |  | Total
Level 3 assets, December 31, 2021 | $ | 261,113 |  |  | $ | 17,943 |  |  | $ | 3,765 |  |  | $ | 83,486 |  |  | $ | 75,201 |  |  | $ | 441,508 |
Net realized loss on investments | (122) |  |  | — |  |  | (51) |  |  | (6) |  |  | — |  |  | (179) |
Net unrealized appreciation (depreciation) on investments | (9,416) |  |  | (5,488) |  |  | 3,558 |  |  | 6,050 |  |  | (12,600) |  |  | (17,896) |
Amortization of Net Loan Fees | 1,058 |  |  | 6 |  |  | — |  |  | — |  |  | 186 |  |  | 1,250 |
Accretion of interest income on Structured Finance Securities | — |  |  | — |  |  | — |  |  | — |  |  | 7,647 |  |  | 7,647 |
Capitalized PIK interest and dividends | 362 |  |  | 58 |  |  | 230 |  |  | — |  |  | — |  |  | 650 |
Amendment fees | (206) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (206) |
Purchase and origination of portfolio investments | 85,066 |  |  | — |  |  | — |  |  | 1,290 |  |  | 43,198 |  |  | 129,554 |
Proceeds from principal payments on portfolio investments | (51,060) |  |  | (8,245) |  |  | — |  |  | — |  |  | (9,500) |  |  | (68,805) |
Sale and redemption of portfolio investments | (2,845) |  |  | — |  |  | — |  |  | (3,141) |  |  | — |  |  | (5,986) |
Proceeds from distributions received from portfolio investments | — |  |  | — |  |  | — |  |  | — |  |  | (14,261) |  |  | (14,261) |
Transfers out of Level 3 | (6,403) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (6,403) |
Transfers into Level 3 | 3,252 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,252 |
Level 3 assets, September 30, 2022 | $ | 280,799 |  |  | $ | 4,274 |  |  | $ | 7,502 |  |  | $ | 87,679 |  |  | $ | 89,871 |  |  | $ | 470,125 |
The net unrealized depreciation reported in the Company’s consolidated statements of operations for the nine months ended September 30, 2023 and 2022, attributable to the Company’s Level 3 assets still held at those respective period ends, was as follows:
| Nine Months Ended September 30,
| 2023 |  | 2022
Senior secured debt investments | $ | (4,125) |  |  | $ | (8,941) |
Subordinated debt investments | (22) |  |  | (5,487) |
Preferred equity | 2,474 |  |  | 3,507 |
Common equity, warrants and other | (7,590) |  |  | 7,657 |
Structured Finance Securities | (3,622) |  |  | (12,553) |
Net unrealized depreciation on investments held | $ | (12,885) |  |  | $ | (15,817) |
Investment portfolio measured at fair value on a recurring basis | The following tables present the Company’s investment portfolio measured at fair value on a recurring basis as of September 30, 2023 and December 31, 2022:
Security |  | Level 1 |  | Level 2 |  | Level 3 |  | Fair Value as of September 30, 2023
Debt investments |  | $ | — |  |  | $ | 21,666 |  |  | $ | 257,578 |  |  | $ | 279,244 |
Equity investments |  | — |  |  | — |  |  | 94,714 |  |  | 94,714 |
Structured Finance Securities |  | — |  |  | — |  |  | 83,289 |  |  | 83,289 |
|  | $ | — |  |  | $ | 21,666 |  |  | $ | 435,581 |  |  | $ | 457,247 |
Security |  | Level 1 |  | Level 2 |  | Level 3 |  | Fair Value as of December 31, 2022
Debt investments |  | $ | — |  |  | $ | 30,823 |  |  | $ | 282,039 |  |  | $ | 312,862 |
Equity investments |  | — |  |  | — |  |  | 99,196 |  |  | 99,196 |
Structured Finance Securities |  | — |  |  | — |  |  | 88,518 |  |  | 88,518 |
|  | $ | — |  |  | $ | 30,823 |  |  | $ | 469,753 |  |  | $ | 500,576 |
Significant Level 3 inputs | The following tables provides the primary quantitative information about valuation techniques and the Company’s unobservable inputs to its Level 3 fair value measurements as of September 30, 2023 and December 31, 2022. The Company may make changes to the valuation techniques, among techniques otherwise commonly used in accordance with its valuation policies, and/or the weighting of techniques used for particular investments based on changes in facts-and-circumstances and depending on the availability of, or changes in, information in order to produce the best estimate of fair value as of the measurement date. In addition to the techniques and unobservable inputs noted in the tables below and in accordance with OFS Advisor’s valuation policy, OFS Advisor, as valuation designee, may also use other valuation techniques and methodologies when determining the fair value measurements of the Company’s investment assets.
| Fair Value as of September 30, 2023 |  | Valuation technique |  | Unobservable inputs |  | Range (Weighted average)
Debt investments: |  |  |  |  |  |  |
Senior secured | $ | 234,746 |  |  | Discounted cash flow |  | Discount rates |  | 10.32% - 21.66% (13.18%)
Senior secured | 2,477 |  |  | Market approach |  | EBITDA multiples |  | 7.00x - 7.00x (7.00x)
Senior secured | 20,255 |  |  | Market approach |  | Revenue multiples |  | 0.40x - 1.40x (0.59x)
Subordinated | 100 |  |  | Market approach |  | Revenue multiples |  | 0.23x - 0.23x (0.23x)
Structured Finance Securities: |  |  |  |  |  |  |
Subordinated notes(1) | 48,043 |  |  | Discounted cash flow |  | Discount rates |  | 16.00% - 58.00% (32.24%)
|  |  |  |  | Constant default rate |  | 2.00% - 2.00% (2.00%)
|  |  |  |  | Recovery rate |  | 65.00% - 65.00% (65.00%)
Subordinated notes | 97 |  |  | Market approach |  | Net asset value liquidation(2) |  |
Subordinated notes | 4,840 |  |  | Market approach |  | Transaction Price |  |
Mezzanine debt | 27,502 |  |  | Discounted cash flow |  | Discount margin |  | 6.85% - 10.25% (8.04%)
|  |  |  |  | Constant default rate |  | 2.00% - 3.00% (2.03%)
|  |  |  |  | Recovery rate |  | 65.00% - 65.00% (65.00%)
Mezzanine debt | 2,807 |  |  | Market approach |  | Transaction Price |  |
Equity investments: |  |  |  |  |  |  |
Preferred equity | 11,462 |  |  | Market approach |  | EBITDA multiples |  | 4.58x - 7.50x (6.84x)
Preferred equity | 344 |  |  | Discounted cash flow |  | Discount rates |  | 13.26% - 13.26% (13.26%)
Common equity, warrants and other | 5,445 |  |  | Market approach |  | EBITDA multiples |  | 4.58x - 16.50x (9.55x)
Common equity, warrants and other | 77,105 |  |  | Discounted cash flow |  | Discount rates |  | 10.75% - 10.75% (10.75%)
|  |  | Market approach |  | EBITDA multiples |  | 12.50x - 12.50x (12.50x)
Common equity, warrants and other | 358 |  |  | Market approach |  | Revenue multiples |  | 0.40x - 0.70x (0.70x)
| $ | 435,581 |  |  |  |  |  |  |
(1) The cash flows utilized in the discounted cash flow calculations assume: (i) liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market prices; and (ii) redeployment of proceeds at the issuing CLO’s assumed reinvestment rate. (2) Net asset value liquidation represents the fair value, or estimated expected residual value, of the Structured Finance Security that has been optionally redeemed.
| Fair Value at December 31, 2022 |  | Valuation technique |  | Unobservable inputs |  | Range (Weighted average)
Debt investments: |  |  |  |  |  |  |
Senior secured | $ | 264,702 |  |  | Discounted cash flow |  | Discount rates |  | 10.21% - 20.71% (12.94%)
Senior secured | 16,110 |  |  | Market approach |  | Revenue multiples |  | 0.46x - 0.70x (0.56x)
Subordinated | 1,226 |  |  | Market approach |  | EBITDA multiples |  | 10.50x - 10.50x (10.50x)
Structured Finance Securities: |  |  |  |  |  |  |
Subordinated notes(1) | 53,688 |  |  | Discounted cash flow |  | Discount rates |  | 12.50% - 34.00% (22.14%)
|  |  |  |  | Constant default rate |  | 2.00% - 2.00% (2.00%)
|  |  |  |  | Recovery rate |  | 65.00% - 65.00% (65.00%)
Mezzanine debt | 26,413 |  |  | Discounted cash flow |  | Discount margin |  | 7.25% - 11.60% (8.58%)
|  |  |  |  | Constant default rate |  | 2.00% - 3.00% (2.03%)
|  |  |  |  | Recovery rate |  | 65.00% - 65.00% (65.00%)
Subordinated notes | 118 |  |  | Market approach |  | Net asset value liquidation(2) |  |
Loan accumulation facility | 8,299 |  |  | Market approach |  | Probability weighted NAV analysis |  |
Equity investments: |  |  |  |  |  |  |
Preferred equity | 6,202 |  |  | Market approach |  | EBITDA multiples |  | 7.25x - 7.25x (7.25x)
Preferred equity | 1,901 |  |  | Market approach |  | Revenue multiples |  | 0.15x - 0.87x (0.87x)
Common equity, warrants and other | 91,070 |  |  | Market approach |  | EBITDA multiples |  | 3.72x - 11.75x (9.63x)
Common equity, warrants and other | 24 |  |  | Market approach |  | Revenue multiples |  | 0.15x - 0.87x (0.15x)
| $ | 469,753 |  |  |  |  |  |  |
(1) The cash flows utilized in the discounted cash flow calculations assume: (i) liquidation of (a) certain distressed investments and (b) all investments currently in default held by the issuing CLO at their current market prices; and (ii) redeployment of proceeds at the issuing CLO’s assumed reinvestment rate. (2) NAV liquidation represents the fair value, or estimated expected residual value, of the investment.
Carrying values and fair values of debt | The following table sets forth carrying values and fair values of the Company’s debt as of September 30, 2023 and December 31, 2022:
| As of September 30, 2023 |  | As of December 31, 2022
Description | Carrying Value(1) |  | Fair Value |  | Carrying Value(1) |  | Fair Value
PWB Credit Facility | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
BNP Facility | 91,100 |  |  | 91,100 |  |  | 104,700 |  |  | 104,700 |
Unsecured Notes Due February 2026 | 123,129 |  |  | 113,799 |  |  | 122,547 |  |  | 109,037 |
Unsecured Notes Due October 2028 | 53,959 |  |  | 47,850 |  |  | 53,806 |  |  | 47,058 |
SBA-guaranteed debentures | 31,870 |  |  | 30,692 |  |  | 50,697 |  |  | 49,470 |
Total debt | $ | 300,058 |  |  | $ | 283,441 |  |  | $ | 331,750 |  |  | $ | 310,265 |
(1) Carrying value is calculated as the outstanding principal amount less unamortized deferred debt issuance costs. The following tables present the fair value measurements of the Company's debt and indicate the fair value hierarchy of the significant unobservable inputs utilized by the Company to determine such fair values as of September 30, 2023 and December 31, 2022:
| September 30, 2023
Description | Level 1(1) |  | Level 2 |  | Level 3(2) |  | Total
PWB Credit Facility | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
BNP Facility | — |  |  | — |  |  | 91,100 |  |  | 91,100 |
Unsecured Notes Due February 2026 | — |  |  | — |  |  | 113,799 |  |  | 113,799 |
Unsecured Notes Due October 2028 | 47,850 |  |  | — |  |  | — |  |  | 47,850 |
SBA-guaranteed debentures | — |  |  | — |  |  | 30,692 |  |  | 30,692 |
Total debt, at fair value | $ | 47,850 |  |  | $ | — |  |  | $ | 235,591 |  |  | $ | 283,441 |
| December 31, 2022
Description | Level 1(1) |  | Level 2 |  | Level 3(2) |  | Total
PWB Credit Facility | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
BNP Facility | — |  |  | — |  |  | 104,700 |  |  | 104,700 |
Unsecured Notes Due February 2026 | — |  |  | — |  |  | 109,037 |  |  | 109,037 |
Unsecured Notes Due October 2028 | 47,058 |  |  | — |  |  | — |  |  | 47,058 |
SBA-guaranteed debentures | — |  |  | — |  |  | 49,470 |  |  | 49,470 |
Total debt, at fair value | $ | 47,058 |  |  | $ | — |  |  | $ | 263,207 |  |  | $ | 310,265 |
(1) For Level 1 measurements, fair value is estimated by using the closing price of the security on the Nasdaq Global Select Market. (2) For Level 3 measurements, fair value is estimated by discounting remaining payments at current market rates for similar instruments at the measurement date and considering such factors as the legal maturity date.

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- Definition Tabular disclosure of assets, including [financial] instruments measured at fair value that are classified in stockholders' equity, if any, by class that are measured at fair value on a recurring basis. The disclosures contemplated herein include the fair value measurements at the reporting date by the level within the fair value hierarchy in which the fair value measurements in their entirety fall, segregating fair value measurements using quoted prices in active markets for identical assets (Level 1), significant other observable inputs (Level 2), and significant unobservable inputs (Level 3). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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- Definition Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (c) -SubTopic 10 -Topic 820 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 3 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-3 + Details
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