Investments

3 Months Ended

Mar. 31, 2023

Schedule Of Investments [Abstract]

Investments

Note 5. Investments

Fair Value Measurement and Disclosures

The following table shows the composition of our investment portfolio as of March 31, 2023, with the fair value disaggregated into the three levels of the fair value hierarchy in accordance with ASC 820:

					Fair Value Hierarchy
	Cost		Fair Value		Level 1		Level 2		Level 3
First Lien Secured Debt	$	2,135,187	$	2,114,795	$	—	$	—	$	2,114,795
Second Lien Secured Debt		82,185		69,357		—		—		69,357
Unsecured Debt		33		31		—		—		31
Structured Products and Other		17,103		10,902		—		—		10,902
Preferred Equity		40,580		36,611		—		—		36,611
Common Equity/Interests		316,284		153,054		1,370		323		151,361
Warrants		389		461		—		—		461
Total Investments	$	2,591,761	$	2,385,211	$	1,370	$	323	$	2,383,518
Money Market Fund	$	62,238	$	62,238	$	62,238	$	—	$	—
Total Cash Equivalents	$	62,238	$	62,238	$	62,238	$	—	$	—
Total Investments after Cash Equivalents	$	2,653,999	$	2,447,449	$	63,608	$	323	$	2,383,518

The following table shows the composition of our investment portfolio as of December 31, 2022, with the fair value disaggregated into the three levels of the fair value hierarchy in accordance with ASC 820:

					Fair Value Hierarchy
	Cost		Fair Value		Level 1		Level 2		Level 3
First Lien Secured Debt	$	2,150,973	$	2,130,309	$	—	$	—	$	2,130,309
Second Lien Secured Debt		105,731		70,919		—		—		70,919
Unsecured Debt		50		50		—		—		50
Structured Products and Other		16,998		9,413		—		—		9,413
Preferred Equity		40,530		35,557		—		—		35,557
Common Equity/Interests		292,503		151,398		1,761		323		149,314
Warrants		389		474		—		—		474
Total Investments	$	2,607,174	$	2,398,120	$	1,761	$	323	$	2,396,036

The following table shows changes in the fair value of our Level 3 investments during the three months ended March 31, 2023:

	First Lien Secured Debt (2)			Second Lien Secured Debt (2)			Unsecured Debt			Structured Products and Other		Preferred Equity		Common Equity/Interests			Warrants			Total
Fair value as of December 31, 2022	$	2,130,309		$	70,919		$	50		$	9,413	$	35,557	$	149,314		$	474		$	2,396,036
Net realized gains (losses)		2,531			(1,128	)		—			—		—		367			—			1,770
Net change in unrealized gains (losses)		272			21,983			(2	)		1,383		1,004		(21,734	)		(13	)		2,893
Net amortization on investments		2,421			111			—			—		—		(36	)		—			2,496
Purchases, including capitalized PIK (3)		151,510			—			1			106		50		23,473			—			175,140
Sales (3)		(172,248	)		(22,528	)		(18	)		—		—		(23	)		—			(194,817	)
Transfers out of Level 3 (1)		—			—			—			—		—		—			—			—
Transfers into Level 3 (1)		—			—			—			—		—		—			—			—
Fair value as of March 31, 2023	$	2,114,795		$	69,357		$	31		$	10,902	$	36,611	$	151,361		$	461		$	2,383,518
Net change in unrealized gains (losses) on Level 3 investments still held as of March 31, 2023	$	620		$	(235	)	$	(2	)	$	1,384	$	1,004	$	(21,734	)	$	(14	)	$	(18,977	)

(1)Transfers out (if any) of Level 3 are due to an increase in the quantity and reliability of broker quotes obtained and transfers into (if any) Level 3 are due to a decrease in the quantity and reliability of broker quotes obtained as assessed by the Investment Adviser. Transfers are assumed to have occurred at the end of the period. There were no transfers between Level 1 and Level 2 fair value measurements during the period shown.

(2)Includes unfunded commitments measured at fair value of $(4,006).

(3)Includes reorganizations and restructuring of investments.

The following table shows changes in the fair value of our Level 3 investments during the three months ended March 31, 2022:

	First Lien Secured Debt (2)			Second Lien Secured Debt (2)			Unsecured Debt			Structured Products and Other			Preferred Equity		Common Equity/Interests			Warrants			Total
Fair value as of December 31, 2021	$	2,267,313		$	105,014		$	22,000		$	10,821		$	28,957	$	158,515		$	372		$	2,592,992
Net realized gains (losses)		(415	)		452			25			—			—		696			—			758
Net change in unrealized gains (losses)		798			2,687			—			(793	)		1,205		(28,543	)		(273	)		(24,919	)
Net amortization on investments		6,317			114			—			—			—		—			—			6,431
Purchases, including capitalized PIK (3)		220,442			—			—			10			—		214			—			220,666
Sales (3)		(234,949	)		(10,423	)		(22,025	)		—			—		(6,978	)		—			(274,375	)
Transfers out of Level 3 (1)		—			—			—			—			—		—			—			—
Transfers into Level 3 (1)		—			—			—			—			—		390			—			390
Fair value as of March 31, 2022	$	2,259,506		$	97,844		$	—		$	10,038		$	30,162	$	124,294		$	99		$	2,521,943
Net change in unrealized gains (losses) on Level 3 investments still held as of March 31, 2022	$	1,104		$	2,488		$	—		$	(793	)	$	1,205	$	(28,369	)	$	(273	)	$	(24,638	)

(1)Transfers out (if any) of Level 3 are due to an increase in the quantity and reliability of broker quotes obtained and transfers into (if any) Level 3 are due to a decrease in the quantity and reliability of broker quotes obtained as assessed by the Investment Adviser. Transfers are assumed to have occurred at the end of the period. There were no transfers between Level 1 and Level 2 fair value measurements during the period shown.

(2)Includes unfunded commitments measured at fair value of $(2,091).

(3)Includes reorganizations and restructuring of investments.

The following tables summarize the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of March 31, 2023 and December 31, 2022. In addition to the techniques and inputs noted in the tables below, according to our valuation policy we may also use other valuation techniques and methodologies when determining our fair value measurements. The below tables are not intended to be all-inclusive, but rather provide information on the significant unobservable inputs as they relate to the Company’s determination of fair values.

The unobservable inputs used in the fair value measurement of our Level 3 investments as of March 31, 2023 were as follows:

				Quantitative Information about Level 3 Fair Value Measurements
Asset Category		Fair Value		Valuation Techniques/Methodologies	Unobservable Input	Range		Weighted Average (1)
First Lien Secured Debt	$		84,575	Discounted Cash Flow	Discount Rate	12.0%	14.1%	12.0%
				Residual Value	Residual Value	N/A	N/A	N/A
			49,476	Recent Transaction	Recent Transaction	N/A	N/A	N/A
			1,374	Recovery Analysis	Recoverable Amount	N/A	N/A	N/A
			1,965,035	Yield Analysis	Discount Rate	6.6%	58.0%	12.3%
			14,335	Cost Approach	Cost Approach	N/A	N/A	N/A
Second Lien Secured Debt			6,129	Market Comparable Technique	Comparable Multiple	11.0x	11.0x	11.0x
			233	Recovery Analysis	Recoverable Amount	N/A	N/A	N/A
			62,995	Yield Analysis	Discount Rate	14.0%	24.7%	16.4%
Structured Products and Other			10,902	Yield Analysis	Discount Rate	12.5%	12.5%	12.50%
Preferred Equity			34,151	Market Comparable Technique	Comparable Multiple	2.3x	12.0x	11.3x
			1,960	Option Pricing Model	Expected Volatility	140.0%	140.0%	140.0%
			300	Recent Transaction	Recent Transaction	N/A	N/A	N/A
			11	Recovery Analysis	Recoverable Amount	N/A	N/A	N/A
			78	Residual Value	Residual Value	N/A	N/A	N/A
			111	Yield Analysis	Discount Rate	13.0%	13.0%	13.0%
Common Equity/Interests			112,639	Discounted Cash Flow	Discount Rate	14.1%	14.1%	14.1%
				Residual Value	Residual Value	N/A	N/A	N/A
			12,699	Market Comparable Technique	Comparable Multiple	3.8x	43.5x	13.1x
			140	Option Pricing Model	Expected Volatility	35.0%	140.0%	35.0%
			5,198	Recent Transaction	Recent Transaction	N/A	N/A	N/A
			484	Recovery Analysis	Recoverable Amount	N/A	N/A	N/A
			428	Yield Analysis	Discount Rate	13.0%	13.0%	13.0%
			195	Sale Proceeds	Sale Proceeds	N/A	N/A	N/A
			100	Cost Approach	Cost Approach	N/A	N/A	N/A
			19,478	Estimated Proceeds	Estimated Proceeds	N/A	N/A	N/A
Warrants			461	Option Pricing Model	Expected Volatility	50.0%	50.0%	50.0%
Unsecured Debt			31	Yield Analysis	Discount Rate	12.2%	12.2%	12.2%
Total Level 3 Investments	$		2,383,518

_________________

(1)The weighted average information is generally derived by assigning each disclosed unobservable input a proportionate weight based on the fair value of the related investment. For the commodity price unobservable input, the weighted average price is an undiscounted price based upon the estimated production level from the underlying reserves.

The unobservable inputs used in the fair value measurement of our Level 3 investments as of December 31, 2022 were as follows:

Quantitative Information about Level 3 Fair Value Measurements

Asset Category

Fair Value

Valuation Techniques/Methodologies

Unobservable Input

Range

Weighted Average (1)

First Lien Secured Debt

$

150,000

Discounted Cash Flow

Discount Rate

11.4%

12.0%

12.0%

Residual Value

Residual Value

N/A

N/A

N/A

69,333

Recent Transaction

Recent Transaction

N/A

N/A

N/A

2,539

Recovery Analysis

Recoverable Amount

N/A

N/A

N/A

1,908,437

Yield Analysis

Discount Rate

7.1%

52.8%

12.0%

Second Lien Secured Debt

6,429

Market Comparable Technique

Comparable Multiple

11.0x

11.0x

11.0x

1,402

Recovery Analysis

Recoverable Amount

N/A

N/A

N/A

62,849

Yield Analysis

Discount Rate

13.3%

23.1%

15.50%

239

Sale Proceeds

Sale Proceeds

N/A

N/A

N/A

Structured Products and Other

9,413

Yield Analysis

Discount Rate

12.3%

12.3%

12.30%

Preferred Equity

33,183

Market Comparable Technique

Comparable Multiple

2.1

x

19.3

x

13.4

x

1,961

Option Pricing Model

Expected Volatility

90.0%

90.0%

90.0%

250

Recent Transaction

Recent Transaction

N/A

N/A

N/A

11

Recovery Analysis

Recoverable Amount

N/A

N/A

N/A

78

Residual Value

Residual Value

N/A

N/A

N/A

74

Yield Analysis

Discount Rate

12.5%

12.5%

12.5%

Common Equity/Interests

111,446

Discounted Cash Flow

Discount Rate

11.4%

11.4%

11.4%

Residual Value

Residual Value

N/A

N/A

N/A

11,996

Market Comparable Technique

Comparable Multiple

6.5

x

36.5

x

13.3

x

190

Option Pricing Model

Expected Volatility

35.0%

90.0%

35.0%

4,256

Recent Transaction

Recent Transaction

N/A

N/A

N/A

—

Recovery Analysis

Recoverable Amount

N/A

N/A

N/A

449

Yield Analysis

Discount Rate

12.5%

12.5%

12.5%

20,977

Sale Proceeds

Sale Proceeds

N/A

N/A

N/A

Warrants

474

Option Pricing Model

Expected Volatility

50.0%

50.0%

50.0%

Unsecured Debt

50

Recent Transaction

Recent Transaction

N/A

N/A

N/A

Total Level 3 Investments

$

2,396,036

____________________

(1)The weighted average information is generally derived by assigning each disclosed unobservable input a proportionate weight based on the fair value of the related investment. For the commodity price unobservable input, the weighted average price is an undiscounted price based upon the estimated production level from the underlying reserves.

The significant unobservable inputs used in the fair value measurement of the Company’s debt and equity securities are primarily earnings before interest, taxes, depreciation and amortization (“EBITDA”) comparable multiples and market discount rates. The Company typically uses EBITDA comparable multiples on its equity securities to determine the fair value of investments. The Company uses market discount rates for debt securities to determine if the effective yield on a debt security is commensurate with the market yields for that type of debt security. If a debt security’s effective yield is significantly less than the market yield for a similar debt security with a similar credit profile, the resulting fair value of the debt security may be lower. For certain investments where fair value is derived based on a recovery analysis, the Company uses underlying commodity prices from third party market pricing services to determine the fair value and/or recoverable amount, which represents the proceeds expected to be collected through asset sales or liquidation. Further, for certain investments, the Company also considered the probability of future events which are not in management’s control. Significant increases or decreases in any of these inputs in isolation would result in a significantly lower or higher fair value measurement. The significant unobservable inputs used in the fair value measurement of the structured products include the discount rate applied in the valuation models in addition to default and recovery rates applied to projected cash flows in the valuation models. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment; conversely decreases in the discount rate can significantly increase the fair value of an investment. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks. For certain investments such as warrants, the Company may use an option pricing technique, of which the applicable method is the Black-Scholes Option Pricing Method (“BSM”), to perform valuations. The BSM is a model of price variation over time of financial instruments, such as equity, that is used to determine the price of call or put options. Various inputs are required but the primary unobservable input into the BSM model is the underlying asset volatility.

Investment Transactions

For the three months ended March 31, 2023 and 2022, purchases of investments on a trade date basis were $151,058 and $220,063, respectively.

For the three months ended March 31, 2023 and 2022, sales and repayments (including prepayments and unamortized fees) of investments on a trade date basis were $171,529 and $274,375, respectively.

PIK Income

The Company holds loans and other investments, including certain preferred equity investments, that have contractual PIK income. PIK income computed at the contractual rate is accrued into income and reflected as receivable up to the capitalization date. During the three months ended March 31, 2023 and 2022, PIK income earned was $784 and $625, respectively.

The following table shows the change in capitalized PIK balance for the three months ended March 31, 2023 and 2022:

	Three Months Ended March 31,
	2023		2022
PIK balance at beginning of period	$	21,534	$	38,625
PIK income capitalized		791		602
Adjustments due to investments exited or written off		—		—
PIK income received in cash		—		—
PIK balance at end of period	$	22,325	$	39,227

Dividend Income on CLOs

The Company holds structured products and other investments. The CLO equity investments are entitled to recurring distributions which are generally equal to the excess cash flow generated from the underlying investments after payment of the contractual payments to debt holders and fund expenses. The Company records as dividend income the accretable yield from its beneficial interests in structured products such as CLOs based upon a number of cash flow assumptions that are subject to uncertainties and contingencies. During the three months ended March 31, 2023 and 2022, dividend income from structured products was $0 and $331, respectively.

Investments on Non-Accrual Status

As of March 31, 2023, 1.0% of total investments at amortized cost, or 0.4% of total investments at fair value, were on non-accrual status. As of December 31, 2022, 1.3% of total investments at amortized cost, or 0.6% of total investments at fair value, were on non-accrual status.