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Investments (Tables)

9 Months Ended

Sep. 30, 2023

Schedule of Investments in and Advances to Affiliates

The following table summarizes the Company’s realized gains and losses and changes in unrealized appreciation and depreciation on control and affiliate investments for the three and nine months ended September 30, 2023 and 2022.


(in thousands)				Three Months Ended September 30, 2023								Nine Months Ended September 30, 2023
Portfolio Company(1)	Type	Fair Value as of September 30, 2023		Interest Income		Fee Income		Net Change in Unrealized Appreciation (Depreciation)		Realized Gain (Loss)		Interest Income		Fee Income		Net Change in Unrealized Appreciation (Depreciation)		Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC	Control	$	247	$	—	$	—	$	(50)	$	—	$	—	$	—	$	(72)	$	—
Gibraltar Acquisition LLC (3)	Control	55,992		772		22		(1,726)		—		2,299		60		4,676		—
Hercules Adviser LLC(4)	Control	40,668		153		—		1,507		—		455		—		9,515		—
Tectura Corporation	Control	6,243		174		—		(830)		—		516		—		(1,799)		—
Total Control Investments		$	103,150	$	1,099	$	22	$	(1,099)	$	—	$	3,270	$	60	$	12,320	$	—


(in thousands)				Three Months Ended September 30, 2022								Nine Months Ended September 30, 2022
Portfolio Company(1)	Type	Fair Value as of September 30, 2022		Interest Income		Fee Income		Net Change in Unrealized Appreciation (Depreciation)		Realized Gain (Loss)		Interest Income		Fee Income		Net Change in Unrealized Appreciation (Depreciation)		Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC	Control	$	400	$	—	$	—	$	(22)	$	—	$	—	$	—	$	(165)	$	—
Gibraltar Business Capital, LLC	Control	37,662		853		18		(1,423)		—		2,531		51		(6,228)		—
Hercules Adviser LLC	Control	33,945		154		—		(1,236)		—		393		—		9,955		—
Tectura Corporation	Control	8,318		174		—		110		—		516		—		49		—
Total Control Investments		$	80,325	$	1,181	$	18	$	(2,571)	$	—	$	3,440	$	51	$	3,611	$	—

Affiliate Investments
Black Crow AI, Inc.(2)	Affiliate	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	(120)	$	3,772
Pineapple Energy LLC(2)	Affiliate	—		81		—		4,631		(2,014)		1,204		—		4,209		(2,014)
Total Affiliate Investments		$	—	$	81	$	—	$	4,631	$	(2,014)	$	1,204	$	—	$	4,089	$	1,758
Total Control & Affiliate Investments		$	80,325	$	1,262	$	18	$	2,060	$	(2,014)	$	4,644	$	51	$	7,700	$	1,758

(1)In accordance with Rules 3-09, 4-08(g), and Rule 10-01(b)(1) of Regulation S-X, (“Rule 3-09”, “Rule 4-08(g)”, and “Rule 10-01(b)(1)”, respectively), the Company must determine if its unconsolidated subsidiaries are considered “significant subsidiaries”. As of September 30, 2023 and September 30, 2022, there were no unconsolidated subsidiaries that are considered “significant subsidiaries”.

(2)As of September 30, 2022, Black Crow AI, Inc. and Pineapple Energy LLC were no longer affiliates as defined under the 1940 Act.

(3)Gibraltar Acquisition LLC is a wholly-owned subsidiary, which is the holding company for their wholly-owned affiliated portfolio companies, Gibraltar Business Capital, LLC and Gibraltar Equipment Finance, LLC. The subsidiary has no significant assets or liabilities, other than their equity and debt investments and equity interest in Gibraltar Business Capital, LLC and Gibraltar Equipment Finance, LLC, respectively.

(4)Hercules Adviser LLC is owned by Hercules Capital Management LLC and presented with Hercules Partner Holdings, LLC which are both wholly owned by the Company. Please refer to “Note 1” for additional disclosure.

Schedule of Investments Portfolio

The following table shows the fair value of the Company’s portfolio of investments by asset class as of September 30, 2023 and December 31, 2022:


(in thousands)	September 30, 2023				December 31, 2022

	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
Senior Secured Debt	$	3,021,950	92.7	%	$	2,741,388	92.5	%
Unsecured Debt	69,930		2.1	%	54,056		1.8	%
Preferred Stock	42,290		1.3	%	41,488		1.4	%
Common Stock	94,705		2.9	%	92,484		3.1	%
Warrants	27,833		0.9	%	30,646		1.1	%
Investment Funds & Vehicles	4,683		0.1	%	3,893		0.1	%
Total	$	3,261,391	100.0	%	$	2,963,955	100.0	%

A summary of the Company’s investment portfolio, at value, by geographic location as of September 30, 2023 and December 31, 2022 is shown as follows:


(in thousands)	September 30, 2023				December 31, 2022
	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
United States	$	2,901,718	89.0	%	$	2,670,520	90.1	%
United Kingdom	201,853		6.3	%	171,629		5.8	%
Netherlands	88,986		2.7	%	88,915		3.0	%
Israel	52,967		1.6	%	9,052		0.3	%
Canada	10,222		0.3	%	19,472		0.7	%
Denmark	4,135		0.1	%	—		0.0	%
Germany	1,069		0.0	%	990		0.0	%
Other	441		0.0	%	573		0.0	%
Ireland	—		0.0	%	2,804		0.1	%
Total	$	3,261,391	100.0	%	$	2,963,955	100.0	%

The following table shows the fair value of the Company’s portfolio by industry sector as of September 30, 2023 and December 31, 2022:


(in thousands)	September 30, 2023				December 31, 2022
	Investments at Fair Value		Percentage of Total Portfolio		Investments at Fair Value		Percentage of Total Portfolio
Drug Discovery & Development	$	1,191,061	36.5	%	$	1,150,707	38.8	%
Software	828,849		25.4	%	798,264		26.9	%
Consumer & Business Services	497,664		15.3	%	439,384		14.8	%
Healthcare Services, Other	278,221		8.5	%	198,763		6.7	%
Information Services	122,485		3.8	%	60,759		2.0	%
Diversified Financial Services	107,554		3.3	%	68,569		2.3	%
Communications & Networking	106,032		3.3	%	101,833		3.4	%
Biotechnology Tools	33,763		1.0	%	32,825		1.1	%
Manufacturing Technology	25,879		0.8	%	46,109		1.6	%
Medical Devices & Equipment	22,191		0.7	%	1,834		0.1	%
Electronics & Computer Hardware	20,285		0.6	%	21,517		0.7	%
Media/Content/Info	13,117		0.4	%	35		0.0	%
Sustainable and Renewable Technology	10,514		0.3	%	15,486		0.5	%
Consumer & Business Products	2,159		0.1	%	2,821		0.1	%
Semiconductors	1,179		0.0	%	21,921		0.7	%
Surgical Devices	418		0.0	%	3,038		0.1	%
Drug Delivery	20		0.0	%	90		0.0	%
Total	$	3,261,391	100.0	%	$	2,963,955	100.0	%

Schedule of Investment Collateral

The Company's investments were collateralized as follows as of September 30, 2023 and December 31, 2022:


	Percentage of debt investments (at fair value), as of
	September 30, 2023		December 31, 2022
Senior Secured First Lien
All assets including intellectual property	53.8	%	42.0	%
All assets with negative pledge on intellectual property	21.8	%	26.1	%
“Last-out” with security interest in all of the assets	11.7	%	11.6	%
Total senior secured first lien position	87.3	%	79.7	%
Second lien	10.4	%	18.4	%
Unsecured	2.3	%	1.9	%
Total debt investments at fair value	100.0	%	100.0	%

Summary Of Fair Value and Location Of The Company's Derivative Instruments

The following is a summary of the fair value and location of the Company’s derivative instruments in the Consolidated Statements of Assets and Liabilities held as of September 30, 2023 and December 31, 2022:


(in thousands)		Fair Value
Derivative Instrument	Statement Location	September 30, 2023		December 31, 2022
Foreign currency forward contract	Other assets	$	230	$	—
	Total	$	230	$	—

Summary of Net realized and unrealized gains and losses

Net realized and unrealized gains and losses on derivative instruments recorded by the Company during the three and nine months ended September 30, 2023 and 2022 are in the following locations in the Consolidated Statements of Operations:


(in thousands)		Three Months Ended September 30,				Nine Months Ended September 30,
Derivative Instrument	Statement Location	2023		2022		2023		2022
Foreign currency forward contract	Net realized gain (loss) - Non-control / Non-affiliate investments	$	—	$	—	$	—	$	—
Foreign currency forward contract	Net change in unrealized appreciation (depreciation) - Non-control / Non-affiliate investments	784		—		230		—
	Total	$	784	$	—	$	230	$	—

Schedule of Investment Interest Income and Fee Income

The Company’s investment portfolio generates interest, fee, and dividend income. The composition of the Company’s interest income and fee income is as follows:


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Contractual interest income	$	89,747	$	66,451	$	258,685	$	172,057
Exit fee interest income	10,904		8,696		34,340		22,077
PIK interest income	6,652		4,944		17,999		14,888
Other investment income (1)	3,036		1,317		8,198		3,369
Total interest and dividend income	$	110,339	$	81,408	$	319,222	$	212,391


(in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Recurring fee income	$	2,243	$	2,076	$	6,418	$	5,762
Fee income - expired commitments	300		29		651		550
Accelerated fee income - early repayments	3,862		716		11,774		2,798
Total fee income	$	6,405	$	2,821	$	18,843	$	9,110

(1)Other investment income includes OID interest income and interest recorded on other assets.

Schedule of Unamortized Capitalized Fee Income

As of September 30, 2023 and December 31, 2022, unamortized capitalized fee income was recorded as follows:


(in millions)	September 30, 2023		December 31, 2022
Offset against debt investment cost	$	44.6	$	43.1
Deferred obligation contingent on funding or other milestone	12.1		10.9
Total Unamortized Fee Income	$	56.7	$	54.0

Schedule of Loan Exit Fees Receivable

As of September 30, 2023 and December 31, 2022, loan exit fees receivable were recorded as follows:


(in millions)	September 30, 2023		December 31, 2022
Included within debt investment cost	$	34.7	$	32.5
Deferred receivable related to expired commitments	2.9		5.0
Total Exit Fees Receivable	$	37.6	$	37.5

- Definition

Tabular disclosure of all significant concentrations of risk, including credit risk and market risk, arising from all financial instruments (as defined), whether from an individual counterparty or groups of counterparties. The disclosure concerning concentrations of risk may consist of the following information: (1) for concentrations of credit risk disclosure may include: (a) information about the (shared) activity, region, or economic characteristic that identifies the concentration, (b) the maximum amount of loss due to credit risk that, based on the gross fair value of the financial instrument, the entity would incur if parties to the financial instruments that make up the concentration failed completely to perform according to the terms of the contracts and the collateral or other security, if any, for the amount due proved to be of no value to the entity, (c) the policy of requiring collateral or other security to support financial instruments subject to credit risk, information about the entity's access to that collateral or other security, and the nature and a brief description of the collateral or other security supporting those financial instruments, and (d) the policy of entering into master netting arrangements to mitigate the credit risk of financial instruments, information about the arrangements for which the entity is a party, and a brief description of the terms of those arrangements, including the extent to which they would reduce the entity's maximum amount of loss due to credit risk and (2) for disclosure of quantitative information about the market risks of financial instruments that is consistent with the way the company manages or adjusts those risks, disclosure may include: (a) more details about current positions and perhaps activity during the period, (b) the hypothetical effects on comprehensive income (or net assets), or annual income, of several possible changes in market prices, (c) a gap analysis of interest rate re-pricing or maturity dates, (d) the duration of the financial instruments, (e) the entity's value at risk from derivatives and from other positions at the end of the reporting period and the average value at risk during the year, or (f) other ways of reporting quantitative information as internally developed.

+ References + Details