Portfolio Investments

6 Months Ended

Dec. 31, 2023

Schedule of Investments [Abstract]

Portfolio Investments

Portfolio Investments

At December 31, 2023, we had investments in 126 long-term portfolio investments and CLOs, which had an amortized cost of $7,633,623 and a fair value of $7,631,846. At June 30, 2023, we had investments in 130 long-term portfolio investments and CLOs, which had an amortized cost of $7,800,596 and a fair value of $7,724,931.

The original cost basis of debt placement and equity securities acquired, including follow-on investments for existing portfolio companies, payment-in-kind interest, and structuring fees, totaled $302,801 and $612,511 during the six months ended December 31, 2023 and December 31, 2022, respectively. Debt repayments and considerations from sales of equity securities of approximately $224,978 and $227,195 were received during the six months ended December 31, 2023 and December 31, 2022, respectively.

Throughout the remainder of this footnote, we aggregate our portfolio investments by type of investment, which may differ slightly from the nomenclature used by the constituent instruments defining the rights of holders of the investment, as disclosed on our Consolidated Schedules of Investments (“SOI”). The following investments are included in each category:

•First Lien Revolving Line of Credit includes our debt investments in first lien revolvers as well as our debt investments in delayed draw term loans.

•First Lien Debt includes our debt investments listed on the SOI such as first lien term loans (including “unitranche” loans, which are loans that combine both senior and subordinated debt and “last out” loans which are loans that have a secondary payment priority behind “first out” first-lien loans).

•Second Lien Revolving Line of Credit includes our debt investments in second lien revolvers as well as our debt investments in delayed draw term loans.

•Second Lien Debt includes our debt investments listed on the SOI as second lien term loans.

•Third Lien Debt includes our debt investments listed on the SOI as third lien term loans.

•Unsecured Debt includes our debt investments listed on the SOI as unsecured.

•Subordinated Structured Notes includes our investments in the “equity” security class of CLO funds such as income notes, preference shares, and subordinated notes.

•Equity, unless specifically stated otherwise, includes our investments in preferred stock, common stock, membership interests, net profits interests, net operating income interests, net revenue interests, overriding royalty interests, escrows receivable, and warrants.

The following table shows the composition of our investment portfolio as of December 31, 2023 and June 30, 2023:

	December 31, 2023				June 30, 2023
	Cost		Fair Value		Cost		Fair Value
First Lien Revolving Line of Credit	$	76,646	$	76,323	$	58,139	$	58,058
First Lien Debt (1)	4,546,997		4,400,003		4,431,887		4,302,795
Second Lien Revolving Line of Credit	5,143		4,829		5,139		4,646
Second Lien Debt	1,320,526		1,177,221		1,586,112		1,257,862
Unsecured Debt	7,200		7,200		7,200		7,200
Subordinated Structured Notes	886,750		601,491		952,815		665,002
Equity	790,361		1,364,779		759,304		1,429,368
Total Investments	$	7,633,623	$	7,631,846	$	7,800,596	$	7,724,931

(1) First lien debt includes a loan that the Company classifies as “unitranche” and a loan classified as “first lien last out” The total amortized cost and fair value of the unitranche and/or last out loans were $37,000 and $37,000, respectively, as of December 31, 2023. The total amortized cost and fair value of the unitranche and/or last out loans were $49,265 and $48,332, respectively, as of June 30, 2023.

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of December 31, 2023:

	Level 1		Level 2		Level 3		Total
First Lien Revolving Line of Credit	$	—	$	—	$	76,323	$	76,323
First Lien Debt(1)	—		48,725		4,351,278		4,400,003
Second Lien Revolving Line of Credit	—		—		4,829		4,829
Second Lien Debt	—		—		1,177,221		1,177,221
Unsecured Debt	—		—		7,200		7,200
Subordinated Structured Notes	—		—		601,491		601,491
Equity	—		—		1,364,779		1,364,779
Total Investments	$	—	$	48,725	$	7,583,121	$	7,631,846

(1) First lien debt includes a loan that the Company classifies as “unitranche”. The total amortized cost and fair value of the unitranche loan was $37,000 and $37,000, respectively, as of December 31, 2023.

The following table shows the fair value of our investments disaggregated into the three levels of the ASC 820 valuation hierarchy as of June 30, 2023:

	Level 1		Level 2		Level 3		Total
First Lien Revolving Line of Credit	$	—	$	—	$	58,058	$	58,058
First Lien Debt (1)	—		7,481		4,295,314		4,302,795
Second Lien Revolving Line of Credit	—		—		4,646		4,646
Second Lien Debt	—		—		1,257,862		1,257,862
Unsecured Debt	—		—		7,200		7,200
Subordinated Structured Notes	—		—		665,002		665,002
Equity	—		—		1,429,368		1,429,368
Total Investments	$	—	$	7,481	$	7,717,450	$	7,724,931

(1) First lien debt includes a loan that the Company classifies as “unitranche” and a loan classified as “first lien last out”. The total amortized cost and fair value of the unitranche and/or last out loans were $49,265 and $48,332, respectively, as of June 30, 2023.

The following tables show the aggregate changes in the fair value of our Level 3 investments during the six months ended December 31, 2023:

	Fair Value Measurements Using Unobservable Inputs (Level 3)
	Control  Investments		Affiliate  Investments		Non-Control/  Non-Affiliate  Investments		Total
Fair value as of June 30, 2023	$	3,571,697	$	10,397	$	4,135,356	$	7,717,450
Net realized losses on investments	(147)		—		(207,342)		(207,489)
Net change in unrealized (losses) gains	(117,235)		2,588		186,874		72,227
Net realized and unrealized (losses) gains	(117,382)		2,588		(20,468)		(135,262)
Purchases of portfolio investments(3)	133,481		—		106,962		240,443
Payment-in-kind interest	44,843		—		17,515		62,358
Accretion of discounts and premiums, net	520		—		2,131		2,651
Decrease to Subordinated Structured Notes cost, net(4)	—		—		(40,212)		(40,212)
Repayments and sales of portfolio investments(3)	(52,184)		1,307		(173,617)		(224,494)
Transfers out of Level 3(1)	—		—		(39,813)		(39,813)
Fair value as of December 31, 2023	$	3,580,975	$	14,292	$	3,987,854	$	7,583,121

	First Lien Revolving Line of Credit		First Lien Debt(2)		Second Lien Revolving Line of Credit		Second Lien Debt		Unsecured Debt		Subordinated Structured Notes		Equity		Total
Fair value as of June 30, 2023	$	58,058	$	4,295,314	$	4,646	$	1,257,862	$	7,200	$	665,002	$	1,429,368	$	7,717,450
Net realized (losses) on investments	—		(1,505)		—		(179,986)		—		(25,851)		(147)		(207,489)
Net change in unrealized (losses) gains	(242)		(19,560)		179		184,945		—		2,552		(95,647)		72,227
Net realized and unrealized (losses) gains	(242)		(21,065)		179		4,959		—		(23,299)		(95,794)		(135,262)
Purchases of portfolio investments(3)	23,811		197,054		—		(10,170)		—		—		29,748		240,443
Payment-in-kind interest	2,051		58,917		—		1,390		—		—		—		62,358
Accretion of discounts and premiums, net	84		1,493		4		1,070		—		—		—		2,651
Decrease to Subordinated Structured Notes cost, net(4)	—		—		—		—		—		(40,212)		—		(40,212)
Repayments and sales of portfolio investments(3)	(7,439)		(140,622)		—		(77,890)		—		—		1,457		(224,494)
Transfers out of Level 3(1)	—		(39,813)		—		—		—		—		—		(39,813)
Fair value as of December 31, 2023	$	76,323	$	4,351,278	$	4,829	$	1,177,221	$	7,200	$	601,491	$	1,364,779	$	7,583,121

    

(1)Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the six months ended December 31, 2023, two of our first lien notes transferred out of Level 3 to Level 2 because inputs to the valuation became observable.

(2) First lien debt includes a loan that the Company classifies as “unitranche” and a loan classified as “first lien last out”. The total amortized cost and fair value of the unitranche and/or last out loans were $37,000 and $37,000, respectively, as of December 31, 2023. The total amortized cost and fair value of the unitranche and/or last out loans were $49,265 and $48,332, respectively, as of June 30, 2023.

(3) Includes reorganizations and restructuring of investments.
(4) Reduction to cost value of our Subordinated Structured Notes investments represents the difference between distributions received, or entitled to be received, for the six months ended December 31, 2023, of $65,781 and the effective yield interest income recognized on our Subordinated Structured Notes of $25,569.

The following tables show the aggregate changes in the fair value of our Level 3 investments during the six months ended December 31, 2022:

	Fair Value Measurements Using Unobservable Inputs (Level 3)
	Control  Investments		Affiliate  Investments		Non-Control/  Non-Affiliate  Investments		Total
Fair value as of June 30, 2022	$	3,438,317	$	393,264	$	3,697,113	$	7,528,694
Net realized (losses) gains on investments	(1,712)		16,143		(21,324)		(6,893)
Net change in unrealized losses	(68,747)		(89,034)		(51,198)		(208,979)
Net realized and unrealized (losses) gains	(70,459)		(72,891)		(72,522)		(215,872)
Purchases of portfolio investments	128,191		—		427,495		555,686
Payment-in-kind interest	37,476		—		13,550		51,026
Accretion of discounts and premiums, net	384		—		2,396		2,780
Decrease to Subordinated Structured Notes cost, net(2)	—		—		(1,194)		(1,194)
Repayments and sales of portfolio investments	(76,211)		(24,678)		(119,292)		(220,181)
Transfers into Level 3(1)	—		—		26,188		26,188
Fair Value as of as of December 31, 2022	$	3,457,698	$	7,944	$	4,261,485	$	7,727,127

	First Lien Revolving Line of Credit		First Lien Debt(3)		Second Lien Debt		Unsecured Debt		Subordinated Structured Notes		Equity		Total
Fair value as of June 30, 2022	$	39,746	$	3,684,144	$	1,471,336	$	7,200	$	711,429	$	1,614,839	$	7,528,694
Net realized (losses) gains on investments	—		(14,472)		(8,791)		(1)		1,940		14,431		(6,893)
Net change in unrealized gains (losses)	112		(13,032)		(68,124)		—		(11,281)		(116,480)		(208,979)
Net realized and unrealized gains (losses)	112		(27,504)		(76,915)		(1)		(9,341)		(102,049)		(215,872)
Purchases of portfolio investments	2,776		468,878		65,319		—		—		13,580		555,686
Payment-in-kind interest	1,432		43,838		5,756		—		—		—		51,026
Accretion of discounts and premiums, net	7		1,546		1,225		—		—		—		2,780
Decrease to Subordinated Structured Notes cost, net(2)	—		—		—		—		(1,194)		—		(1,194)
Repayments and sales of portfolio investments	(129)		(158,484)		(37,635)		1		(1,937)		(21,997)		(220,181)
Transfers into Level 3(1)	—		26,188		—		—		—		—		26,188
Fair value as of December 31, 2022	$	43,944	$	4,038,606	$	1,429,086	$	7,200	$	698,957	$	1,504,373	$	7,727,127

(1) Transfers are assumed to have occurred at the beginning of the quarter during which the asset was transferred. During the six months ended December 31, 2022, two of our first lien notes transferred out of Level 2 to Level 3 because inputs to the valuation became unobservable.
(2) Reduction to cost value of our Subordinated Structured Notes investments represents the difference between distributions received, or entitled to be received, for the six months ended December 31, 2022, of $50,136 and the effective yield interest income recognized on our Subordinated Structured Notes of $48,942.
(3) First lien debt includes a loan that the Company classifies as “unitranche”. The total amortized cost and fair value of the unitranche loan were $20,000 and $20,000, respectively, as of December 31, 2022.

The net change in unrealized (losses) gains on the investments that use Level 3 inputs was $(124,741) and $184,548 for investments still held as of December 31, 2023 and December 31, 2022, respectively.

The following table shows industries that comprise of greater than 10% of our portfolio at fair value as of December 31, 2023 and June 30, 2023:

	December 31, 2023						June 30, 2023
	Cost		Fair Value		% of Portfolio		Cost		Fair Value		% of Portfolio
Equity Real Estate Investment Trusts (REITs)	$	807,100	$	1,357,907	17.8	%	$	741,133	$	1,437,796	18.6	%
Health Care Providers & Services	670,173		772,888		10.1	%	687,813		798,365		10.3	%
Consumer Finance	647,029		742,471		9.7	%	625,033		736,635		9.5	%
All Other Industries	5,509,321		4,758,580		62.4	%	5,746,617		4,752,135		61.6	%
Total	$	7,633,623	$	7,631,846	100.0	%	$	7,800,596	$	7,724,931	100.0	%

As of December 31, 2023 investments in California comprised 10.7% of our investments at fair value, with a cost of $970,206 and a fair value of $820,213. As of June 30, 2023 investments in California comprised 10.3% of our investments at fair value, with a cost of $933,559 and a fair value of $791,860.

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

				Unobservable Input
Asset Category	Fair Value		Primary Valuation Approach or Technique	Input	Range			Weighted Average (5)
First Lien Debt	$	1,833,893	Discounted cash flow (Yield analysis)	Market yield	9.0%	to	56.3%	12.4%
First Lien Debt	739,725		Enterprise value waterfall (Market approach)	EBITDA multiple	5.5x	to	12.0x	9.2x
First Lien Debt	30,588		Discounted cash flow (Yield analysis)	Market yield	16.6%	to	16.6%	16.6%
			Enterprise value waterfall (Market approach)	Revenue multiple	1.0x	to	1.5x	1.3x
			Enterprise value waterfall (Discounted cash flow)	Discount rate	11.8%	to	55.0%	33.4%
First Lien Debt	52,187		Enterprise value waterfall (Market approach)	Revenue multiple	1.0x	to	1.5x	1.3x
			Enterprise value waterfall (Discounted cash flow)	Discount rate	11.8%	to	55.0%	33.4%
First Lien Debt	184,447		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x	to	1.5x	1.0x
First Lien Debt	54,739		Enterprise value waterfall (Discounted cash flow)	Discount rate	6.0%	to	8.0%	7.0%
First Lien Debt (1)	20,630		Enterprise value waterfall (Discounted cash flow)	Loss-adjusted discount rate	7.7%	to	9.9%	8.1%
				Projected loss rates	—%	to	3.2%	2.8%
First Lien Debt (2)	210,000		Enterprise value waterfall (Discounted cash flow)	Discount rate (3)	11.1%	to	24.0%	12.9%
First Lien Debt	101,368		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.0x	to	1.9x	1.4x
First Lien Debt	412,702		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.4x	to	2.9x	2.7x
				Earnings multiple	8.0x	to	11.5x	9.8x
First Lien Debt	787,070		Discounted cash flow	Discount Rate	6.3%	to	9.8%	7.1%
				Terminal Cap Rate	5.3%	to	8.3%	5.9%
First Lien Debt	252		Asset recovery analysis	Recoverable amount	n/a			n/a
Second Lien Debt	1,174,642		Discounted cash flow (Yield analysis)	Market yield	8.9%	to	41.6%	15.4%
Second Lien Debt	7,408		Asset recovery analysis	Recoverable amount	n/a			n/a
Unsecured Debt	7,200		Enterprise value waterfall (Market approach)	EBITDA multiple	5.5x	to	7.0x	6.3x
Subordinated Structured Notes	601,491		Discounted cash flow	Discount rate (3)	6.8%	to	27.4%	18.0%
Preferred Equity	2,283		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x	to	1.5x	1.3x
Preferred Equity	26,285		Enterprise value waterfall (Market approach)	EBITDA multiple	6.8x	to	9.3x	8.7x
Preferred Equity	9,903		Enterprise value waterfall (Discounted cash flow)	Discount rate	6.0%	to	8.0%	7.0%
Common Equity/Interests/Warrants	510,562		Enterprise value waterfall (Market approach)	EBITDA multiple	4.8x	to	12.0x	8.7x
Common Equity/Interests/Warrants	7,442		Enterprise value waterfall (Market approach)	Revenue multiple	0.4x	to	1.5x	0.6x
Common Equity/Interests/Warrants	10,958		Enterprise value waterfall (Market approach)	Revenue multiple	1.0x	to	1.5x	1.3x
			Enterprise value waterfall (Discounted cash flow)	Discount rate	11.8%	to	55.0%	33.4%
Common Equity/Interests/Warrants (1)	—		Enterprise value waterfall (Discounted cash flow)	Loss-adjusted discount rate	7.7%	to	9.9%	8.1%
				Projected loss rates	—%	to	3.2%	2.8%
Common Equity/Interests/Warrants (2)	39,141		Enterprise value waterfall (Discounted cash flow)	Discount rate (3)	11.1%	to	24.0%	12.9%
Common Equity/Interests/Warrants (4)	44,308		Discounted cash flow	Discount rate	6.3%	to	9.8%	7.1%
				Terminal Cap Rate	5.3%	to	8.3%	5.9%

				Unobservable Input
Asset Category	Fair Value		Primary Valuation Approach or Technique	Input	Range			Weighted Average (5)
Common Equity/Interests/Warrants	19,419		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.0x	to	1.9x	1.3x
Common Equity/Interests/Warrants	190,927		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.4x	to	2.9x	2.7x
				Earnings multiple	8.0x	to	11.5x	9.8x
Common Equity/Interests/Warrants	487,388		Discounted cash flow	Discount rate	6.3%	to	9.8%	7.1%
				Terminal Cap Rate	5.3%	to	8.3%	5.9%
Common Equity/Interests/Warrants	3,678		Enterprise value waterfall (Discounted cash flow)	Discount Rate	13.3%	to	30.0%	23.7%
Common Equity/Interests/Warrants	12,485		Asset recovery analysis	Recoverable amount	n/a			n/a
Total Level 3 Investments	$	7,583,121

(1)Represents the fair value of online consumer loans held by NPRC (see National Property REIT Corp section below) through its wholly owned subsidiary, American Consumer Lending Limited (“ACLL”), and valued using a discounted cash flow valuation technique.

(2)Represents the fair value of rated secured structured notes held by NPRC through its wholly owned subsidiary, National General Lending Limited (“NGL”), and valued using a discounted cash flow valuation technique.

(3)Represents the implied discount rate based on our internally generated single-cash flow model that is derived from the fair value estimated by the corresponding multi-path cash flow model utilized by the independent valuation firm.

(4)Represents Residual Profit Interests in Real Estate Investments.

(5)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 Loss-adjusted discount rate and Projected loss rate unobservable inputs of investments represented in (1), the weighted average is determined based on the purchase yield of recently issued loans within each respective term-grade cohort.

The ranges of unobservable inputs used in the fair value measurement of our Level 3 investments as of June 30, 2023 were as follows:

				Unobservable Input
Asset Category	Fair Value		Primary Valuation Approach or Technique	Input	Range			Weighted Average (5)
First Lien Debt	$	1,871,464	Discounted cash flow (Yield analysis)	Market yield	9.2%	to	34.3%	12.8%
First Lien Debt	708,883		Enterprise value waterfall (Market approach)	EBITDA multiple	4.8x	to	11.5x	9.3x
First Lien Debt	75,015		Enterprise value waterfall (Market approach)	Revenue multiple	1.0x	to	1.5x	1.3x
			Enterprise value waterfall (Discounted cash flow)	Discount rate	11.8%	to	55.0%	33.4%
First Lien Debt	199,915		Enterprise value waterfall (Market approach)	Revenue multiple	0.2x	to	2.0x	1.0x
First Lien Debt	56,600		Enterprise value waterfall (Discounted cash flow)	Discount rate	6.0%	to	8.0%	7.0%
First Lien Debt (1)	21,580		Enterprise value waterfall (Discounted cash flow)	Loss-adjusted discount rate	7.6%	to	13.2%	8.1%
				Projected loss rates	0.2%	to	6.8%	5.2%
First Lien Debt (2)	200,600		Enterprise value waterfall (Discounted cash flow)	Discount rate (3)	11.7%	to	19.3%	13.4%
First Lien Debt	96,239		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.0x	to	2.0x	1.4x
First Lien Debt	395,926		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.8x	to	3.0x	2.9x
				Earnings multiple	7.3x	to	9.3x	8.3x
First Lien Debt	725,703		Discounted cash flow	Discount Rate	6.3%	to	9.8%	7.0%
				Terminal Cap Rate	5.0%	to	8.3%	5.8%
First Lien Debt	1,447		Asset recovery analysis	Recoverable amount	n/a			n/a
Second Lien Debt	1,255,520		Discounted cash flow (Yield analysis)	Market yield	10.2%	to	45.7%	14.8%
Second Lien Debt	6,988		Asset recovery analysis	Recoverable amount	n/a			n/a
Unsecured Debt	7,200		Enterprise value waterfall (Market approach)	EBITDA multiple	4.8x	to	7.5x	6.1x
Subordinated Structured Notes	665,002		Discounted cash flow	Discount rate (3)	4.0%	to	37.1%	23.4%
Preferred Equity	12,637		Enterprise value waterfall (Market approach)	Revenue multiple	0.2x	to	2.0x	1.1x
Preferred Equity	13,920		Enterprise value waterfall (Market approach)	EBITDA multiple	6.8x	to	9.3x	8.6x
Preferred Equity	7,598		Enterprise value waterfall (Discounted cash flow)	Discount rate	6.0%	to	8.0%	7.0%
Common Equity/Interests/Warrants	438,848		Enterprise value waterfall (Market approach)	EBITDA multiple	4.8x	to	11.5x	9.1x
Common Equity/Interests/Warrants (1)	1,400		Enterprise value waterfall (Discounted cash flow)	Loss-adjusted discount rate	7.6%	to	13.2%	8.1%
				Projected loss rates	0.2%	to	6.8%	5.2%
Common Equity/Interests/Warrants (2)	35,648		Enterprise value waterfall (Discounted cash flow)	Discount rate (3)	11.7%	to	19.3%	13.4%
Common Equity/Interests/Warrants (4)	56,254		Discounted cash flow	Discount rate	6.3%	to	9.8%	7.0%
				Terminal Cap Rate	5.0%	to	8.3%	5.8%
Common Equity/Interests/Warrants	24,975		Enterprise value waterfall (Market approach)	Tangible book value multiple	1.0x	to	2.0x	1.3x
Common Equity/Interests/Warrants	202,456		Enterprise value waterfall (Market approach)	Tangible book value multiple	2.8x	to	3.0x	2.9x
				Earnings multiple	7.3x	to	9.3x	8.3x
Common Equity/Interests/Warrants	618,791		Discounted cash flow	Discount rate	6.3%	to	9.8%	7.0%
				Terminal Cap Rate	5.0%	to	8.3%	5.8%
Common Equity/Interests/Warrants	4,131		Enterprise value waterfall (Discounted cash flow)	Discount rate	13.0%	to	30.0%	22.5%

				Unobservable Input
Asset Category	Fair Value		Primary Valuation Approach or Technique	Input	Range	Weighted Average (5)
Common Equity/Interests/Warrants	12,710		Asset recovery analysis	Recoverable amount	n/a	n/a
Total Level 3 Investments	$	7,717,450

(1)Represents the fair value of online consumer loans held by NPRC through its wholly owned subsidiary, American Consumer Lending Limited (“ACLL”), and valued using a discounted cash flow valuation technique.

(2)Represents the fair value of rated secured structured notes held by NPRC through its wholly owned subsidiary, National General Lending Limited (“NGL”), and valued using a discounted cash flow valuation technique.

(3)Represents the implied discount rate based on our internally generated single-cash flow model that is derived from the fair value estimated by the corresponding multi-path cash flow model utilized by the independent valuation firm.

(4)Represents Residual Profit Interests in Real Estate Investments.

(5)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 Loss-adjusted discount rate and Projected loss rate unobservable inputs of investments represented in (1), the weighted average is determined based on the purchase yield of recently issued loans within each respective term-grade cohort.

Investments for which market quotations are readily available are valued at such market quotations. In order to validate market quotations, management and the independent valuation firm look at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. These investments are classified as Level 1 or Level 2 in the fair value hierarchy.

The fair value of debt investments specifically classified as Level 2 in the fair value hierarchy are generally valued by an independent pricing agent or more than one principal market maker, if available, otherwise a principal market maker or a primary market dealer. We generally value over-the-counter securities by using the prevailing bid and ask prices from dealers during the relevant period end, which were provided by an independent pricing agent and screened for validity by such service.

In determining the range of values for debt instruments where market quotations are not readily available, and are therefore classified as Level 3 in the fair value hierarchy, except CLOs and debt investments in controlling portfolio companies, management and the independent valuation firm estimated corporate and security credit ratings and identified corresponding yields to maturity for each loan from relevant market data. A discounted cash flow technique was then applied using the appropriate yield to maturity as the discount rate, to determine a range of values. In determining the range of values for debt investments of controlled companies and equity investments, the enterprise value was determined by applying a market approach such as using earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples, net income and/or book value multiples for similar guideline public companies and/or similar recent investment transactions and/or an income approach, such as the discounted cash flow technique. The enterprise value technique may also be used to value debt investments which are credit impaired. For stressed debt and equity investments, asset recovery analysis was used.

In determining the range of values for our investments in CLOs, the independent valuation firm uses a discounted multi-path cash flow model. The valuations were accomplished through the analysis of the CLO deal structures to identify the risk exposures from the modeling point of view as well as to determine an appropriate call date (i.e., expected maturity). These risk factors are sensitized in the multi-path cash flow model using Monte Carlo simulations to generate probability-weighted (i.e., multi-path) cash flows for the underlying assets and liabilities. These cash flows are discounted using appropriate market discount rates, and relevant data in the CLO market and certain benchmark credit indices are considered, to determine the value of each CLO investment. In addition, we generate a single-path cash flow utilizing our best estimate of expected cash receipts, and assess the reasonableness of the implied discount rate that would be effective for the value derived from the corresponding multi-path cash flow model.

Our portfolio consists of residual interests and debt investments in CLOs, which involve a number of significant risks. CLOs are typically very highly levered (10 - 14 times), and therefore the residual interest tranches that we invest in are subject to a higher degree of risk of total loss. In particular, investors in CLO residual interests indirectly bear risks of the underlying loan investments held by such CLOs. We generally have the right to receive payments only from the CLOs, and generally do not

have direct rights against the underlying borrowers or the entity that sponsored the CLOs. While the CLOs we target generally enable the investor to acquire interests in a pool of senior loans without the expenses associated with directly holding the same investments, the prices of indices and securities underlying our CLOs will rise or fall. These prices (and, therefore, the prices of the CLOs) will be influenced by the same types of political and economic events that affect issuers of securities and capital markets generally. The failure by a CLO investment in which we invest to satisfy financial covenants, including with respect to adequate collateralization and/or interest coverage tests, could lead to a reduction in its payments to us. In the event that a CLO fails certain tests, holders of debt senior to us would be entitled to additional payments that would, in turn, reduce the payments we would otherwise be entitled to receive. Separately, we may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting CLO or any other investment we may make. If any of these occur, it could materially and adversely affect our operating results and cash flows.

The interests we have acquired in CLOs are generally thinly traded or have only a limited trading market. CLOs are typically privately offered and sold, even in the secondary market. As a result, investments in CLOs may be characterized as illiquid securities. In addition to the general risks associated with investing in debt securities, CLO residual interests carry additional risks, including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the quality of the collateral may decline in value or default; (iii) our investments in CLO tranches will likely be subordinate to other senior classes of note tranches thereof; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the CLO investment or unexpected investment results. Our net asset value may also decline over time if our principal recovery with respect to CLO residual interests is less than the cost of those investments. Our CLO investments and/or the CLOs’ underlying senior secured loans may prepay more quickly than expected, which could have an adverse impact on our value. These investments are classified as Level 3 in the fair value hierarchy.

An increase in SOFR would materially increase the CLO’s financing costs. Since most of the collateral positions within the CLOs have SOFR floors, there may not be corresponding increases in investment income (if SOFR increases but stays below the SOFR floor rate of such investments) resulting in materially smaller distribution payments to the residual interest investors.

We hold more than a 10% interest in certain foreign corporations that are treated as controlled foreign corporations (“CFC”) for U.S. federal income tax purposes (including our residual interest tranche investments in CLOs). Therefore, we are treated as receiving a deemed distribution (taxable as ordinary income) each year from such foreign corporations in an amount equal to our pro rata share of the corporation’s income for that tax year (including both ordinary earnings and capital gains). We are required to include such deemed distributions from a CFC in our taxable income and we are required to distribute at least 90% of such income to maintain our RIC status, regardless of whether or not the CFC makes an actual distribution during such year.

If we acquire shares in “passive foreign investment companies” (“PFICs”) (including residual interest tranche investments in CLOs that are PFICs), we may be subject to federal income tax on a portion of any “excess distribution” or gain from the disposition of such shares even if such income is distributed as a taxable dividend to our stockholders. Certain elections may be available to mitigate or eliminate such tax on excess distributions, but such elections (if available) will generally require us to recognize our share of the PFIC’s income for each year regardless of whether we receive any distributions from such PFICs. We must nonetheless distribute such income to maintain our status as a RIC.

Legislation known as FATCA and regulations thereunder impose a withholding tax of 30% on payments of U.S. source interest and dividends, to certain non-U.S. entities, including certain non-U.S. financial institutions and investment funds, unless such non-U.S. entity complies with certain reporting requirements regarding its United States account holders and its United States owners. Most CLOs in which we invest will be treated as non-U.S. financial entities for this purpose, and therefore will be required to comply with these reporting requirements to avoid the 30% withholding. If a CLO in which we invest fails to properly comply with these reporting requirements, it could reduce the amounts available to distribute to residual interest and junior debt holders in such CLO vehicle, which could materially and adversely affect our operating results and cash flows.

If we are required to include amounts in income prior to receiving distributions representing such income, we may have to sell some of our investments at times and/or at prices management would not consider advantageous, raise additional debt or equity capital or forgo new investment opportunities for this purpose.

The significant unobservable input used to value our investments based on the yield technique and discounted cash flow technique is the market yield (or applicable discount rate) used to discount the estimated future cash flows expected to be received from the underlying investment, which includes both future principal and interest/dividend payments. Increases or decreases in the market yield (or applicable discount rate) would result in a decrease or increase, respectively, in the fair value measurement. Management and the independent valuation firms consider the following factors when selecting market yields or discount rates: risk of default, rating of the investment and comparable company investments, and call provisions.

The significant unobservable inputs used to value our investments based on the EV analysis may include market multiples of specified financial measures such as EBITDA, net income, or book value of identified guideline public companies, implied valuation multiples from precedent M&A transactions, and/or discount rates applied in a discounted cash flow technique. The independent valuation firm identifies a population of publicly traded companies with similar operations and key attributes to that of the portfolio company. Using valuation and operating metrics of these guideline public companies and/or as implied by relevant precedent transactions, a range of multiples of the latest twelve months EBITDA, or other measure such as net income or book value, is typically calculated. The independent valuation firm utilizes the determined multiples to estimate the portfolio company’s EV generally based on the latest twelve months EBITDA of the portfolio company (or other meaningful measure). Increases or decreases in the multiple would result in an increase or decrease, respectively, in EV which would result in an increase or decrease in the fair value measurement of the debt of controlled companies and/or equity investment, as applicable. In certain instances, a discounted cash flow analysis may be considered in estimating EV, in which case, discount rates based on a weighted average cost of capital and application of the capital asset pricing model may be utilized.

The significant unobservable input used to value our private REIT investments based on the discounted cash flow analysis is the discount rate and terminal capitalization rate applied to projected cash flows of the underlying properties. Increases or decreases in the discount rate and terminal capitalization rate would result in a decrease or increase, respectively, in the fair value measurement.

Changes in market yields, discount rates, capitalization rates or EBITDA multiples, each in isolation, may change the fair value measurement of certain of our investments. Generally, an increase in market yields, discount rates or capitalization rates, or a decrease in EBITDA (or other) multiples may result in a decrease in the fair value measurement of certain of our investments.

Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.

In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the currently assigned valuations.

Changes in Valuation Techniques

During the six months ended December 31, 2023, the valuation methodology for DTI Holdco, Inc. (“Epiq”) for the First Lien Term Loan changed from a combination of the yield analysis and market quotes to relying solely on market quotes, since market quotes were more active in the current period. As a result of the quoted prices of the First Lien Term Loan, the fair value of our investment in Epiq First Lien Term Loan increased to $18,269 as of December 31, 2023, a premium of $283 from its amortized cost, compared to the $449 unrealized discount recorded at June 30, 2023.

During the six months ended December 31, 2023, the valuation methodology for First Brands Group for the First Lien Term Loan changed from a combination of the yield analysis and market quotes to relying solely on market quotes, since market quotes were more active in the current period. As a result of the quoted prices of the First Lien Term Loan, the fair value of our investment in First Brands Group First Lien Term Loan was $22,198 as of December 31, 2023, a discount of $36 from its amortized cost, compared to the $75 unrealized discount recorded at June 30, 2023.

During the six months ended December 31, 2023, the valuation methodology for Strategic Materials changed from the yield analysis to the asset recovery analysis, given the company’s interest payment default. As a result, the fair value of our investment in Strategic Materials decreased to $0 as of December 31, 2023, a discount of $6,980 to its amortized cost, compared to the unrealized discount of $2,692 recorded at June 30, 2023.

Credit Quality Indicators and Undrawn Commitments

As of December 31, 2023, $4,595,832 of our loans to portfolio companies, at fair value, bear interest at floating rates and have LIBOR or SOFR floors ranging from 0.0% - 5.5%. As of December 31, 2023, $1,069,744 of our loans to portfolio companies, at fair value, bear interest at fixed rates ranging from 4.5% to 16.0%. As of June 30, 2023, $4,664,827 of our loans to portfolio companies, at fair value, bore interest at floating rates and have LIBOR floors ranging from 0.0% to 5.0%. As of June 30, 2023, $965,734 of our loans to portfolio companies, at fair value, bore interest at fixed rates ranging from 5.0% to 20.0%

As of December 31, 2023 and June 30, 2023 , the cost basis of our loans on non-accrual status amounted to $164,628 and $421,198 respectively, with fair value of $15,405 and $86,422, respectively. The fair values of these investments represent approximately 0.2% and 1.1% of our total assets at fair value as of December 31, 2023 and June 30, 2023, respectively.

Undrawn committed revolvers and delayed draw term loans to our portfolio companies incur commitment and unused fees ranging from 0.00% to 7.25%. As of December 31, 2023 and June 30, 2023, we had $28,837 and $49,160, respectively, of undrawn revolver and delayed draw term loan commitments to our portfolio companies. The fair value of our undrawn committed revolvers and delayed draw term loans was zero as of December 31, 2023 and June 30, 2023 as they were all floating rate instruments that repriced frequently.

National Property REIT Corp.

Prospect owns 100% of the equity of NPH Property Holdings, LLC (“NPH”), a consolidated holding company which owns 100% of the common equity of NPRC.

NPRC is a Maryland corporation and a qualified REIT for federal income tax purposes. NPRC was formed to hold for investment, operate, finance, lease, manage, and sell a portfolio of real estate assets and engage in any and all other activities as may be necessary, incidental or convenient to carry out the foregoing. NPRC acquires real estate assets, including, but not limited to, industrial, commercial, and multi-family properties. NPRC may acquire real estate assets directly or through joint ventures by making a majority equity investment in a property-owning entity (“JV”). Additionally, through its wholly-owned subsidiaries, NPRC invests in online consumer loans and rated secured structured notes (“RSSN”).

During the six months ended December 31, 2023, we provided $119,781 of debt financing and $4,600 of equity financing to NPRC to fund real estate capital expenditures, provide working capital, and to fund purchases of rated secured structured notes.

During the six months ended December 31, 2023, we received partial repayments of $50,450 of our loans previously outstanding with NPRC and its wholly owned subsidiary.

During the six months ended December 31, 2022, we provided $104,471 of debt financing and $3,600 of equity financing to NPRC to fund capital expenditures for existing real estate properties, to provide working capital, and to fund purchases of rated secured structured notes.

During the six months ended December 31, 2022, we received partial repayments of $72,852 of our loans previously outstanding with NPRC and its wholly owned subsidiaries and $4,000 as a return of capital on our equity investment in NPRC.

The online consumer loan investments held by certain of NPRC’s wholly owned subsidiaries are unsecured obligations of individual borrowers that are issued in amounts ranging from $10 to $50, with fixed terms ranging from 60 months to 84 months. As of December 31, 2023, the outstanding investment in online consumer loans by certain of NPRC’s wholly-owned subsidiaries was comprised of 27 individual loans valued at $81, residual interest in two securitizations valued at $2,726, and one corporate bond valued at $16,484, for an aggregate fair value of $19,291. As of December 31, 2023, our investment in NPRC and its wholly-owned subsidiaries relating to online consumer lending had a fair value of $20,349.

The rated secured structured note investments held by certain of NPRC’s wholly owned subsidiaries are subordinated debt interests in broadly syndicated loans managed by established collateral management teams with many years of experience in the industry. As of December 31, 2023, the outstanding investment in rated secured structured notes by certain of NPRC’s wholly owned subsidiaries was comprised of 90 investments with a fair value of $418,762 and face value of $467,017. The average outstanding note is approximately $5,189 with an expected maturity date ranging from October 2026 to April 2032 and weighted-average expected maturity of 6 years as of December 31, 2023. Coupons range from three-month SOFR (“3M”) plus 5.20% to 9.23% with a weighted-average coupon of 3M + 6.46%. As of December 31, 2023, our investment in NPRC and its wholly-owned subsidiaries relating to rated secured structured notes had a fair value of $268,882. As of December 31, 2023, based on outstanding notional balance, 12.3% of the portfolio was invested in Single - B rated tranches and 87.7% of the portfolio in BB rated tranches.

As of December 31, 2023, our investment in NPRC and its wholly owned subsidiaries had an amortized cost of $1,037,730 and a fair value of $1,588,537. The fair value of $1,357,907 related to NPRC’s real estate portfolio was comprised of forty-eight multi-family properties, seven student housing properties, four senior living properties, and three commercial properties. The following table shows the location, acquisition date, purchase price, and mortgage outstanding due to other parties for each of the properties held by NPRC as of December 31, 2023:

No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
1	Filet of Chicken	Forest Park, GA	10/24/2012	$	7,400	$	—
2	Arlington Park Marietta, LLC	Marietta, GA	5/8/2013	14,850		13,486
3	Taco Bell, OK	Yukon, OK	6/4/2014	1,719		—
4	Taco Bell, MO	Marshall, MO	6/4/2014	1,405		—
5	Abbie Lakes OH Partners, LLC	Canal Winchester, OH	9/30/2014	12,600		14,670
6	Kengary Way OH Partners, LLC	Reynoldsburg, OH	9/30/2014	11,500		14,832
7	Lakeview Trail OH Partners, LLC	Canal Winchester, OH	9/30/2014	26,500		28,292
8	Lakepoint OH Partners, LLC	Pickerington, OH	9/30/2014	11,000		16,102
9	Sunbury OH Partners, LLC	Columbus, OH	9/30/2014	13,000		16,330
10	Heatherbridge OH Partners, LLC	Blacklick, OH	9/30/2014	18,416		23,318
11	Jefferson Chase OH Partners, LLC	Blacklick, OH	9/30/2014	13,551		18,176
12	Goldenstrand OH Partners, LLC	Hilliard, OH	10/29/2014	7,810		11,072
13	SSIL I, LLC	Aurora, IL	11/5/2015	34,500		24,674
14	Vesper Tuscaloosa, LLC	Tuscaloosa, AL	9/28/2016	54,500		41,481
15	Vesper Iowa City, LLC	Iowa City, IA	9/28/2016	32,750		23,920
16	Vesper Corpus Christi, LLC	Corpus Christi, TX	9/28/2016	14,250		10,406
17	Vesper Campus Quarters, LLC	Corpus Christi, TX	9/28/2016	18,350		13,658
18	Vesper College Station, LLC	College Station, TX	9/28/2016	41,500		30,889
19	Vesper Statesboro, LLC	Statesboro, GA	9/28/2016	7,500		7,480
20	Vesper Manhattan KS, LLC	Manhattan, KS	9/28/2016	23,250		14,679
21	9220 Old Lantern Way, LLC	Laurel, MD	1/30/2017	187,250		153,580
22	7915 Baymeadows Circle Owner, LLC	Jacksonville, FL	10/31/2017	95,700		89,248
23	8025 Baymeadows Circle Owner, LLC	Jacksonville, FL	10/31/2017	15,300		15,529
24	23275 Riverside Drive Owner, LLC	Southfield, MI	11/8/2017	52,000		54,272
25	23741 Pond Road Owner, LLC	Southfield, MI	11/8/2017	16,500		18,790
26	150 Steeplechase Way Owner, LLC	Largo, MD	1/10/2018	44,500		36,151
27	Olentangy Commons Owner LLC	Columbus, OH	6/1/2018	113,000		92,876
28	Villages of Wildwood Holdings LLC	Fairfield, OH	7/20/2018	46,500		58,393
29	Falling Creek Holdings LLC	Richmond, VA	8/8/2018	25,000		25,374
30	Crown Pointe Passthrough LLC	Danbury, CT	8/30/2018	108,500		89,400
31	Lorring Owner LLC	Forestville, MD	10/30/2018	58,521		47,680
32	Hamptons Apartments Owner, LLC	Beachwood, OH	1/9/2019	96,500		79,520
33	5224 Long Road Holdings, LLC	Orlando, FL	6/28/2019	26,500		21,200
34	Druid Hills Holdings LLC	Atlanta, GA	7/30/2019	96,000		79,104
35	Bel Canto NPRC Parcstone LLC	Fayetteville, NC	10/15/2019	45,000		42,793
36	Bel Canto NPRC Stone Ridge LLC	Fayetteville, NC	10/15/2019	21,900		21,545
37	Sterling Place Holdings LLC	Columbus, OH	10/28/2019	41,500		34,196
38	SPCP Hampton LLC	Dallas, TX	11/2/2020	36,000		38,843
39	Palmetto Creek Holdings LLC	North Charleston, SC	11/10/2020	33,182		25,865
40	Valora at Homewood Holdings LLC	Homewood, AL	11/19/2020	81,250		63,844
41	NPRC Fairburn LLC	Fairburn, GA	12/14/2020	52,140		43,900
42	NPRC Grayson LLC	Grayson, GA	12/14/2020	47,860		40,500
43	NPRC Taylors LLC	Taylors, SC	1/27/2021	18,762		14,075
44	Parkside at Laurel West Owner LLC	Spartanburg, SC	2/26/2021	57,005		42,025
45	Willows at North End Owner LLC	Spartanburg, SC	2/26/2021	23,255		19,000
46	SPCP Edge CL Owner LLC	Webster, TX	3/12/2021	34,000		25,496
47	Jackson Pear Orchard LLC	Ridgeland, MS	6/28/2021	50,900		42,975

No.	Property Name	City	Acquisition Date	Purchase Price		Mortgage Outstanding
48	Jackson Lakeshore Landing LLC	Ridgeland, MS	6/28/2021	22,600		17,955
49	Jackson Reflection Pointe LLC	Flowood, MS	6/28/2021	45,100		33,203
50	Jackson Crosswinds LLC	Pearl, MS	6/28/2021	41,400		38,601
51	Elliot Apartments Norcross, LLC	Norcross, GA	11/30/2021	128,000		105,494
52	Orlando 442 Owner, LLC (West Vue Apartments)	Orlando, FL	12/30/2021	97,500		73,000
53	NPRC Wolfchase LLC	Memphis, TN	3/18/2022	82,100		60,000
54	NPRC Twin Oaks LLC	Hattiesburg. MS	3/18/2022	44,850		35,246
55	NPRC Lancaster LLC	Birmingham, AL	3/18/2022	37,550		29,152
56	NPRC Rutland LLC	Macon, GA	3/18/2022	29,750		23,463
57	Southport Owner LLC (Southport Crossing)	Indianapolis, IN	3/29/2022	48,100		36,075
58	TP Cheyenne, LLC	Cheyenne, WY	5/26/2022	27,500		17,656
59	TP Pueblo, LLC	Pueblo, CO	5/26/2022	31,500		20,166
60	TP Stillwater, LLC	Stillwater, OK	5/26/2022	26,100		15,328
61	TP Kokomo, LLC	Kokomo, IN	5/26/2022	20,500		12,753
62	Terraces at Perkins Rowe JV LLC	Baton Rouge, LA	11/14/2022	41,400		29,566
				$	2,614,826	$	2,187,297

Unconsolidated Significant Subsidiaries

Our investments are generally in small and mid-sized companies in a variety of industries. In accordance with Regulation S-X 3-09 and Regulation S-X 4-08(g), we must determine which of our unconsolidated controlled portfolio companies are considered “significant subsidiaries,” if any, as defined in Rule 1-02(w)(2) for BDC’s and closed end investment companies. Regulation S-X 3-09 requires separate audited financial statements of an unconsolidated subsidiary in an annual report. Regulation S-X 4-08(g) requires summarized financial information in an annual report.

Pursuant to Regulation S-X 10-01(b), Interim Financial Statements, summarized interim income statement information is required for an unconsolidated subsidiary within a quarterly report if the unconsolidated subsidiary would otherwise require separate audited financial statements within an annual report pursuant to Regulation S-X 3-09.

For the six months ended December 31, 2023 and December 31, 2022, NPRC was deemed to be a significant subsidiary due to income. The following table shows summarized income statement information for NPRC for the periods included in this quarterly report:

	Six Months Ended December 31,
Summary Statement of Operations	2023		2022
Total Income	$	253,571	$	212,454
Operating Expenses	(110,999)		(108,196)
Operating Income	142,572		104,258
Interest Expense	(138,624)		(135,849)
Depreciation and Amortization	(53,803)		(57,939)
Fair Value Adjustment	(12,082)		(6,565)
Net Loss	$	(61,937)	$	(96,095)

During the six months ended December 31, 2023, First Tower Finance Company LLC (“First Tower Finance”) was deemed a significant subsidiary due to income. The following table shows First Tower Finance summarized income statement information for the periods included within this quarterly report:

	Six Months Ended December 31,
Summary Statement of Operations	2023		2022
Total Income	$	155,035	$	157,956
Total Expenses	172,731		183,453
Net Loss	$	(17,696)	$	(25,497)