Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2023

Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Company classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:

Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets.

Level 3: Inputs that are unobservable for an asset or liability.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of June 30, 2023 and December 31, 2022, the Company’s investments were categorized as follows in the fair value hierarchy:



	June 30, 2023
Valuation Inputs	(Unaudited)		December 31, 2022

Level 1—Price quotations in active markets	$	1	$	—
Level 2—Significant other observable inputs	543		564
Level 3—Significant unobservable inputs	12,839		13,385
Investments measured at net asset value(1)	1,381		1,428
	$	14,764	$	15,377

____________

(1)Certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the consolidated balance sheet.

In addition, the Company had foreign currency forward contracts, as described in Note 7, which were categorized as Level 2 in the fair value hierarchy as of June 30, 2023 and December 31, 2022.

The Company’s board of directors is responsible for overseeing the valuation of the Company's portfolio investments at fair value as determined in good faith pursuant to the Advisor's valuation policy. The Company's board of directors has designated the Advisor with day-to-day responsibility for implementing the portfolio valuation process set forth in the Advisor's valuation policy.

The Company’s investments consist primarily of debt investments that were acquired directly from the issuer. Debt investments, for which broker quotes are not available, are valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, the borrower’s ability to adequately service its debt, prevailing interest rates for like investments, expected cash flows, call features, anticipated repayments and other relevant terms of the investments. Except as described below, all of the Company’s equity/other investments are also valued by independent valuation firms, which determine the fair value of such investments by considering, among other factors, contractual rights ascribed to such investments, as well as various income scenarios and multiples of earnings before interest, taxes, depreciation and amortization, or EBITDA, cash flows, net income, revenues or, in limited instances, book value or liquidation value. An investment that is newly issued and purchased near the date of the financial statements is valued at cost if the Advisor determines that the cost of such investment is the best indication of its fair value. Such investments described above are typically classified as Level 3 within the fair value hierarchy. Investments that are traded on an active public market are valued at their closing price as of the date of the financial statements and are classified as Level 1 within the fair value hierarchy. Except as described above, the Advisor typically values the Company's other investments by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which are provided by independent

third-party pricing services and screened for validity by such services and are typically classified as Level 2 within the fair value hierarchy.

The Advisor periodically benchmarks the bid and ask prices it receives from the third-party pricing services and/or dealers and independent valuation firms as applicable, against the actual prices at which the Company purchases and sells its investments. Based on the results of the benchmark analysis and the experience of the Company’s management in purchasing and selling these investments, the Advisor believes that these prices are reliable indicators of fair value. The Advisor reviewed and approved the valuation determinations made with respect to these investments in a manner consistent with the Advisor’s valuation policy.

The following is a reconciliation for the six months ended June 30, 2023 and 2022 of investments for which significant unobservable inputs (Level 3) were used in determining fair value:


	For the Six Months Ended June 30, 2023
	Senior Secured Loans—First Lien		Senior Secured Loans—Second Lien		Other Senior Secured Debt		Subordinated Debt		Asset Based Finance		Equity/Other		Total
Fair value at beginning of period	$	9,124	$	874	$	22	$	264	$	1,902	$	1,199	$	13,385
Accretion of discount (amortization of premium)	23		2		—		1		1		—		27
Net realized gain (loss)	1		(48)		—		(126)		7		(96)		(262)
Net change in unrealized appreciation (depreciation)	(34)		27		(2)		130		(39)		120		202
Purchases	562		3		—		8		67		12		652
Paid-in-kind interest	28		—		1		10		4		15		58
Sales and repayments	(1,072)		(5)		—		—		(163)		(16)		(1,256)
Transfers into Level 3	33		—		—		—		—		—		33
Transfers out of Level 3	—		—		—		—		—		—		—
Fair value at end of period	$	8,665	$	853	$	21	$	287	$	1,779	$	1,234	$	12,839
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	(41)	$	(22)	$	(2)	$	4	$	(39)	$	22	$	(78)


	For the Six Months Ended June 30, 2022
	Senior Secured Loans—First Lien		Senior Secured Loans—Second Lien		Other Senior Secured Debt		Subordinated Debt		Asset Based Finance		Equity/Other		Total
Fair value at beginning of period	$	9,542	$	1,205	$	29	$	74	$	2,245	$	877	$	13,972
Accretion of discount (amortization of premium)	37		5		—		—		4		1		47
Net realized gain (loss)	(62)		(42)		—		—		51		207		154
Net change in unrealized appreciation (depreciation)	(111)		(20)		(8)		(39)		(118)		(59)		(355)
Purchases	1,920		8		—		42		711		340		3,021
Paid-in-kind interest	20		1		1		1		18		17		58
Sales and repayments	(1,549)		(186)		—		—		(798)		(360)		(2,893)
Transfers into Level 3	—		—		—		—		—		—		—
Transfers out of Level 3	—		—		—		—		—		—		—
Fair value at end of period	$	9,797	$	971	$	22	$	78	$	2,113	$	1,023	$	14,004
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	(175)	$	(66)	$	(8)	$	(39)	$	(107)	$	5	$	(390)

The valuation techniques and significant unobservable inputs used in recurring Level 3 fair value measurements as of June 30, 2023 and December 31, 2022 were as follows:

Type of Investment

Fair Value at

June 30, 2023

(Unaudited)

Valuation

Technique(1)

Unobservable
Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input(2)

Senior Debt

8,596

Discounted Cash Flow

Discount Rate

6.3% - 20.0% (11.7%)

Decrease

753

Waterfall

EBITDA Multiple

0.2x - 14.5x (7x)

Increase

154

Other(3)

Cost

Subordinated Debt

256

Discounted Cash Flow

Discount Rate

10.9% - 14.9% (13.0%)

Decrease

Waterfall

EBITDA Multiple

6.9x - 6.9x (6.9x)

Increase

Asset Based Finance

926

Discounted Cash Flow

Discount Rate

5.4% - 45.0% (11.4%)

Decrease

552

Waterfall

EBITDA Multiple

1.0x - 13.7x (1.2x)

Increase

155

Cost

142

Other(3)

Indicative Dealer Quotes

44.0% - 44.0% (44.0%)

Increase

Equity/Other

728

Waterfall

EBITDA Multiple

0.6x - 16.0x (7.2x)

Increase

499

Discounted Cash Flow

Discount Rate

10.0% - 25.0% (15.7%)

Decrease

Other(3)

Option Pricing Model

Equity Illiquidity Discount

65.0% - 65.0% (65.0%)

Decrease

Total

12,839

Type of Investment

Fair Value at
December 31, 2022

Valuation

Technique(1)

Unobservable
Input

Range

Impact to Valuation from an Increase in Input(2)

Senior Debt

9,274

Discounted Cash Flow

Discount Rate

6.0% - 24.2% (12.0%)

Decrease

575

Waterfall

EBITDA Multiple

0.3x - 19.8x (7.2x)

Increase

167

Cost

Other(3)

Subordinated Debt

242

Discounted Cash Flow

Discount Rate

10.9% - 14.9% (13.3%)

Decrease

Waterfall

EBITDA Multiple

7.5x - 7.5x (7.5x)

Increase

Asset Based Finance

980

Discounted Cash Flow

Discount Rate

5.1% - 44.0% (11.3%)

Decrease

636

Waterfall

EBITDA Multiple

1.0x - 13.7x (1.6x)

Increase

144

Cost

138

Other(3)

Indicative Dealer Quotes

42.0% - 42.0% (42.0%)

Increase

Equity/Other

683

Waterfall

EBITDA Multiple

0.0x - 15.0x (7.4x)

Increase

488

Discounted Cash Flow

Discount Rate

10.0% - 25.0% (15.6%)

Decrease

Cost

Other(3)

Option Pricing Model

Equity Illiquidity Discount

65.0% - 65.0% (65.0%)

Decrease

Total

13,385

_______________

(1)Investments using a market quotes valuation technique were primarily valued by using the midpoint of the prevailing bid and ask prices from dealers on the date of the relevant period end, which were provided by independent third-party pricing services and screened for validity by such services. Investments valued using an EBITDA multiple or a revenue multiple pursuant to the market comparables valuation technique may be conducted using an enterprise valuation waterfall analysis.

(2)Represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the input would have the opposite effect. Significant changes in these inputs in isolation could result in significantly higher or lower fair value measurements.

(3)Fair value based on expected outcome of proposed corporate transactions and/or other factors.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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