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Fair Value of Financial Instruments (Tables)
 9 Months Ended
Sep. 30, 2023
Fair Value Disclosures [Abstract]  
Fair Value Measurements of Investments

The following tables present fair value measurements of investments as of September 30, 2023 and December 31, 2022:

 

 

Fair Value Hierarchy at September 30, 2023

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

First-lien debt investments

 

$

—

 

 

$

1,726

 

 

$

2,831,046

 

 

$

2,832,772

 

Second-lien debt investments

 

 

—

 

 

 

—

 

 

 

39,940

 

 

 

39,940

 

Mezzanine debt investments

 

 

—

 

 

 

123

 

 

 

36,267

 

 

 

36,390

 

Equity and other investments

 

 

6,088

 

 

 

10,728

 

 

 

133,363

 

 

 

150,179

 

Structured credit investments

 

 

—

 

 

 

53,996

 

 

 

—

 

 

 

53,996

 

Total investments at fair value

 

$

6,088

 

 

$

66,573

 

 

$

3,040,616

 

 

$

3,113,277

 

Interest rate swaps

 

 

—

 

 

 

(55,943

)

 

 

—

 

 

 

(55,943

)

Total

 

$

6,088

 

 

$

10,630

 

 

$

3,040,616

 

 

$

3,057,334

 

 

 

 

Fair Value Hierarchy at December 31, 2022

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

First-lien debt investments

 

$

—

 

 

$

21,935

 

 

$

2,495,959

 

 

$

2,517,894

 

Second-lien debt investments

 

 

—

 

 

 

—

 

 

 

40,762

 

 

 

40,762

 

Mezzanine debt investments

 

 

—

 

 

 

—

 

 

 

10,158

 

 

 

10,158

 

Equity and other investments

 

 

7,498

 

 

 

13,128

 

 

 

147,059

 

 

 

167,685

 

Structured credit investments

 

 

—

 

 

 

51,426

 

 

 

—

 

 

 

51,426

 

Total investments at fair value

 

$

7,498

 

 

$

86,489

 

 

$

2,693,938

 

 

$

2,787,925

 

Interest rate swaps

 

 

—

 

 

 

(55,314

)

 

 

—

 

 

 

(55,314

)

Total

 

$

7,498

 

 

$

31,175

 

 

$

2,693,938

 

 

$

2,732,611

 

Changes in Fair Value of Investments Using Level 3 Inputs

The following tables present the changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three and nine months ended September 30, 2023:

 

 

As of and for the Three Months Ended

 

 

 

September 30, 2023

 

 

 

First-lien
debt
investments

 

 

Second-lien
debt
investments

 

 

Mezzanine
 debt
investments

 

 

Equity
and other
investments

 

 

Total

 

Balance, beginning of period

 

$

2,777,390

 

 

$

39,708

 

 

$

40,237

 

 

$

136,186

 

 

$

2,993,521

 

Purchases or originations

 

 

176,758

 

 

 

—

 

 

 

—

 

 

 

1,062

 

 

 

177,820

 

Repayments / redemptions

 

 

(142,031

)

 

 

—

 

 

 

(102

)

 

 

—

 

 

 

(142,133

)

Sales Proceeds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(5,380

)

 

 

(5,380

)

Paid-in-kind interest

 

 

3,830

 

 

 

207

 

 

 

996

 

 

 

—

 

 

 

5,033

 

Net change in unrealized gains (losses)

 

 

10,480

 

 

 

1

 

 

 

(2,373

)

 

 

(4,371

)

 

 

3,737

 

Net realized gains (losses)

 

 

(173

)

 

 

—

 

 

 

—

 

 

 

3,366

 

 

 

3,193

 

Net amortization of discount on securities

 

 

4,792

 

 

 

24

 

 

 

9

 

 

 

—

 

 

 

4,825

 

Transfers within Level 3

 

 

—

 

 

 

—

 

 

 

(2,500

)

 

 

2,500

 

 

 

—

 

Transfers into (out of) Level 3

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Balance, End of Period

 

$

2,831,046

 

 

$

39,940

 

 

$

36,267

 

 

$

133,363

 

 

$

3,040,616

 

 

 

 

As of and for the Nine Months Ended

 

 

 

September 30, 2023

 

 

 

First-lien
debt
investments

 

 

Second-lien
debt
investments

 

 

Mezzanine
 debt
investments

 

 

Equity
and other
investments

 

 

Total

 

Balance, beginning of period

 

$

2,495,959

 

 

$

40,762

 

 

$

10,158

 

 

$

147,059

 

 

$

2,693,938

 

Purchases or originations

 

 

594,216

 

 

 

4,850

 

 

 

29,806

 

 

 

3,122

 

 

 

631,994

 

Repayments / redemptions

 

 

(318,424

)

 

 

—

 

 

 

(102

)

 

 

—

 

 

 

(318,526

)

Sales Proceeds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(11,188

)

 

 

(11,188

)

Paid-in-kind interest

 

 

10,127

 

 

 

401

 

 

 

1,139

 

 

 

—

 

 

 

11,667

 

Net change in unrealized gains (losses)

 

 

37,626

 

 

 

(6,140

)

 

 

(2,270

)

 

 

(17,299

)

 

 

11,917

 

Net realized gains (losses)

 

 

(198

)

 

 

—

 

 

 

—

 

 

 

8,438

 

 

 

8,240

 

Net amortization of discount on securities

 

 

11,740

 

 

 

67

 

 

 

36

 

 

 

—

 

 

 

11,843

 

Transfers within Level 3

 

 

—

 

 

 

—

 

 

 

(2,500

)

 

 

2,500

 

 

 

—

 

Transfers into (out of) Level 3

 

 

—

 

 

 

—

 

 

 

—

 

 

 

731

 

 

 

731

 

Balance, End of Period

 

$

2,831,046

 

 

$

39,940

 

 

$

36,267

 

 

$

133,363

 

 

$

3,040,616

 

 

 

Certain of the Company's investment positions in Copper Bidco, LLC were transferred into Level 3 from Level 2 for fair value measurement purposes during the nine months ended September 30, 2023, as a result of changes in the observability of inputs into the security valuation for this portfolio company.

The following tables present the changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three and nine months ended September 30, 2022:

 

 

 

As of and for the Three Months Ended

 

 

 

September 30, 2022

 

 

 

First-lien
debt
investments

 

 

Second-lien
debt
investments

 

 

Mezzanine
 debt
investments

 

 

Equity
and other
investments

 

 

Total

 

Balance, beginning of period

 

$

2,295,057

 

 

$

41,523

 

 

$

10,397

 

 

$

137,581

 

 

$

2,484,558

 

Purchases or originations

 

 

243,794

 

 

 

—

 

 

 

—

 

 

 

8,355

 

 

 

252,149

 

Repayments / redemptions

 

 

(21,559

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(21,559

)

Sale Proceeds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Paid-in-kind interest

 

 

2,796

 

 

 

—

 

 

 

65

 

 

 

—

 

 

 

2,861

 

Net change in unrealized gains (losses)

 

 

(7,332

)

 

 

(344

)

 

 

(494

)

 

 

(3,547

)

 

 

(11,717

)

Net realized gains

 

 

55

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

55

 

Net amortization of discount on securities

 

 

3,328

 

 

 

18

 

 

 

1

 

 

 

—

 

 

 

3,347

 

Transfers within Level 3

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Transfers into (out of) Level 3

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Balance, End of Period

 

$

2,516,139

 

 

$

41,197

 

 

$

9,969

 

 

$

142,389

 

 

$

2,709,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the Nine Months Ended

 

 

 

September 30, 2022

 

 

 

First-lien
debt
investments

 

 

Second-lien
debt
investments

 

 

Mezzanine
 debt
investments

 

 

Equity
and other
investments

 

 

Total

 

Balance, beginning of period

 

$

2,298,856

 

 

$

—

 

 

$

18,549

 

 

$

117,233

 

 

$

2,434,638

 

Purchases or originations

 

 

622,416

 

 

 

54

 

 

 

—

 

 

 

41,131

 

 

 

663,601

 

Repayments / redemptions

 

 

(383,428

)

 

 

(10

)

 

 

—

 

 

 

—

 

 

 

(383,438

)

Sale Proceeds

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(18,315

)

 

 

(18,315

)

Paid-in-kind interest

 

 

9,433

 

 

 

—

 

 

 

190

 

 

 

—

 

 

 

9,623

 

Net change in unrealized gains (losses)

 

 

(43,946

)

 

 

(1,629

)

 

 

(6,640

)

 

 

(13,816

)

 

 

(66,031

)

Net realized gains

 

 

168

 

 

 

—

 

 

 

—

 

 

 

14,022

 

 

 

14,190

 

Net amortization of discount on securities

 

 

12,640

 

 

 

53

 

 

 

4

 

 

 

—

 

 

 

12,697

 

Transfers within Level 3

 

 

—

 

 

 

—

 

 

 

(2,134

)

 

 

2,134

 

 

 

—

 

Transfers into (out of) Level 3

 

 

—

 

 

 

42,729

 

 

 

—

 

 

 

—

 

 

 

42,729

 

Balance, End of Period

 

$

2,516,139

 

 

$

41,197

 

 

$

9,969

 

 

$

142,389

 

 

$

2,709,694

 

 
Net Change in Unrealized Gains or Losses on Investments for Which Level 3 Inputs were Used in Determining Fair Value

The following table presents information with respect to the net change in unrealized gains or losses on investments for which Level 3 inputs were used in determining fair value that are still held by the Company at September 30, 2023 and 2022:

 

 

Net Change in Unrealized

 

 

Net Change in Unrealized

 

 

 

Gains or (Losses)

 

 

Gains or (Losses)

 

 

 

for the Three Months Ended

 

 

for the Three Months Ended

 

 

 

September 30, 2023 on

 

 

September 30, 2022 on

 

 

 

Investments Held at

 

 

Investments Held at

 

 

 

September 30, 2023

 

 

September 30, 2022

 

First-lien debt investments

 

$

11,306

 

 

$

(8,880

)

Second-lien debt investments

 

 

1

 

 

 

(344

)

Mezzanine debt investments

 

 

411

 

 

 

(494

)

Equity and other investments

 

 

(1,400

)

 

 

(3,547

)

Total

 

$

10,318

 

 

$

(13,265

)

 

 

 

 

Net Change in Unrealized

 

 

Net Change in Unrealized

 

 

 

Gains or (Losses)

 

 

Gains or (Losses)

 

 

 

for the Nine Months Ended

 

 

for the Nine Months Ended

 

 

 

September 30, 2023 on

 

 

September 30, 2022 on

 

 

 

Investments Held at

 

 

Investments Held at

 

 

 

September 30, 2023

 

 

September 30, 2022

 

First-lien debt investments

 

$

40,214

 

 

$

(39,664

)

Second-lien debt investments

 

 

(6,140

)

 

 

(1,629

)

Mezzanine debt investments

 

 

976

 

 

 

(6,639

)

Equity and other investments

 

 

(9,947

)

 

 

797

 

Total

 

$

25,103

 

 

$

(47,135

)
Fair Value of Level 3 Investments at Fair Value Significant Unobservable Inputs Used in Valuations

The following tables present the fair value of Level 3 Investments at fair value and the significant unobservable inputs used in the valuations as of September 30, 2023 and December 31, 2022. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

 

 

 

September 30, 2023

 

 

 

 

 

Valuation

 

Unobservable

 

Range (Weighted

 

Impact to Valuation
from an

 

 

Fair Value

 

 

Technique

 

Input

 

Average)

 

Increase to Input

First-lien debt investments

 

$

2,831,046

 

 

Income approach (1)

 

Discount rate

 

9.8% — 18.0% (14.5%)

 

Decrease

Second-lien debt investments

 

 

39,940

 

 

Income approach (2)

 

Discount rate

 

15.5% — 15.5% (15.5%)

 

Decrease

Mezzanine debt investments

 

 

36,267

 

 

Income approach (3)

 

Discount rate

 

15.0% — 22.5% (15.6%)

 

Decrease

Equity and other investments

 

 

133,363

 

 

Market Multiple (4)

 

Comparable multiple

 

2.0x — 22.5x (6.8x)

 

Increase

Total

 

$

3,040,616

 

 

 

 

 

 

 

 

 

(1)
Includes $20.6 million of debt investments which were valued using an asset valuation waterfall.
(2)
Includes $34.6 million of debt investments which were valued using an asset valuation waterfall.
(3)
Includes $0.1 million of debt investments which were valued using an asset valuation waterfall.
(4)
Includes $10.3 million of equity investments which were valued using an asset valuation waterfall, $2.1 million of equity investments using a Black-Scholes model, and $14.9 million using discounted cash flow analysis.

 

 

December 31, 2022

 

 

 

 

 

Valuation

 

Unobservable

 

Range (Weighted

 

Impact to Valuation
from an

 

 

Fair Value

 

 

Technique

 

Input

 

Average)

 

Increase to Input

First-lien debt investments

 

$

2,495,959

 

 

Income approach (1)

 

Discount rate

 

9.3% — 18.5% (15.1%)

 

Decrease

Second-lien debt investments

 

 

40,762

 

 

Income approach

 

Discount rate

 

19.6% — 19.6% (19.6%)

 

Decrease

Mezzanine debt investments

 

 

10,158

 

 

Income approach (2)

 

Discount rate

 

14.5% — 18.0% (16.0%)

 

Decrease

Equity and other investments

 

 

147,059

 

 

Market Multiple (3)

 

Comparable multiple

 

2.0x — 26.6x (7.9x)

 

Increase

Total

 

$

2,693,938

 

 

 

 

 

 

 

 

 

 

(1)
Includes $21.0 million of first-lien debt investments which were valued using an asset valuation waterfall.
(2)
Includes $0.1 million of debt investments which were valued using an asset valuation waterfall.
(3)
Includes $38.4 million of equity investments which were valued using an asset valuation waterfall, $7.5 million of equity investments using a Black-Scholes model, and $13.1 million using a discounted cash flow analysis.
Fair Value of Company's 2023 Notes, 2024 Notes and 2026 Notes

The following table presents the fair value of the Company’s 2023 Notes, 2024 Notes, 2026 Notes and 2028 Notes, as of September 30, 2023 and December 31, 2022.

 

 

 

September 30, 2023

 

 

December 31, 2022

 

 

 

Outstanding
Principal

 

 

Fair
Value (1)

 

 

Outstanding
Principal

 

 

Fair
Value (1)

 

2023 Notes

 

$

—

 

 

$

—

 

 

$

150,000

 

 

$

149,640

 

2024 Notes

 

 

347,500

 

 

 

336,716

 

 

 

347,500

 

 

 

332,853

 

2026 Notes

 

 

300,000

 

 

 

264,725

 

 

 

300,000

 

 

 

261,750

 

2028 Notes

 

 

300,000

 

 

 

296,360

 

 

 

—

 

 

 

—

 

Total

 

$

947,500

 

 

$

897,801

 

 

$

797,500

 

 

$

744,243

 
(1)
The fair value is based on broker quotes received by the Company and is categorized as Level 2 within the fair value hierarchy.