PORTFOLIO INVESTMENTS AND FAIR VALUE

6 Months Ended

Jun. 30, 2024

PORTFOLIO INVESTMENTS AND FAIR VALUE

PORTFOLIO INVESTMENTS AND FAIR VALUE

NOTE 6 — PORTFOLIO INVESTMENTS AND FAIR VALUE

In accordance with the authoritative guidance on fair value measurements and disclosures under U.S. GAAP, the Company discloses the fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 — Quoted prices in markets that are not considered to be active or financial instruments for which significant inputs are observable, either directly or indirectly;

Level 3 — Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by management.

The Company considers whether the volume and level of activity for the asset or liability have significantly decreased and identifies transactions that are not orderly in determining fair value. Accordingly, if the Company determines that either the volume and/or level of activity for an asset or liability has significantly decreased (from normal conditions for that asset or liability) or price quotations or observable inputs are not associated with orderly transactions, increased analysis and management judgment will be required to estimate fair value. Valuation techniques such as an income approach might be appropriate to supplement or replace a market approach in those circumstances.

At June 30, 2024, the Company had investments in 100 portfolio companies. The composition of our investments as of June 30, 2024 is as follows:

	Cost		Fair Value
Senior Secured – First Lien(1)	$	829,427,074	$	807,170,632
Senior Secured – Second Lien		12,053,692		11,948,850
Unsecured Debt		6,529,163		6,434,510
Equity		61,507,960		74,124,457
Total Investments	$	909,517,889	$	899,678,449

(1) Includes unitranche investments, which may combine characteristics of first lien senior secured, as well as second lien and/or subordinated loans. Our unitranche loans may expose us to certain risk associated with second lien and subordinated loans to the extent we invest in the “last-out” portion of the unitranche loans which account for 4.3% of our portfolio at fair value.

At December 31, 2023, the Company had investments in 93 portfolio companies. The composition of our investments as of December 31, 2023 was as follows:

	Cost		Fair Value
Senior Secured – First Lien(1)	$	793,819,152	$	774,789,320
Senior Secured – Second Lien		42,269,568		21,957,500
Unsecured Debt		6,138,183		5,956,280
Equity		59,916,647		71,757,583
Total Investments	$	902,143,550	$	874,460,683

(1) Includes unitranche investments, which may combine characteristics of first lien senior secured, as well as second lien and/or subordinated loans. Our unitranche loans may expose us to certain risk associated with second lien and subordinated loans to the extent we invest in the “last-out” portion of the unitranche loans which account for 4.5% of our portfolio at fair value.

The Company’s investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements. As of June 30, 2024 and December 31, 2023, the Company had 63 and 57 of such investments with aggregate unfunded commitments of $42,716,858 and $37,021,242, respectively. The Company maintains sufficient liquidity (through cash on hand and available borrowings under the Credit Facility) to fund such unfunded loan commitments should the need arise.

The aggregate gross unrealized appreciation and depreciation and the aggregate cost and fair value of the Company’s portfolio company securities as of June 30, 2024 and December 31, 2023 were as follows:

	June 30, 2024		December 31, 2023
Aggregate cost of portfolio company securities	$	909,517,889	$	902,143,550
Gross unrealized appreciation of portfolio company securities		41,566,254		38,379,839
Gross unrealized depreciation of portfolio company securities		(50,517,053)		(65,262,547)
Gross unrealized appreciation on foreign currency translations of portfolio company securities		6,832		11,142
Gross unrealized depreciation on foreign currency translations of portfolio company securities		(895,473)		(811,301)
Aggregate fair value of portfolio company securities	$	899,678,449	$	874,460,683

The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of June 30, 2024 are as follows:

	Quoted Prices
	in Active
	Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
	Securities		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Senior Secured – First Lien	$	—	$	—	$	807,170,632	$	807,170,632
Senior Secured – Second Lien		—		—		11,948,850		11,948,850
Unsecured Debt		—		—		6,434,510		6,434,510
Equity		—		—		74,124,457		74,124,457
Total Investments	$	—	$	—	$	899,678,449	$	899,678,449

The fair values of our investments disaggregated into the three levels of the fair value hierarchy based upon the lowest level of significant input used in the valuation as of December 31, 2023 are as follows:

	Quoted Prices
	in Active
	Markets		Significant Other		Significant
	for Identical		Observable		Unobservable
	Securities		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Senior Secured – First Lien	$	—	$	—	$	774,789,320	$	774,789,320
Senior Secured – Second Lien		—		—		21,957,500		21,957,500
Unsecured Debt		—		—		5,956,280		5,956,280
Equity		—		—		71,757,583		71,757,583
Total Investments	$	—	$	—	$	874,460,683	$	874,460,683

The change in aggregate values of Level 3 portfolio investments during the six months ended June 30, 2024 are as follows:

	Senior Secured		Senior Secured
	Loans-First		Loans-Second		Unsecured
	Lien		Lien		Debt		Equity		Total
Fair value at beginning of period	$	774,789,320	$	21,957,500	$	5,956,280	$	71,757,583	$	874,460,683
Purchases of investments		91,773,227		—		104,064		2,976,848		94,854,139
Payment-in-kind interest		1,276,591		—		279,277		—		1,555,868
Sales and redemptions		(58,776,411)		(9,782,348)		—		(3,363,259)		(71,922,018)
Realized (losses) gains		—		(20,475,000)		—		1,977,726		(18,497,274)
Change in unrealized appreciation included in earnings(1)		(3,142,612)		20,207,225		87,604		779,692		17,931,909
Change in unrealized depreciation on foreign currency included in earnings		(84,000)		—		(349)		(4,133)		(88,482)
Amortization of premium and accretion of discount, net		1,334,517		41,473		7,634		—		1,383,624
Fair value at end of period	$	807,170,632	$	11,948,850	$	6,434,510	$	74,124,457	$	899,678,449

(1) Includes reversal of positions during the six months ended June 30, 2024.

There were no Level 3 transfers during the six months ended June 30, 2024.

The change in aggregate values of Level 3 portfolio investments during the year ended December 31, 2023 are as follows:

	Senior Secured		Senior Secured
	Loans-First		Loans-Second		Unsecured
	Lien		Lien		Debt		Equity		Total
Fair value at beginning of period	$	735,555,508	$	45,304,300	$	4,823,898	$	59,049,932	$	844,733,638
Purchases of investments		174,156,432		—		62,086		13,251,090		187,469,608
Payment-in-kind interest		3,185,845		—		613,998		—		3,799,843
Sales and redemptions		(125,442,776)		(9,882,105)		(211,627)		(2,280,087)		(137,816,595)
Realized losses		(11,200,184)		(17,979,749)		—		(702,093)		(29,882,026)
Change in unrealized (depreciation) appreciation included in earnings(1)		(4,667,866)		4,373,111		651,997		2,434,910		2,792,152
Change in unrealized appreciation on foreign currency included in earnings		610,523		—		166		3,831		614,520
Amortization of premium and accretion of discount, net		2,591,838		141,943		15,762		—		2,749,543
Fair value at end of period	$	774,789,320	$	21,957,500	$	5,956,280	$	71,757,583	$	874,460,683

(1) Includes reversal of positions during the year ended December 31, 2023.

There were no Level 3 transfers during the year ended December 31, 2023.

The following is a summary of geographical concentration of our investment portfolio as of June 30, 2024:

					% of Total
					Investments at
	Cost		Fair Value		Fair Value
Texas	$	190,397,619	$	182,310,319	20.26	%
California		175,231,067		167,876,824	18.66	%
Florida		97,112,470		95,037,776	10.56	%
Pennsylvania		50,135,079		50,880,596	5.66	%
Illinois		60,071,025		50,057,978	5.56	%
Arizona		43,670,291		46,107,597	5.12	%
Ohio		32,503,385		33,898,064	3.77	%
Colorado		31,592,859		30,213,198	3.36	%
Wisconsin		27,376,583		26,652,648	2.96	%
New York		23,410,121		23,776,815	2.64	%
Canada		23,591,112		23,720,849	2.64	%
Georgia		11,689,719		21,497,197	2.39	%
Massachusetts		17,803,910		18,188,672	2.02	%
Missouri		16,862,205		16,878,753	1.88	%
District of Columbia		12,907,715		14,931,792	1.66	%
North Carolina		13,837,116		14,545,047	1.62	%
New Jersey		12,657,028		13,723,098	1.53	%
Indiana		13,310,323		13,359,110	1.48	%
Michigan		10,632,842		10,675,129	1.19	%
Tennessee		9,380,372		9,503,729	1.06	%
Washington		8,224,142		8,268,232	0.92	%
Idaho		8,139,043		8,194,898	0.91	%
Louisiana		7,368,587		7,571,666	0.84	%
Minnesota		6,254,365		6,298,112	0.70	%
South Carolina		4,828,567		4,976,220	0.55	%
United Kingdom		438,063		443,358	0.05	%
Maryland		92,281		90,772	0.01	%
Total Investments at Fair Value	$	909,517,889	$	899,678,449	100.00	%

The following is a summary of geographical concentration of our investment portfolio as of December 31, 2023:

					% of Total
					Investments
	Cost		Fair Value		at Fair Value
Texas	$	182,531,256	$	175,311,724	20.04	%
California		175,207,692		167,713,589	19.18	%
Florida		93,155,844		92,297,574	10.55	%
Pennsylvania		49,939,315		50,188,102	5.74	%
Illinois		58,633,617		49,834,429	5.70	%
Arizona		42,136,322		44,558,279	5.10	%
Ohio		31,805,370		34,370,277	3.93	%
Colorado		31,525,420		30,971,079	3.54	%
Wisconsin		27,452,444		26,190,771	3.00	%
Washington		24,321,085		24,540,695	2.81	%
Georgia		9,100,050		18,885,409	2.16	%
Maryland		16,676,194		16,718,728	1.91	%
New York		14,692,043		14,931,263	1.71	%
Indiana		14,235,403		14,488,700	1.66	%
North Carolina		13,891,930		14,532,532	1.66	%
District of Columbia		13,030,899		14,006,563	1.60	%
New Jersey		10,461,226		11,191,295	1.28	%
Michigan		10,664,100		10,736,783	1.23	%
Massachusetts		10,151,621		10,515,487	1.20	%
Tennessee		9,390,657		9,379,311	1.07	%
Missouri		8,862,512		8,850,162	1.01	%
Canada		8,700,383		8,813,132	1.01	%
Idaho		8,405,946		8,470,065	0.97	%
Minnesota		5,976,818		5,907,639	0.68	%
Louisiana		5,538,823		5,536,231	0.63	%
South Carolina		4,946,375		5,083,862	0.58	%
United Kingdom		20,710,205		437,002	0.05	%
Total Investments at Fair Value	$	902,143,550	$	874,460,683	100.00	%

The following is a summary of industry concentration of our investment portfolio as of June 30, 2024:

					% of Total
					Investments at
	Cost		Fair Value		Fair Value
Services: Business	$	202,749,474	$	213,983,941	23.79	%
Healthcare & Pharmaceuticals		101,386,605		101,756,317	11.32	%
High Tech Industries		79,664,820		80,852,810	8.99	%
Media: Advertising, Printing & Publishing		72,108,946		73,574,049	8.18	%
Capital Equipment		52,138,481		53,627,751	5.96	%
Beverage, Food, & Tobacco		48,771,753		52,344,722	5.82	%
Consumer Goods: Non-Durable		63,718,753		51,305,443	5.70	%
Consumer Goods: Durable		48,269,368		42,809,175	4.76	%
Environmental Industries		27,282,468		26,475,138	2.94	%
Services: Consumer		28,016,420		25,404,537	2.82	%
Aerospace & Defense		27,343,433		24,668,190	2.74	%
Chemicals, Plastics, & Rubber		22,846,701		22,833,761	2.54	%
Construction & Building		21,430,125		21,540,125	2.39	%
Transportation & Logistics		17,227,934		17,521,862	1.95	%
Containers, Packaging, & Glass		17,416,591		16,014,420	1.78	%
Retail		14,853,049		14,717,767	1.64	%
Media: Broadcasting & Subscription		12,227,156		14,248,411	1.58	%
Energy: Oil & Gas		11,376,162		10,532,005	1.17	%
Education		10,482,969		8,005,290	0.89	%
FIRE: Real Estate		17,934,808		7,500,423	0.83	%
Finance		557,135		7,128,653	0.79	%
Hotel, Gaming, & Leisure		5,925,134		6,949,968	0.77	%
Media: Diversified & Production		5,789,604		5,883,691	0.65	%
Total Investments at Fair Value	$	909,517,889	$	899,678,449	100.00	%

The following is a summary of industry concentration of our investment portfolio as of December 31, 2023:

					% of Total
					Investments
	Cost		Fair Value		at Fair Value
Services: Business	$	198,018,290	$	207,963,749	23.78	%
Healthcare & Pharmaceuticals		100,724,952		102,915,887	11.77	%
High Tech Industries		90,795,799		91,992,012	10.52	%
Media: Advertising, Printing & Publishing		57,640,321		58,741,061	6.72	%
Consumer Goods: Non-Durable		63,145,301		52,938,611	6.05	%
Beverage, Food, & Tobacco		42,554,582		45,074,817	5.15	%
Consumer Goods: Durable		49,046,730		43,725,324	5.00	%
Capital Equipment		32,517,673		33,879,801	3.87	%
Services: Consumer		33,976,976		33,260,111	3.80	%
Construction & Building		30,319,119		30,486,411	3.49	%
Aerospace & Defense		46,745,104		24,541,921	2.81	%
Environmental Industries		24,219,811		22,997,844	2.63	%
Media: Broadcasting & Subscription		17,952,103		20,760,920	2.37	%
Transportation & Logistics		17,235,150		17,661,859	2.02	%
Chemicals, Plastics, & Rubber		18,338,366		17,569,176	2.01	%
Metals & Mining		16,580,562		16,625,000	1.90	%
Containers, Packaging, & Glass		17,432,252		15,539,555	1.78	%
Utilities: Oil & Gas		9,943,041		10,000,000	1.14	%
Education		10,251,179		8,367,469	0.96	%
FIRE: Real Estate		17,285,138		6,175,994	0.71	%
Media: Diversified & Production		5,662,174		5,763,247	0.66	%
Finance		569,039		5,736,868	0.66	%
Hotel, Gaming, & Leisure		—		890,968	0.10	%
Energy: Oil & Gas		1,189,888		852,078	0.10	%
Total Investments at Fair Value	$	902,143,550	$	874,460,683	100.00	%

The following provides quantitative information about Level 3 fair value measurements as of June 30, 2024:

Description:	Fair Value		Valuation Technique	Unobservable Inputs	Range (Average)(1)(3)
First lien debt	$	807,170,632	Income/Market	HY credit spreads,	-4.75% to 6.36% (-0.65%)
			approach(2)	Risk free rates	-2.46% to 2.75% (0.60%)
				Market multiples	5.3x to 24.1x (11.8x)(4)
Second lien debt	$	11,948,850	Income/Market	HY credit spreads,	-2.08% to -0.76% (-1.42%)
			approach(2)	Risk free rates	0.22% to 0.23% (0.22%)
				Market multiples	5.1 to 10.1x (7.6x)(4)
Unsecured debt	$	6,434,510	Income/Market	HY credit spreads,	-1.18% to -1.18% (-1.18%)
			approach(2)	Risk free rates	0.04% to 0.04% (0.04%)
Equity investments	$	74,124,457	Market approach(5)	Underwriting multiple/
				EBITDA multiple	3.5x to 19.3x (11.7x)
Total Long Term Level 3 Investments	$	899,678,449

(1) Weighted average based on fair value as of June 30, 2024.

(2) Included but not limited to (a) the market approach, which is used to determine sufficient enterprise value, and (b) the income approach which is based on discounting future cash flows using an appropriate market yield.

(3) The Company calculates the price of the loan by discounting future cash flows, which include forecasted future BSBY, SOFR, or SONIA rates based on the published forward curve at the valuation date, using an appropriate yield calculated as of the valuation date. This yield is calculated based on the loan’s yield at the original investment and is adjusted as of the valuation date based on: changes in comparable credit spreads, changes in risk free interest rates (per swap rates), and changes in credit quality (via an estimated shadow rating). Significant movements in any of these factors could result in a significantly lower or higher fair value measurement. As an example, the “Range (Average)” for first lien debt instruments in the table above indicates that the change in the HY spreads between the date a loan closed and the valuation date ranged from -4.75% (-475 basis points) to 6.36% (636 basis points). The average of all changes was -0.65% (-65 basis points).

(4) Median of LTM (last twelve months) EBITDA multiples of comparable companies.

(5) The primary significant unobservable input used in the fair value measurement of the Company’s equity investments is the EBITDA multiple (the “Multiple”). Significant increases (decreases) in the Multiple in isolation could result in a significantly higher (lower) fair value measurement. To determine the Multiple for the market approach, the Company considers current market trading and/or transaction multiple, portfolio company performance (financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate Multiple to use in the market approach.

The following provides quantitative information about Level 3 fair value measurements as of December 31, 2023:

Description:	Fair Value		Valuation Technique	Unobservable Inputs	Range (Average)(1)(3)
First lien debt	$	774,789,320	Income/Market	HY credit spreads,	-3.00% to 8.11% (-0.23%)
			approach(2)	Risk free rates	-1.62% to 2.03% (0.04%)
				Market multiples	5.2x to 22.5x (11.0x)(4)
Second lien debt	$	21,957,500	Income/Market	HY credit spreads,	-0.97% to -0.33% (-0.63%)
			approach(2)	Risk free rates	-0.51% to 0.31% (-0.23%)
				Market multiples	6.5x to 17.5x (10.9x)(4)
Unsecured debt	$	5,956,280	Income/Market	HY credit spreads,	4.98% to 4.98% (4.98%)
			approach(2)	Risk free rates	4.47% to 4.47% (4.47%)
				Market multiples	9.5x to 9.5x (9.5x)(4)
Equity investments	$	71,757,583	Market approach(5)	Underwriting multiple/
				EBITDA multiple	3.5x to 23.2x (12.1x)
Total Long Term Level 3 Investments	$	874,460,683

(1) Weighted average based on fair value as of December 31, 2023.

(2) Inclusive of but not limited to (a) the market approach, which is used to determine sufficient enterprise value, and (b) the income approach which is based on discounting future cash flows using an appropriate market yield.

(3) The Company calculates the price of the loan by discounting future cash flows, which include forecasted future LIBOR rates based on the published forward LIBOR curve at the valuation date, using an appropriate yield calculated as of the valuation date. This yield is calculated based on the loan’s yield at the original investment and is adjusted as of the valuation date based on: changes in comparable credit spreads, changes in risk free interest rates (per swap rates), and changes in credit quality (via an estimated shadow rating). Significant movements in any of these factors would result in a significantly lower or higher fair value measurement. As an example, the “Range (Average)” for a first lien debt instruments in the table above indicates that the change in the HY spreads between the date a loan closed and the valuation date ranged from -3.00% (-300 basis points) to 8.11% (811 basis points). The average of all changes was -0.23% (-23 basis points).

(4) Median of LTM (last twelve months) EBITDA multiples of comparable companies.

(5) The primary significant unobservable input used in the fair value measurement of the Company’s equity investments is the EBITDA multiple (the “Multiple”). Significant increases (decreases) in the Multiple in isolation would result in a significantly higher (lower) fair value measurement. To determine the Multiple for the market approach, the Company considers current market trading and/or transaction multiple, portfolio company performance (financial ratios) relative to public and private peer companies and leverage levels, among other factors. Changes in one or more of these factors can have a similar directional change on other factors in determining the appropriate Multiple to use in the market approach.