Investments

9 Months Ended

Sep. 30, 2023

Note 4. Investments

Fair Value Measurement and Disclosures

The following table shows the composition of our investments as of September 30, 2023, with the fair value disaggregated into the three levels of the fair value hierarchy in accordance with ASC 820:

        Fair Value Hierarchy

        Cost

        Fair Value

        Level 1

        Level 2

        Level 3

        First Lien Secured Debt

        $

        5,247,771

         $

        5,241,795

        $

        —

        $

        1,413,988

        $

        3,827,807

        Second Lien Secured Debt

        39,544

        30,716

        —

        —

        30,716

        Unsecured Debt

        15,460

        14,206

        —

        14,206

        —

        Common Equity/Interests

        390

        480

        —

        —

        480

        Preferred Equity

        100

        35

        —

        —

        35

        Total Investments before Cash Equivalents

        $

        5,303,265

        $

        5,287,232

        $

        —

        $

        1,428,194

        $

        3,859,038

        Money Market Fund

        $

        240,002

        $

        240,002

        $

        240,002

        $

        —

        $

        —

        Total Cash Equivalents

        $

        240,002

        $

        240,002

        $

        240,002

        $

        —

        $

        —

        Total Investments after Cash Equivalents

        $

        5,543,267

        $

        5,527,234

        $

        240,002

        $

        1,428,194

        $

        3,859,038

        Interest rate swaps

        $

        —

        $

        (13,621)

        $

        —

        $

        (13,621)

        $

        —

        Foreign currency forward transactions

        —

        1,072

        —

        1,072

        —

        Total Assets and Liabilities at Fair Value

        $

        5,543,267

        $

        5,514,685

        $

        240,002

        $

        1,415,645

        $

        3,859,038

The following table shows the composition of our investments as of December 31, 2022, with the fair value disaggregated into the three levels of the fair value hierarchy in accordance with ASC 820:

        Fair Value Hierarchy

        Cost

        Fair Value

        Level 1

        Level 2

        Level 3

        First Lien Secured Debt

        $

        4,357,934

        $

        4,266,966

        $

        —

        $

        1,436,996

        $

        2,829,970

        Unsecured Debt

        69,276

        41,665

        —

        41,665

        —

        Common Equity/Interests

        200

        205

        —

        —

        205

        Preferred Equity

        100

        56

        —

        —

        56

        Total Investments before Cash Equivalents

        $

        4,427,510

        $

        4,308,892

        $

        —

        $

        1,478,661

        $

        2,830,231

        Money Market Fund

        $

        4

        $

        4

        $

        4

        $

        —

        $

        —

        Total Cash Equivalents

        $

        4

        $

        4

        $

        4

        $

        —

        $

        —

        Total Investments after Cash Equivalents

        $

        4,427,514

        $

        4,308,896

        $

        4

        $

        1,478,661

        $

        2,830,231

        Interest rate swaps

        $

        —

        $

        (460)

        $

        —

        $

        (460)

        $

        —

        Foreign currency forward transactions

        —

        249

        —

        249

        —

        Total Assets and Liabilities at Fair Value

        $

        4,427,514

        $

        4,308,685

        $

        4

        $

        1,478,450

        $

        2,830,231

The following tables show changes in the fair value of our Level 3 investments during the three and nine months ended September 30, 2023:


	Three Months Ended September 30, 2023
	First Lien Secured Debt (2)		Second Lien Secured Debt (2)		Unsecured Debt		Common Equity/Interests		Preferred Equity		Total
Fair value as of June 30, 2023	$	3,268,563	$	32,528	$	—	$	225	$	26	$	3,301,342
Net realized gains (losses)		234		—		—		—		—		234
Net change in unrealized gains (losses)		(9,764)		(1,744)		—		65		9		(11,434)
Net amortization on investments		2,828		(68)		—		—		—		2,760
Purchases, including capitalized PIK (3)		666,970		—		—		190		—		667,160
Sales (3)		(101,024)		—		—		—		—		(101,024)
Transfers out of Level 3 (1)		—		—		—		—		—		—
Transfers into Level 3 (1)		—		—		—		—		—		—
Fair value as of September 30, 2023	$	3,827,807	$	30,716	$	—	$	480	$	35	$	3,859,038

Net change in unrealized gains (losses) on Level 3 investments still held as of September 30, 2023	$	(3,404)	$	(1,744)	$	—	$	51	$	—	$	(5,097)


	Nine Months Ended September 30, 2023
	First Lien Secured Debt (2)		Second Lien Secured Debt (2)		Unsecured Debt		Common Equity/Interests		Preferred Equity		Total
Fair value as of December 31, 2022	$	2,829,970	$	—	$	—	$	205	$	56	$	2,830,231
Net realized gains (losses)		1,854		—		—		—		—		1,854
Net change in unrealized gains (losses)		17,596		(2,758)		—		85		(21)		14,902
Net amortization on investments		7,283		(199)		—		—		—		7,084
Purchases, including capitalized PIK (3)		1,568,260		33,673		—		190		—		1,602,123
Sales (3)		(538,926)		—		—		—		—		(538,926)
Transfers out of Level 3 (1)		(58,230)		—		—		—		—		(58,230)
Transfers into Level 3 (1)		—		—		—		—		—		—
Fair value as of September 30, 2023	$	3,827,807	$	30,716	$	—	$	480	$	35	$	3,859,038

Net change in unrealized gains (losses) on Level 3 investments still held as of September 30, 2023	$	16,563	$	(2,758)	$	—	$	85	$	(21)	$	13,869

(1)

Transfers out (if any) of Level 3 are due to an increase in the quantity and reliability of broker quotes obtained and transfers into (if any) Level 3 are due to a decrease in the quantity and reliability of broker quotes obtained as assessed by the Investment Adviser. Transfers are assumed to have occurred at the end of the period. There were no transfers between Level 1 and Level 2 fair value measurements during the periods shown.

(2)

Includes unfunded commitments measured at fair value of $(5,459).

(3)

Includes reorganizations and restructuring of investments.

The following tables show changes in the fair value of our Level 3 investments during the three and nine months ended September 30, 2022:


	Three Months Ended September 30, 2022
	First Lien Secured Debt (2)		Second Lien Secured Debt (2)		Unsecured Debt		Common Equity/Interests		Preferred Equity		Total
Fair value as of June 30, 2022	$	1,965,218	$	—	$	—	$	50	$	—	$	1,965,268
Net realized gains (losses)		389		—		—		—		—		389
Net change in unrealized gains (losses)		(14,209)		—		—		(6)		1		(14,214)
Net amortization on investments		1,334		—		—		—		—		1,334
Purchases, including capitalized PIK (3)		564,731		—		—		150		99		564,981
Sales (3)		(70,692)		—		—		—		—		(70,692)
Transfers out of Level 3 (1)		—		—		—		—		—		—
Transfers into Level 3 (1)		29,177		—		—		—		—		29,177
Fair value as of September 30, 2022	$	2,475,948	$	—	$	—	$	194	$	100	$	2,476,242
								—		—		—
Net change in unrealized gains (losses) on Level 3 investments still held as of September 30, 2022	$	(13,100)	$	—	$	—	$	(6)	$	1	$	(13,100)


	Nine Months Ended September 30, 2022
	First Lien Secured Debt (2)		Second Lien Secured Debt (2)		Unsecured Debt		Common Equity/Interests		Preferred Equity		Total
Fair value as of December 31, 2021	$	—	$	—	$	—	$	—	$	—	$	—
Net realized gains (losses)		3,894		—		182		—		—		4,076
Net change in unrealized gains (losses)		(32,544)		—		—		(6)		1		(32,549)
Net amortization on investments		2,503		—		—		—		—		2,503
Purchases, including capitalized PIK (3)		2,460,013		—		19,958		200		99		2,480,271
Sales (3)		(249,935)		—		(20,140)		—		—		(270,075)
Transfers out of Level 3 (1)		—		—		—		—		—		—
Transfers into Level 3 (1)		292,017		—		—		—		—		292,017
Fair value as of September 30, 2022	$	2,475,948	$	—	$	—	$	194	$	100	$	2,476,242
		—				—		—		—		—
Net change in unrealized gains (losses) on Level 3 investments still held as of September 30, 2022	$	(32,384)	$	—	$	—	$	(6)	$	1	$	(32,389)

(1)

(2)

Includes unfunded commitments measured at fair value of $(3,450).

(3)

Includes reorganizations and restructuring of investments.

The following tables summarize the significant unobservable inputs the Company used to value its investments categorized within Level 3 as of September 30, 2023 and December 31, 2022. In addition to the techniques and inputs noted in the tables below, according to our valuation policy we may also use other valuation techniques and methodologies when determining our fair value measurements. The below table is not intended to be all-inclusive, but rather provide information on the significant unobservable inputs as they relate to the Company’s determination of fair values.

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


			Quantitative Information about Level 3 Fair Value Measurements
Asset Category		Fair Value	Valuation Techniques/Methodologies	Unobservable Input	Range			Weighted Average (1)
First Lien Secured Debt	$	3,290,866	Discounted Cash Flow	Discount Rate	8.3%	-	13.9%	11.1%
		536,941	Transactional Value	Cost	N/A		N/A	N/A
Second Lien Secured Debt		30,716	Discounted Cash Flow	Discount Rate	19.1%	-	19.1%	19.1%
Common Equity/Interests		290	Market Comparable Technique	Comparable Multiple	7.8x	-	21.0x	14.2x
		190	Transactional Value	Cost	N/A	-	N/A	N/A
Preferred Equity		35	Market Comparable Technique	Comparable Multiple	13.3x	-	13.3x	13.3x
Total Level 3 Investments	$	3,859,038

(1)

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 commodity price unobservable input, the weighted average price is an undiscounted price based upon the estimated production level from the underlying reserves.

The unobservable inputs used in the fair value measurement of our Level 3 investments as of December 31, 2022 were as follows:


			Quantitative Information about Level 3 Fair Value Measurements
Asset Category		Fair Value	Valuation Techniques/Methodologies	Unobservable Input	Range			Weighted Average (1)
First Lien Secured Debt	$	2,279,041	Discounted Cash Flow	Discount Rate	8.7%	-	14.5%	10.7%
		550,929	Transactional Value	Cost	N/A		N/A	N/A
Common Equity/Interests		205	Recent Transaction	Recent Transaction	N/A		N/A	N/A
Preferred Equity		56	Recent Transaction	Recent Transaction	N/A		N/A	N/A
Total Level 3 Investments	$	2,830,231

(1)

The significant unobservable inputs used in the fair value measurement of the Company’s debt and equity securities are primarily earnings before interest, taxes, depreciation and amortization (“EBITDA”) comparable multiples and market discount rates. The Company typically uses EBITDA comparable multiples on its equity securities to determine the fair value of investments. The Company uses market discount rates for debt securities to determine if the effective yield on a debt security is commensurate with the market yields for that type of debt security. If a debt security’s effective yield is significantly less than the market yield for a similar debt security with a similar credit profile, the resulting fair value of the debt security may be lower. For certain investments where fair value is derived based on a recovery analysis, the Company uses underlying commodity prices from third party market pricing services to determine the fair value and/or recoverable amount, which represents the proceeds expected to be collected through asset sales or liquidation. Further, for certain investments, the Company also considered the probability of future events which are not in management’s control. Significant increases or decreases in any of these inputs in isolation would result in a significantly lower or higher fair value measurement. The significant unobservable inputs used in the fair value measurement of the structured products include the discount rate applied in the valuation models in addition to default and recovery rates applied to projected cash flows in the valuation models. Specifically, when a discounted cash flow model is used to determine fair value, the significant input used in the valuation model is the discount rate applied to present value the projected cash flows. Increases in the discount rate can significantly lower the fair value of an investment; conversely decreases in the discount rate can significantly increase the fair value of an investment. The discount rate is determined based on the market rates an investor would expect for a similar investment with similar risks.

Investment Transactions

For the three and nine months ended September 30, 2023, purchases of investments on a trade date basis were $880,047 and $2,306,194, respectively. For the three and nine months ended September 30, 2022, purchases of investments on a trade date basis were $760,047 and $5,826,781, respectively.

For the three and nine months ended September 30, 2023, sales and repayments (including prepayments and unamortized fees) of investments on a trade date basis were $376,012 and $1,441,363, respectively. For the three and nine months ended September 30, 2022, sales and repayments (including prepayments and unamortized fees) of investments on a trade date basis were $454,521 and $1,674,871, respectively.

PIK Income

The Company holds loans and other investments, including certain preferred equity investments, that have contractual PIK income. PIK income computed at the contractual rate is accrued into income and reflected as receivable up to the capitalization date. During the three and nine months ended September 30, 2023, PIK income earned was $2,983 and $6,728, respectively. During the three and nine months ended September 30, 2022, PIK income earned was $1,679 and $3,627, respectively.

The following table shows the change in capitalized PIK balance for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
		2023		2022		2023		2022
PIK balance at beginning of period	$	8,850	$	1,893	$	5,333	$	—
PIK income capitalized		2,392		1,734		5,909		3,627
Adjustments due to investments exited or written off		—		—		—		—
PIK income received in cash		—		—		—		—
PIK balance at end of period	$	11,242	$	3,627	$	11,242	$	3,627