UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
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Table of Contents
i
Forward-Looking Statements
This quarterly report on Form 10-Q contains forward-looking statements that involve substantial known and unknown risks, uncertainties and other factors. Undue reliance should not be placed on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about the company, current and prospective portfolio investments, the industry, beliefs and assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond control of the Company and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:
| ● | future operating results; |
| ● | business prospects and the prospects of portfolio companies; |
| ● | changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets; |
| ● | the ability of KA Credit Advisors II, LLC (our “Advisor”) to locate suitable investments and to monitor and administer investments; |
| ● | the ability of the Advisor and its affiliates to attract and retain highly talented professionals; |
| ● | risk associated with possible disruptions in operations or the economy generally; |
| ● | the timing of cash flows, if any, from the operations of the companies in which the Company invests; |
| ● | the dependence of the future success on the general economy and its effect on the industries in which the Company invests; |
| ● | the ability to maintain qualification as a business development company (“BDC”) and as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”); |
| ● | the use of borrowed money to finance a portion of the Company’s investments; |
| ● | the adequacy, availability and pricing of financing sources and working capital for the Company; |
| ● | actual or potential conflicts of interest with the Advisor and its affiliates; |
| ● | contractual arrangements and relationships with third parties; |
| ● | the risk associated with an economic downturn, increased inflation, political instability, interest rate volatility, loss of key personnel, and the illiquid nature of investments of the Company; and |
| ● | the risks, uncertainties and other factors the Company identifies under “Item 1A. Risk Factors” and elsewhere in this quarterly report on Form 10-Q. |
We have based the forward-looking statements included in this report on information available to us on the date of this report. We assume no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. Although we undertake no obligation to revise or update any forward-looking statements, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the United States Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, registration statements on Form 10, quarterly reports on Form 10-Q and current reports on Form 8-K.
ii
PART I—FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Kayne DL 2021, Inc.
Consolidated Statements of Assets and Liabilities
(amounts in 000’s, except share and per share amounts)
| September 30, 2022 (Unaudited) | December 31, 2021 | |||||||
| Assets: | ||||||||
| Investments, at fair value: | ||||||||
| Long-term investments (amortized cost of $ | $ | $ | ||||||
| Short-term investments (amortized cost of $ | ||||||||
| Cash and cash equivalents | ||||||||
| Deferred offering costs | ||||||||
| Receivable for principal payments on investments | ||||||||
| Interest receivable | ||||||||
| Prepaid expenses and other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities: | ||||||||
| Subscription credit facility (Note 6) | $ | $ | ||||||
| Payable to affiliate | ||||||||
| Management fee payable | ||||||||
| Accrued expenses and other liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Commitments and contingencies (Note 8) | ||||||||
| Net Assets: | ||||||||
Common Shares, $ |
|
$ |
|
|
$ |
|
||
| Additional paid-in capital | ||||||||
| Total distributable earnings (deficit) | ||||||||
| Total Net Assets | $ | $ | ||||||
| Total Liabilities and Net Assets | $ | $ | ||||||
| Net Asset Value Per Common Share | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
1
Kayne DL 2021, Inc.
Consolidated Statements of Operations
(amounts in 000’s, except share and per share amounts)
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Income: | ||||||||||||||||
| Investment income from investments: | ||||||||||||||||
| Interest income | $ | $ | $ | $ | ||||||||||||
| Total investment income from investments | ||||||||||||||||
| Total Investment Income | ||||||||||||||||
| Expenses: | ||||||||||||||||
| Interest expense | ||||||||||||||||
| Management fees | ||||||||||||||||
| Professional fees | ||||||||||||||||
| Directors fees | ||||||||||||||||
| Offering costs | ||||||||||||||||
| Initial organization costs | ||||||||||||||||
| Other general and administrative expenses | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| Net Investment Income (Loss) | ( | ) | ( | ) | ||||||||||||
| Realized and unrealized gains (losses) on investments | ||||||||||||||||
| Net realized gains (losses): | ||||||||||||||||
| Investments | ||||||||||||||||
| Total net realized gains (losses) | ||||||||||||||||
| Net change in unrealized gains (losses): | ||||||||||||||||
| Investments | ||||||||||||||||
| Total net change in unrealized gains (losses) | ||||||||||||||||
| Total realized and unrealized gains (losses) | ||||||||||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Per Common Share Data: | ||||||||||||||||
| Basic and diluted net investment income per common share | $ | $ | ||||||||||||||
| $ | $ | |||||||||||||||
See accompanying notes to consolidated financial statements.
2
Kayne DL 2021, Inc.
Consolidated Statements of Changes in Net Assets
(amounts in 000’s)
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, 2022 | September 30, 2021 | September 30, 2022 | September 30, 2021 | |||||||||||||
| Increase (Decrease) in Net Assets Resulting from Operations: | ||||||||||||||||
| Net investment income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net realized gains (losses) on investments | - | - | ||||||||||||||
| Net change in unrealized gains (losses) on investments | - | - | ||||||||||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | ( | ) | ( | ) | ||||||||||||
| Decrease in Net Assets Resulting from Stockholder Distributions | ||||||||||||||||
| Dividends and distributions to stockholders | ( | ) | - | ( | ) | - | ||||||||||
| Net Decrease in Net Assets Resulting from Stockholder Distributions | ( | ) | - | ( | ) | - | ||||||||||
| Increase in Net Assets Resulting from Capital Share Transactions | ||||||||||||||||
| Issuance of common shares | - | - | - | |||||||||||||
| Reinvestment of distributions | - | - | ||||||||||||||
| Net Increase in Net Assets Resulting from Capital Share Transactions | - | - | ||||||||||||||
| Total Increase (Decrease) in Net Assets | ( | ) | ( | ) | ||||||||||||
| Net Assets, Beginning of Period | ( | ) | ||||||||||||||
| Net Assets, End of Period | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
See accompanying notes to consolidated financial statements.
3
Kayne DL 2021, Inc.
Consolidated Statements of Cash Flows
(amounts in 000’s)
(Unaudited)
| For the nine months ended | ||||||||
| September 30, 2022 | September 30, 2021 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net increase (decrease) in net assets resulting from operations | $ | $ | ( | ) | ||||
| Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities: | ||||||||
| Net realized (gains)/losses on investments | ( | ) | ||||||
| Net change in unrealized (gains)/losses on investments | ( | ) | ||||||
| Net accretion of discount on investments | ( | ) | ||||||
| Sales of short-term investments, net | ||||||||
| Purchases of portfolio investments | ( | ) | ||||||
| Proceeds from sales of investments and principal repayments | ||||||||
| Amortization of deferred financing cost | ||||||||
| Increase/(decrease) in operating assets and liabilities: | ||||||||
| (Increase)/decrease in interest and dividends receivable | ( | ) | ||||||
| (Increase)/decrease in deferred offering costs | ( | ) | ||||||
| (Increase)/decrease in receivable for principal payments on investments | ( | ) | ||||||
| (Increase)/decrease in prepaid expenses and other assets | ( | ) | ||||||
| Increase/(decrease) in management fees payable | ||||||||
| Increase/(decrease) in payable to affiliate | ||||||||
| Increase/(decrease) in accrued organizational and offering costs, net | ( | ) | ||||||
| Increase/(decrease) in accrued other general and administrative expenses | ||||||||
| Net cash used in operating activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Borrowings on subscription credit facility, net | ||||||||
| Payments of debt issuance costs | ( | ) | ||||||
| Distributions paid in cash | ( | ) | ||||||
| Proceeds from issuance of common shares | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase in cash and cash equivalents | ||||||||
| Cash and cash equivalents, beginning of period | ||||||||
| Cash and cash equivalents, end of period | $ | $ | ||||||
| Supplemental and Non-Cash Information: | ||||||||
| Interest paid during the period | $ | $ | ||||||
| Non-cash financing activities not included herein consisted of reinvestment of dividends | $ | $ | ||||||
See accompanying notes to consolidated financial statements.
4
Kayne DL 2021, Inc.
Consolidated Schedule of Investments
As of September 30, 2022
(amounts in 000’s)
(Unaudited)
| Maturity | Principal / | Amortized | Fair | Percentage | ||||||||||||||||
| Portfolio Company(1) | Investment | Interest Rate | Date | Par | Cost(2)(3) | Value | of Net Assets | |||||||||||||
| Debt Investments | ||||||||||||||||||||
| Private Credit Investments(4) | ||||||||||||||||||||
| Aerospace & defense | ||||||||||||||||||||
| Precinmac (US) Holdings, Inc. | First lien senior secured loan | $ | $ | % | ||||||||||||||||
| % | ||||||||||||||||||||
| Asset management & custody banks | ||||||||||||||||||||
| Atria Wealth Solutions, Inc. | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Auto components | ||||||||||||||||||||
| Vehicle Accessories, Inc. | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Building products | ||||||||||||||||||||
| BCI Burke Holding Corp. | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Chemicals | ||||||||||||||||||||
| Schrieve Chemical Company, LLC | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Commercial services & supplies | ||||||||||||||||||||
| Allentown, LLC | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| BLP Buyer, Inc. (Bishop Lifting Products) | First lien senior secured revolving loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
5
Kayne DL 2021, Inc.
Consolidated Schedule of Investments
As of September 30, 2022
(amounts in 000’s)
(Unaudited)
| Maturity | Principal / | Amortized | Fair | Percentage | ||||||||||||||||
| Portfolio Company(1) | Investment | Interest Rate | Date | Par | Cost(2)(3) | Value | of Net Assets | |||||||||||||
| Containers & packaging | ||||||||||||||||||||
| FCA, LLC (FCA Packaging) | First lien senior secured revolving loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Diversified telecommunication services | ||||||||||||||||||||
| Corbett Technology Solutions, Inc. | First lien senior secured loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Electronic equipment, instruments & components | ||||||||||||||||||||
| Process Insights, Inc. | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Food products | ||||||||||||||||||||
| Gulf Pacific Holdings, LLC | First lien senior secured delayed draw loan | |||||||||||||||||||
| First lien senior secured revolving loan | ||||||||||||||||||||
| First lien senior secured loan | ||||||||||||||||||||
| Siegel Egg Co., LLC | First lien senior secured revolving loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Health care providers & services | ||||||||||||||||||||
| Brightview, LLC | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| Guardian Dentistry Partners | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| Light Wave Dental Management LLC | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured delayed draw loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| First lien senior secured delayed draw loan | % | |||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| OMH-HealthEdge Holdings, LLC | First lien senior secured loan | % | ||||||||||||||||||
| SGA Dental Partners Holdings, LLC | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
6
Kayne DL 2021, Inc.
Consolidated Schedule of Investments
As of September 30, 2022
(amounts in 000’s)
(Unaudited)
| Maturity | Principal / | Amortized | Fair | Percentage | ||||||||||||||||
| Portfolio Company(1) | Investment | Interest Rate | Date | Par | Cost(2)(3) | Value | of Net Assets | |||||||||||||
| Health care providers & services | ||||||||||||||||||||
| Insurance | ||||||||||||||||||||
| Allcat Claims Service, LLC | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| IT services | ||||||||||||||||||||
| Improving Acquisition LLC | First lien senior secured revolving loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Leisure products | ||||||||||||||||||||
| MacNeill Pride Group | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
7
Kayne DL 2021, Inc.
Consolidated Schedule of Investments
As of September 30, 2022
(amounts in 000’s)
(Unaudited)
| Maturity | Principal / | Amortized | Fair | Percentage | ||||||||||||||||
| Portfolio Company(1) | Investment | Interest Rate | Date | Par | Cost(2)(3) | Value | of Net Assets | |||||||||||||
| Machinery | ||||||||||||||||||||
| Pennsylvania Machine Works, LLC | First lien senior secured loan | % | ||||||||||||||||||
| PVI Holdings, Inc | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Software | ||||||||||||||||||||
| AIDC Intermediate Co 2, LLC (Peak Technologies) | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Textiles, apparel & luxury goods | ||||||||||||||||||||
| American Soccer Company, Incorporated (SCORE) | First lien senior secured revolving loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Trading companies & distributors | ||||||||||||||||||||
| CGI Automated Manufacturing, LLC | First lien senior secured revolving loan | % | ||||||||||||||||||
| First lien senior secured delayed draw loan | % | |||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| Genuine Cable Group, LLC | First lien senior secured loan | % | ||||||||||||||||||
| I.D. Images Acquisition, LLC | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Wireless telecommunication services | ||||||||||||||||||||
| Centerline Communications, LLC | First lien senior secured delayed draw loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Total Private Credit Investments | % | |||||||||||||||||||
| Total Debt Investments | % | |||||||||||||||||||
| Number of | Fair | Percentage | ||||||||||||||
| Shares | Cost | Value | of Net Assets | |||||||||||||
| Short-Term Investments | ||||||||||||||||
| First American Treasury Obligations Fund - Institutional Class Z, 2.83% (5) | % | |||||||||||||||
| Total Short-Term Investments | % | |||||||||||||||
| Total Investments | $ | $ | % | |||||||||||||
| Liabilities in Excess of Other Assets | ( | ) | ( | )% | ||||||||||||
| Net Assets | $ | % | ||||||||||||||
| (1) | As of September 30, 2022, all investments are non-controlled, non-affiliated investments. Non-controlled, non-affiliated investments are defined as investments in which the Company owns less than 5% of the portfolio company’s outstanding voting securities and does not have the power to exercise control over the management or policies of such portfolio company. |
| (2) | The amortized cost represents the original cost adjusted for the amortization of discounts and premiums, as applicable, on debt investments using the effective interest method. |
| (3) | As of September 30, 2022, the tax cost of the Company's investments approximates their amortized cost. |
| (4) | Loan contains a variable rate structure, that may be subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by reference to the London Interbank Offered Rate (“LIBOR” or “L”) (which can include one-, two-, three- or six-month LIBOR), the Secured Overnight Funding Rate (“SOFR” or “S”) (which can include one-, three- or six-month SOFR), or an alternate base rate (which can include the Federal Funds Effective Rate or the Prime Rate or “P”). |
| (5) | The indicated rate is the yield as of September 30, 2022. |
See accompanying notes to consolidated financial statements.
8
Kayne DL 2021, Inc.
Consolidated Schedule of Investments
As of December 31, 2021
(amounts in 000’s)
| Maturity | Principal / | Amortized | Fair | Percentage | ||||||||||||||||
| Portfolio Company(1) | Investment | Interest Rate | Date | Par | Cost(2)(3) | Value | of Net Assets | |||||||||||||
| Debt Investments | ||||||||||||||||||||
| Private Credit Investments(4) | ||||||||||||||||||||
| Capital goods | ||||||||||||||||||||
| I.D. Images Acquisition, LLC | First lien senior secured loan | $ | $ | % | ||||||||||||||||
| % | ||||||||||||||||||||
| Consumer durables & apparel | ||||||||||||||||||||
| BCI Burke Holding Corp. | First lien senior secured loan | % | ||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| First lien senior secured delayed draw loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Food & beverage | ||||||||||||||||||||
| Siegel Egg Co., LLC | First lien senior secured revolving loan | % | ||||||||||||||||||
| First lien senior secured loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Health care equipment & services | ||||||||||||||||||||
| Brightview, LLC | First lien senior secured loan | % | ||||||||||||||||||
| First lien senior secured delayed draw loan | % | |||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| Guardian Dentistry Partners | First lien senior secured loan | % | ||||||||||||||||||
| First lien senior secured delayed draw loan | % | |||||||||||||||||||
| SGA Dental Partners Holdings, LLC | First lien senior secured loan | % | ||||||||||||||||||
| First lien senior secured delayed draw loan | % | |||||||||||||||||||
| First lien senior secured revolving loan | % | |||||||||||||||||||
| % | ||||||||||||||||||||
| Software & services | ||||||||||||||||||||
| Peak Technologies | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Telecommunication services | ||||||||||||||||||||
| Corbett Technology Solutions, Inc. | First lien senior secured loan | % | ||||||||||||||||||
| % | ||||||||||||||||||||
| Total Private Credit Investments | % | |||||||||||||||||||
| Total Debt Investments | % | |||||||||||||||||||
See accompanying notes to consolidated financial statements.
9
Kayne DL 2021, Inc.
Consolidated Schedule of Investments
As of December 31, 2021
(amounts in 000’s)
| Number of Shares | Cost | Fair Value | Percentage of Net Assets | |||||||||||||
| Short-Term Investments | ||||||||||||||||
| First American Treasury Obligations Fund - Institutional Class Z, 0.01% (5) | % | |||||||||||||||
| Total Short-Term Investments | % | |||||||||||||||
| Total Investments | $ | $ | % | |||||||||||||
| Liabilities in Excess of Other Assets | ( | ) | ( | )% | ||||||||||||
| Net Assets | $ | % | ||||||||||||||
| (1) |
| (2) |
| (3) |
| (4) |
| (5) |
See accompanying notes to consolidated financial statements.
10
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Note 1. Organization
Organization
Kayne DL 2021, Inc. (the “Company”) is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, the Company intends to continue to be treated as and to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
The Company was formed as a Delaware corporation to make investments in middle-market companies and commenced operations on December 16, 2021.
As of September 30, 2022, the Company has entered into subscription
agreements with investors for an aggregate capital commitment of $
KA Credit Advisors II, LLC (the “Advisor”) serves as the Company’s investment advisor. The Advisor is an indirect subsidiary of Kayne Anderson Capital Advisors, L.P. (“KACALP” or “Kayne Anderson”). The Advisor is registered with the Securities and Exchange Commission (“SEC”) as an investment advisor under the Investment Advisers Act of 1940, as amended. Subject to the overall supervision of the Company’s board of directors (the “Board”), the Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring investments and monitoring its investments and portfolio companies on an ongoing basis. The Board consists of five directors, four of whom are independent (including the Board’s chairperson). See Note 11 – Subsequent Events.
The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies.
The Company conducts private offerings of its Common Stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). At the closing of any private offering, each investor will make a capital commitment (a “Capital Commitment”) to purchase shares of its Common Stock (“Shares”) pursuant to a subscription agreement entered into with the Company. Investors will be required to fund drawdowns to purchase Shares up to the amount of their respective Capital Commitments each time the Company delivers a notice to the investors. The Company commenced its loan origination and investment activities on December 16, 2021 contemporaneously with the initial drawdown from investors in the private offering.
Note 2. Significant Accounting Policies
A. Basis of Presentation—the accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company is an investment company and follows accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 — “Financial Services — Investment Companies.” In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair statement of the financial statements for the periods presented, have been included.
B. Consolidation—As provided under Regulation S-X and ASC Topic 946 – “Financial Services – Investment Companies”, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of KDL Corp, LLC in its consolidated financial statements. As of September 30, 2022, KDL Corp, LLC held no investments.
C. Use of Estimates—the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the period. Actual results could differ materially from those estimates.
D. Cash and Cash Equivalents—cash and cash equivalents include short-term, liquid investments with an original maturity of three months or less and include money market fund accounts.
E. Investment Valuation, Fair Value—the Company conducts the valuation of its investments consistent with GAAP and the 1940 Act. The Company’s investments will be valued no less frequently than quarterly, in accordance with the terms of Topic 820 of the Financial Accounting Standards Board’s Accounting Standards Codification, Fair Value Measurement and Disclosures (“ASC 820”).
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. Pursuant to Rule 2a-5 and effective September 1, 2022, the Board of Directors designated the Advisor as the “valuation designee” to perform fair value determinations of the Company’s portfolio holdings, subject to oversight by and periodic reporting to the Board. The valuation designee will perform fair valuation of the Company’s portfolio holdings in accordance with the Company’s Valuation Program, as adopted by the Board. The Advisor’s internal valuation process did not materially change as a result of Rule 2a-5.
11
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Traded Investments (Level 1 or Level 2)
Investments for which market quotations are readily available will typically be valued at those market quotations. Traded investments such as corporate bonds, preferred stock, bank notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker, the agent bank, syndicate bank or principal market maker. When price quotes for investments are not available, or such prices are stale or do not represent fair value in the judgment of the Company’s Advisor, fair market value will be determined using the Advisor’s valuation process for investments that are privately issued or otherwise restricted as to resale.
Infrequently, the Company may also invest, to a lesser extent, in equity securities purchased in conjunction with debt investments. While the Company anticipates these equity securities to be issued by privately held companies, the Company may hold equity securities that are publicly traded. Equity securities listed on any exchange other than the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities admitted to trade on the NASDAQ are valued at the NASDAQ official closing price. Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Equity securities traded in the over-the-counter market, but excluding securities admitted to trading on the NASDAQ, are valued at the closing bid prices.
Non-Traded Investments (Level 3)
Investments that are privately issued or otherwise restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment of the Company’s Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment of the Company’s Advisor is stale or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the security on the valuation date. The Company expects that a significant majority of its investments will be Level 3 investments. Unless otherwise determined by the Advisor, the following valuation process is used for the Company’s Level 3 investments:
| ● | Valuation Designee. The applicable investments will be valued no less frequently than quarterly by the Advisor, with new investments valued at the time such investment was made. The value of each Level 3 investment will be initially reviewed by the persons responsible for such portfolio company or investment. The Advisor will use a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs to determine a preliminary value. The Advisor will specify the titles of the persons responsible for determining the fair value of Company investments, including by specifying the particular functions for which they are responsible, and will reasonably segregate fair value determinations from the portfolio management of the Company such that the portfolio manager(s) may not determine, or effectively determine by exerting substantial influence on, the fair values ascribed to portfolio investments. |
| ● | Valuation Firm. Quarterly, a third-party valuation firm engaged by the Advisor reviews the valuation methodologies and calculations employed for each of the Company’s investments that the Advisor has placed on the “watch list” and approximately |
| ● | Oversight. The Board has appointed the Advisor as the valuation designee for the Company for purposes of making determinations of fair value as permitted by Rule 2a-5 under the 1940 Act. The Audit Committee shall aid the Board in overseeing the Advisor’s fair valuation of securities that are not publicly traded or for which current market values are not readily available. The Audit Committee shall meet quarterly to review the fair value determinations, processes and written reports of the Advisor as part of the Board’s oversight responsibilities. |
12
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements will express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
F. Interest Income Recognition— Interest income is recorded on an accrual basis and includes the accretion of discounts, amortization of premiums and payment-in-kind (“PIK”) interest. Discounts from and premiums to par value on investments purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. To the extent loans contain PIK provisions, PIK interest, computed at the contractual rate specified in each applicable agreement, is accrued and recorded as interest income and added to the principal balance of the loan. PIK interest income added to the principal balance is generally collected upon repayment of the outstanding principal. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends for the year the income was earned, even though the Company has not yet collected the cash. The amortized cost of investments represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest.
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon the Company’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer any reasonable doubt that such principal or interest will be collected in full and, in the Company’s judgment, principal and interest are likely to remain current. The Company may make exceptions to this policy if the loan has sufficient collateral value (i.e., typically measured as enterprise value of the portfolio company) or is in the process of collection.
G. Debt Issuance Costs – Costs incurred by the Company related to the issuance of its debt (credit facility) are capitalized and amortized over the period the debt is outstanding. For the purpose of calculating the Company’s asset coverage ratios pursuant to the 1940 Act, deferred issuance costs are not deducted from the carrying value of debt.
H. Dividends to Common Stockholders—Distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Company’s board of directors each quarter and is generally based upon the earnings estimated by management and considers the level of undistributed taxable income carried forward from the prior year for distribution in the current year. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such capital gains for investment.
I. Organizational Costs—organizational expenses include costs and expenses relating to the formation and organization of the Company. The Company has reimbursed the Advisor for these costs which are expensed as incurred.
J. Offering
Costs – offering costs include costs and expenses incurred in connection with the offering of the Company’s common
stock. These costs were capitalized as deferred offering expenses and included in prepaid expenses and other assets on the Statement of
Assets and Liabilities. These costs were amortized over a twelve-month period beginning with the commencement of operations. These expenses
consist primarily of legal fees and other costs incurred in connection with the Company’s share offerings, the preparation of the
Company’s registration statement and registration fees. The Company reimbursed the Advisor for these costs. The aggregate amount
of organizational expenses and offering costs shall not exceed $
K. Income Taxes – it is the Company’s intention to continue to be treated as and to qualify each year for special tax treatment afforded a RIC under the Code. As long as the Company meets certain requirements that govern its sources of income, diversification of assets and timely distribution of earnings to stockholders, the Company will not be subject to U.S. federal income tax.
13
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
The Company must pay distributions equal to
The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
L. LIBOR Transition — The U.K. Financial Conduct Authority (“FCA”) announced that certain London Interbank Offered Rate (“LIBOR”) tenors in certain currencies ceased to be provided at the end of 2021 with all remaining tenors ceasing in June 2023. Alternatives to LIBOR have been established, or are in development in most major currencies, including the Secured Overnight Financing Rate (“SOFR”) that is intended to replace U.S. dollar LIBOR. Markets are developing in response to these new reference rates. The LIBOR transition has become increasingly well-defined in advance of its anticipated discontinuation, but uncertainty remains related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the time of transition. At this time, it is not possible to predict fully the ultimate outcome of these changes.
M. Commitments and Contingencies – in the normal course of business, the Company may enter into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
Note 3. Agreements and Related Party Transactions
A. Administration Agreement – on December 16, 2021, the Company entered into an Administration Agreement with its Advisor, which serves as its Administrator and will provide or oversee the performance of its required administrative services and professional services rendered by others, which will include (but are not limited to), accounting, payment of our expenses, legal, compliance, operations, technology and investor relations, preparation and filing of its tax returns, and preparation of financial reports provided to its stockholders and filed with the SEC.
The Company will reimburse the Administrator for its costs and expenses incurred in performing its obligations under the Administration Agreement. As the Company reimburses the Administrator for its expenses, the Company will indirectly bear such cost. The Administration Agreement may be terminated by either party with 60 days’ written notice.
14
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
B. Investment Advisory Agreement – on December 16, 2021, the Company entered into an Investment Advisory Agreement with its Advisor. Pursuant to the Investment Advisory Agreement with its Advisor, the Company will pay its Advisor a management fee for investment advisory and management services. The Investment Advisory Agreement may be terminated by either party with 60 days’ written notice.
The Company has agreed to reimburse the Advisor and its affiliates for the third-party costs incurred on its behalf in connection with the formation and the offering of shares of the Company’s common stock. Amounts shown as payables to affiliates on the Statement of Assets and Liabilities represent organizational expenses and offering costs of the Company that were paid by the Advisor and its affiliates on behalf of the Company.
Management Fee
The management fee will be calculated at an annual rate of 0.75% of the fair market value of the Company’s investments including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase.
The management fee will be payable quarterly in arrears and calculated based on the average value, at the end of the two most recently completed calendar quarters, of our fair market value of investments, including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase. Management fees for any partial quarter will be appropriately pro-rated.
For the three and nine months ended September 30, 2022, the Company
incurred management fees of $
C. Other – KACALP, an affiliate of the Advisor, made equity
contributions of $
Note 4. Investments
The following table presents the composition of the Company’s investment portfolio at amortized cost and fair value as of September 30, 2022 and December 31, 2021:
| September 30, 2022 | December 31, 2021 | |||||||||||||||
| Amortized | Fair | Amortized | Fair | |||||||||||||
| Cost | Value | Cost | Value | |||||||||||||
| First-lien senior secured debt investments | $ | $ | $ | $ | ||||||||||||
| Short-term investments | ||||||||||||||||
| Total Investments | $ | $ | $ | $ | ||||||||||||
As of September 30, 2022 and December 31, 2021, all of the Company’s investments were qualifying assets as defined by Section 55(a) of the 1940 Act.
Beginning with the three months ended March 31, 2022, the Company uses Global Industry Classification Standards (GICS), Level 3 – Industry, for classifying the industry groupings of its portfolio companies. As of December 31, 2021, the Company used GICS, Level 2 – Industry Group.
15
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
The industry composition of long-term investments based on fair value as of September 30, 2022 and December 31, 2021 was as follows:
| September 30, 2022 | ||||
| Health care providers & services | % | |||
| Trading companies & distributors | % | |||
| Commercial services & supplies | % | |||
| Food products | % | |||
| IT services | % | |||
| Machinery | % | |||
| Software | % | |||
| Textiles, apparel & luxury goods | % | |||
| Containers & packaging | % | |||
| Building products | % | |||
| Diversified telecommunication services | % | |||
| Auto components | % | |||
| Electronic equipment, instruments & components | % | |||
| Leisure products | % | |||
| Insurance | % | |||
| Wireless telecommunication services | % | |||
| Aerospace & defense | % | |||
| Chemicals | % | |||
| Asset management & custody banks | % | |||
| Total | % | |||
| December 31, 2021 | ||||
| Health care equipment & services | % | |||
| Food & beverage | % | |||
| Consumer durables & apparel | % | |||
| Telecommunication services | % | |||
| Capital goods | % | |||
| Software & services | % | |||
| Total | % | |||
16
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Note 5. Fair Value
The Fair Value Measurement Topic of the FASB Accounting Standards Codification (ASC 820) defines fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants under current market conditions at the measurement date. As required by ASC 820, the Company has performed an analysis of all investments measured at fair value to determine the significance and character of all inputs to their fair value determination. Inputs are the assumptions, along with considerations of risk, that a market participant would use to value an asset or a liability. In general, observable inputs are based on market data that is readily available, regularly distributed and verifiable that the Company obtains from independent, third-party sources. Unobservable inputs are developed by the Company based on its own assumptions of how market participants would value an asset or a liability.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories.
Level 1 — Valuations based on quoted unadjusted prices for identical instruments in active markets traded on a national exchange to which the Company has access at the date of measurement.
Level 2 — Valuations based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
The following table presents the fair value hierarchy of investments as of September 30, 2022 and December 31, 2021. Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with the underlying investment.
| Fair Value Hierarchy as of September 30, 2022 | ||||||||||||||||
| Investments: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| First-lien senior secured debt investments | $ | $ | $ | $ | ||||||||||||
| Short-term investments | ||||||||||||||||
| Total Investments | $ | $ | $ | $ | ||||||||||||
| Fair Value Hierarchy as of December 31, 2021 | ||||||||||||||||
| Investments: | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| First-lien senior secured debt investments | $ | $ | $ | $ | ||||||||||||
| Short-term investments | ||||||||||||||||
| Total Investments | $ | $ | $ | $ | ||||||||||||
17
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
The following tables present 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. There were no investments in the Company for the three and nine months ended September 30, 2021.
| For the three months ended |
||||
| September 30, 2022 |
||||
| Fair value, beginning of period | $ | |||
| Purchases of investments | ||||
| Proceeds from sales of investments and principal repayments | ( |
) | ||
| Net change in unrealized gain (loss) | ||||
| Net accretion of discount on investments | ||||
| Transfers into (out of) Level 3 | ||||
| Fair value, end of period | $ | |||
| For the nine months ended |
||||
| September 30, 2022 |
||||
| Fair value, beginning of period | $ | |||
| Purchases of investments | ||||
| Proceeds from principal payments and sales of investments | ( |
) | ||
| Net change in unrealized gain (loss) | ||||
| Net accretion of discount on investments | ||||
| Transfers into (out of) Level 3 | ||||
| Fair value, end of period | $ | |||
For the three and nine months ended September 30, 2022, the Company did not recognize any transfers to or from Level 3. The increase in unrealized gain (loss) relates to investments that were held during the period. The Company includes these unrealized gains and losses on the Statement of Operations – Net Change in Unrealized Gains (Losses).
Valuation Techniques and Unobservable Inputs
Non-traded debt investments are typically valued using either a market yield analysis or an enterprise value analysis. For debt investments that are not considered to be credit impaired, the Company uses a market yield analysis to determine fair value. If the debt investment is considered to be credit impaired (which is determined by performing an enterprise value analysis), the Company will use the enterprise value analysis or a liquidation basis analysis to determine fair value. As of September 30, 2022, none of the Company’s non-traded debt investments were considered to be credit impaired, and the Company used a market yield analysis to determine fair value on these investments.
To determine the estimated market yield for our debt investments, the Company analyzes changes in the risk/reward (measured by yields and leverage) of middle market indices as compared to changes in risk/reward for the underlying investment (the “Market Approach”) and estimates the appropriate credit spread for such debt investment. In this context, the fair market value of the investment is impacted by the structure and pricing of the security relative to current market yields and credit spreads for similar investments in similar businesses as well as the financial performance of such business. In performing this analysis, the Company considers data sources including, but not limited to: (i) industry publications, such as S&P Global’s High-End Middle Market Lending Review; Thomson Reuter’s Refinitiv Middle Market Monthly Stats; CapitalIQ; Pitchbook News; The Lead Left, and other data sources; (ii) comparable investments reviewed or completed by affiliates of the Advisor, and (iii) information obtained and provided by the Advisor’s independent valuation managers.
To determine if a debt investment is credit impaired, the Company estimates the enterprise value of the business and compares such estimate to the outstanding indebtedness of such business. The Company utilizes the following valuation methodologies to determine the estimated enterprise value of the company: (i) analysis of valuations of publicly traded companies in a similar line of business (“public company analysis”), (ii) analysis of valuations of M&A transaction valuations for companies in a similar line of business (“precedent transaction analysis”), (iii) discounted cash flows (“DCF analysis”) and (iv) other valuation methodologies.
18
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
In determining the non-traded debt investment valuations, the following factors are considered, where relevant: the nature and realizable value of any collateral; the company’s ability to make interest payments, amortization payments (if any) and other fixed charges; call features, put features and other relevant terms of the debt security; the company’s historical and projected financial results; the markets in which the company does business; changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be valued; and other relevant factors.
Equity investments in private companies are typically valued using one of or a combination of the following valuation techniques: (i) public company analysis, (ii) precedent transaction analysis and (iii) DCF analysis.
Under all of these valuation techniques, the Advisor estimates operating results of the companies in which it invests, including earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”) and free cash flow. These estimates utilize unobservable inputs such as historical operating results, which may be unaudited, and projected operating results, which will be based on operating assumptions for such company. Investment performance data utilized will be the most recently available as of the measurement date which in many cases may reflect up to a one quarter lag in information. These estimates will be sensitive to changes in assumptions specific to such company as well as general assumptions for the industry. Other unobservable inputs utilized in the valuation techniques outlined above include: discounts for lack of marketability, selection of publicly traded companies, selection of similar precedent transactions, selected ranges for valuation multiples and expected required rates of return (discount rates).
Quantitative Table for Valuation Techniques
The following tables presents quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of September 30, 2022 and December 31, 2021. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to the Company’s determination of fair value.
| As of September 30, 2022 | ||||||||||||||
| Fair | Valuation | Unobservable | Weighted | |||||||||||
| Value | Technique | Input | Range | Average | ||||||||||
| First-lien senior secured debt investments | $ | % | ||||||||||||
| As of December 31, 2021 | ||||||||||||||
| Fair | Valuation | Unobservable | Weighted | |||||||||||
| Value | Technique | Input | Range | Average | ||||||||||
| First-lien senior secured debt investments | $ | % | ||||||||||||
Note 6. Debt
On
For the nine months ended September 30, 2022, the Company had $
19
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Debt obligations consisted of the following as of September 30, 2022:
| September 30, 2022 | ||||||||||||
| Aggregate Principal Committed | Outstanding Principal | Amount Available(1) | ||||||||||
| Subscription Credit Facility | $ | $ | $ | |||||||||
| Total debt | $ | $ | $ | |||||||||
| (1) | The amount available reflects any limitations related to the Subscription Credit Facility's borrowing base as of September 30, 2022. |
For the three and nine months ended September 30, 2022, the components of interest expense were as follows. There was no Subscription Credit Facility in place at September 30, 2021 as the Company had not yet commenced investment operations.
| For the three months ended |
||||
| September 30, 2022 |
||||
| Interest expense | $ | |
||
| Amortization of debt issuance costs | ||||
| Total interest expense | $ | |||
| For the nine months ended |
||||
| September 30, 2022 |
||||
| Interest expense | $ | |||
| Amortization of debt issuance costs | ||||
| Total interest expense | $ | |||
20
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Note 7. Share Transactions
Common Stock Issuances
The following table summarizes the number of common stock shares issued and aggregate proceeds received from such issuances related to the Company’s capital call notices pursuant to subscription agreements with investors for the nine months ended September 30, 2022. See Note 11 – Subsequent Events.
| Offering price | Common stock | Aggregate | ||||||||||
| Common stock issue date | per share | shares issued | offering amount | |||||||||
| June 29, 2022 | $ | | $ | | ||||||||
| Total common stock issued | $ | |||||||||||
As of September 30, 2022, the Company had
subscription agreements with investors for an aggregate capital commitment of $
Dividends and Dividend Reinvestment
The following table summarizes the dividends declared and payable by the Company for the nine months ended September 30, 2022. See Note 11 – Subsequent Events.
| Dividend | Dividend | Dividend | ||||||
| Dividend declaration date | record date | payment date | per share | |||||
| April 19, 2022 | $ | |||||||
| July 19, 2022 | ||||||||
| $ | ||||||||
The following table summarizes the amounts received and shares of common stock issued to shareholders pursuant to the Company’s dividend reinvestment plan for the nine months ended September 30, 2022. See Note 11 – Subsequent Events.
| Dividend | DRIP | |||||||||
| payment | shares | DRIP | ||||||||
| Dividend record date | date | issued | value | |||||||
| April 20, 2022 | $ | |||||||||
| July 20, 2022 | ||||||||||
| $ | ||||||||||
21
Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Note 8. Commitments and Contingencies
The Company had an aggregate of $
A summary of the composition of the unfunded commitments as of September 30, 2022 and December 31, 2021 is shown in the table below:
| As of | As of | |||||||
| September 30, 2022 | December 31, 2021 | |||||||
| Allcat Claims Service, LLC | $ | $ | ||||||
| Allentown, LLC | ||||||||
| American Soccer Company, Incorporated (SCORE) | ||||||||
| Atria Wealth Solutions, Inc. | ||||||||
| BCI Burke Holding Corp. | ||||||||
| BLP Buyer, Inc. (Bishop Lifting Products) | ||||||||
| Brightview, LLC | ||||||||
| Centerline Communications, LLC | ||||||||
| CGI Automated Manufacturing, LLC | ||||||||
| FCA, LLC (FCA Packaging) | ||||||||
| Guardian Dentistry Partners | ||||||||
| Gulf Pacific Holdings, LLC | ||||||||
| Improving Acquisition LLC | ||||||||
| Light Wave Dental Management LLC | ||||||||
| MacNeill Pride Group | ||||||||
| SGA Dental Partners Holdings, LLC | ||||||||
| Siegel Egg Co., LLC | ||||||||
| Total unfunded commitments | $ | $ | ||||||
From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of September 30, 2022 and December 31, 2021, management was not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure.
Note 9. Earnings Per Share
In accordance with the provisions of ASC Topic 260, Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. As of September 30, 2022, there were no dilutive shares.
The following table sets forth the computation of basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2022. The Company commenced investment operations on December 16, 2021.
| For the three months ended | For the nine months ended | |||||||
| September 30, 2022 | September 30, 2022 | |||||||
| Net increase (decrease) in net assets resulting from operations | $ | | $ | | ||||
| $ | $ | |||||||
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Kayne DL 2021, Inc.
Notes to Consolidated Financial Statements
(amounts in 000s, except for shares and per share data)
(Unaudited)
Note 10. Financial Highlights
The following per share of common stock data has been derived from information provided in the unaudited financial statements. The following is a schedule of financial highlights for the nine months ended September 30, 2022. The Company commenced investment operations on December 16, 2021.
| For the nine months ended | ||||
| September 30, 2022 (amounts in thousands, except share and per share amounts) | ||||
| Per Common Share Operating Performance (1) | ||||
| Net Asset Value, Beginning of Period | $ | |||
| Results of Operations: | ||||
| Net Investment Income | ||||
| Net Realized and Unrealized Gain (Loss) on Investments(2) | ||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | ||||
| Distributions to Common Stockholders | ||||
| Distributions from Net Investment Income | ( | ) | ||
| Net Decrease in Net Assets Resulting from Distributions | ( | ) | ||
| Net Asset Value, End of Period | $ | |||
| Shares Outstanding, End of Period | ||||
| Ratio/Supplemental Data | ||||
| Net assets, end of period | $ | |||
| Weighted-average shares outstanding | ||||
| Total Return(3) | % | |||
| Portfolio turnover | % | |||
| Ratio of operating expenses to average net assets | % | |||
| Ratio of net investment income (loss) to average net assets | % | |||
| (1) | |
| (2) | |
| (3) |
Note 11. Subsequent Events
The Company’s management has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent events that require recognition or disclosure in these financial statements except as described below.
On October 14, 2022, the Company sold
On October 25, 2022, the Company paid a distribution of $
On November 8, 2022, the Board of Directors (the “Board”) of the Company elected Rhonda Smith as a member of the Board. Ms. Smith will serve as an independent director of the Company until she stands for re-election at the 2024 Annual Meeting of Stockholders of the Company.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our financial statements and related notes and other financial information appearing elsewhere in this Quarterly Report on Form 10-Q. Except as otherwise specified, references to “we,” “us,” “our,” or the “Company” refer to Kayne DL 2021, Inc.
Overview and Investment Framework
Kayne DL 2021, Inc. was formed as a Delaware corporation to make investments in middle-market companies and commenced operations on December 16, 2021. We are an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes, we intend to qualify, annually, as a RIC under Subchapter M of the Code.
We are managed by KA Credit Advisors II, LLC (the “Advisor”) which is an indirect subsidiary of Kayne Anderson Capital Advisors, L.P. (“KACALP” or “Kayne Anderson”). The Advisor is registered with the Securities and Exchange Commission (“SEC”) as an investment advisor under the Investment Advisers Act of 1940, as amended. Subject to the overall supervision of the Company’s board of directors (the “Board”), the Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring investments and monitoring its investments and portfolio companies on an ongoing basis. The Board consists of five directors, four of whom are independent.
Our investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies. We define “middle-market companies” as U.S.-based companies that, in general, generate between $10 million and $150 million of annual earnings before interest, taxes, depreciation and amortization, or EBITDA. We refer to companies that generate between $10 million and $50 million of annual EBITDA as “core middle-market companies” and companies that generate between $50 million and $150 million of annual EBITDA as “upper middle-market companies.”
We intend to achieve our investment objective by investing primarily in first lien senior secured, unitranche and split-lien loans (collectively, “secured middle market loans”) to privately held middle-market companies. Similar to first lien senior secured loans, unitranche loans typically have a first lien on all assets of the borrower, but provide leverage at levels similar to a combination of first lien and second lien and/or subordinated loans. Split-lien loans are loans that otherwise satisfy the criteria of a first lien loan but which have been structured with a credit facility that is senior in right of payment with respect to working capital assets of the borrower and a term loan that is collateralized by all other assets of the borrower. Depending on market conditions, we expect that at least 90% of our portfolio (including investments purchased with proceeds from borrowings, if any) will be invested in secured middle market loans. It is anticipated that most of these investments will be in core middle market companies, with the remainder in upper middle market companies. The remaining 10% of our portfolio may be invested in higher-returning investments, including, but not limited to, equity securities purchased in conjunction with secured middle market loans and other opportunistic investments (collectively “Opportunistic Investments”), including junior debt, real estate debt and infrastructure credit investments. We expect that the secured middle market loans we invest in will generally have stated maturities of no more than six years.
We intend to execute on our investment objective by (1) accessing the established loan sourcing channels developed by Kayne Anderson’s middle market private credit team, which includes an extensive network of private equity firms, other middle-market lenders, financial advisors and intermediaries, and management teams, (2) selecting investments within our middle-market company focus, (3) implementing Kayne Anderson’s middle market private credit team’s proven underwriting process, and (4) drawing upon the experience and resources of our Advisor’s investment team and the broader Kayne Anderson network.
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We believe our Advisor’s disciplined approach to origination, credit analysis, portfolio construction and risk management should allow us to achieve attractive risk-adjusted returns while preserving investor capital. We anticipate the portfolio will be comprised of a broad mix of loans, with diversity among investment size, industry focus and geography. The Advisor’s team of professionals will conduct in-depth due diligence on prospective investments during the underwriting process and will be heavily involved in structuring the loan’s credit terms of each investment. Once an investment has been made, our Advisor will closely monitor portfolio investments and take a proactive approach identifying and addressing sector or company specific risks. The Advisor maintains a regular dialogue with portfolio company management teams (as well as their financial sponsors, where applicable), reviews detailed operating and financial results on a regular basis (typically monthly or quarterly) and monitors current and projected liquidity needs, in addition to other portfolio management activities.
Recent Developments
On October 14, 2022, we sold 4,933 shares of common stock for a total aggregate offering price of $25.0 million. KACALP, an affiliate of our Advisor, made an equity contribution of $0.2 million associated with its 1% commitment for this October 14, 2022 share issuance. We have subscription agreements with investors for an aggregate capital commitment of $353.5 million to purchase shares of common stock ($275.5 million is undrawn).
On October 25, 2022, we paid a distribution of $72.00 per share to each common stockholder of record as of October 13, 2022. The total distribution was $0.8 million and $0.8 million was reinvested into the Company through the purchase of 150 shares of common stock.
On November 8, 2022, our Board of Directors (the “Board”) elected Rhonda Smith as a member of the Board. Ms. Smith will serve as an independent director for us until she stands for re-election at our 2024 Annual Meeting of Stockholders.
Portfolio and Investment Activity
As of September 30, 2022, we had 55 debt investments in 28 portfolio companies with an aggregate fair value of approximately $58.2 million and an amortized cost of $57.0 million consisting of first lien senior secured debt investments.
As of September 30, 2022, our weighted average total yield to maturity of debt and income producing securities at fair value was 9.9%, and our weighted average total yield to maturity of debt and income producing securities at amortized cost was 10.1%.
Our investment activity for the three months ended September 30, 2022 is presented below (information presented herein is at par value unless otherwise indicated).
| For the three months ended |
||||
| September 30, 2022 ($ in millions) |
||||
| New investments: | ||||
| Gross new investment commitments | $ | 24.5 | ||
| Less: investment commitments sold down, exited or repaid(1) | (1.2 | ) | ||
| Net investment commitments | 23.3 | |||
| Principal amount of investments funded: | ||||
| Private credit investments | $ | 22.8 | ||
| Liquid credit investments | - | |||
| Total principal amount of investments funded | 22.8 | |||
| Principal amount of investments sold: | ||||
| Private credit investments | (1.4 | ) | ||
| Liquid credit investments | - | |||
| Total principal amount of investments sold or repaid | (1.4 | ) | ||
| Number of new investment commitments | 14 | |||
| Average new investment commitment amount | $ | 1.8 | ||
| Weighted average maturity for new investment commitments(2) | 4.8 years | |||
| Percentage of new debt investment commitments at floating rates | 100.0 | % | ||
| Percentage of new debt investment commitments at fixed rates | 0.0 | % | ||
| Weighted average interest rate of new investment commitments | 9.6 | % | ||
| Weighted average spread over benchmark rate of new floating rate investment commitments | 6.2 | % | ||
| Weighted average interest rate on investment sold or paid down | 9.6 | % | ||
| (1) | Does not include repayments on revolving loans, which may be redrawn. |
| (2) | For undrawn delayed draw term loans, the maturity date used is that of the associated term loan. |
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Beginning with the three months ended March 31, 2022, we use Global Industry Classification Standards (GICS), Level 3 – Industry, for classifying the industry groupings of its portfolio companies. As of December 31, 2021, we used GICS, Level 2 – Industry Group.
The tables below describe long-term investments by industry composition based on fair value as of September 30, 2022 and December 31, 2021:
| September 30, 2022 | ||||
| Health care providers & services | 22.7 | % | ||
| Trading companies & distributors | 14.6 | % | ||
| Commercial services & supplies | 8.9 | % | ||
| Food products | 7.7 | % | ||
| IT services | 7.1 | % | ||
| Machinery | 5.2 | % | ||
| Software | 5.2 | % | ||
| Textiles, apparel & luxury goods | 4.6 | % | ||
| Containers & packaging | 4.4 | % | ||
| Building products | 4.2 | % | ||
| Diversified telecommunication services | 3.0 | % | ||
| Auto components | 3.0 | % | ||
| Electronic equipment, instruments & components | 2.5 | % | ||
| Leisure products | 2.5 | % | ||
| Insurance | 1.9 | % | ||
| Wireless telecommunication services | 1.2 | % | ||
| Aerospace & defense | 0.5 | % | ||
| Chemicals | 0.4 | % | ||
| Asset management & custody banks | 0.4 | % | ||
| Total | 100.0 | % | ||
| December 31, 2021 | ||||
| Health care equipment & services | 39.8 | % | ||
| Food & beverage | 22.7 | % | ||
| Consumer durables & apparel | 19.9 | % | ||
| Telecommunication services | 8.0 | % | ||
| Capital goods | 6.0 | % | ||
| Software & services | 3.6 | % | ||
| Total | 100.0 | % |
Results of Operations
Investment Income
For the three and nine months ended September 30, 2022, our total investment income was derived from our portfolio of investments. All debt investments were income producing, and there were no loans on non-accrual status as of September 30, 2022.
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The following table represents the operating results for the three and nine months ended September 30, 2022. For the three and nine months ended September 30, 2021, our only results consisted of initial organization costs of $0.11 million and $0.44 million, respectively. We commenced investment operations on December 16, 2021.
| For the three months ended | For the nine months ended | |||||||
| September 30, 2022 | September 30, 2022 | |||||||
| ($ in millions) | ($ in millions) | |||||||
| Total investment income | $ | 1.12 | $ | 2.08 | ||||
| Less: Net expenses | (0.39 | ) | (1.04 | ) | ||||
| Net investment income | 0.73 | 1.04 | ||||||
| Net realized gains (losses) on investments | (0.00 | ) | (0.00 | ) | ||||
| Net change in unrealized gains (losses) on investments | 0.47 | 0.91 | ||||||
| Net increase (decrease) in net assets resulting from operations | $ | 1.20 | $ | 1.95 | ||||
Investment Income
Investment income for the three and nine months ended September 30, 2022 totaled $1.1 million and $2.1 million, respectively, and consisted primarily of interest income on our debt investments.
Expenses
Operating expenses for the three and nine months ended September 30, 2022, was as follows. For the three and nine months ended September 30, 2021, our only results consisted of initial organization costs of $0.11 million and $0.44 million, respectively. We commenced investment operations on December 16, 2021.
| For the three months ended | For the nine months ended | |||||||
| September 30, 2022 | September 30, 2022 | |||||||
| ($ in millions) | ($ in millions) | |||||||
| Interest and debt financing expenses | $ | 0.04 | $ | 0.10 | ||||
| Management fees | 0.09 | 0.18 | ||||||
| Other operating expenses | 0.19 | 0.57 | ||||||
| Deferred offering costs | 0.04 | 0.11 | ||||||
| Directors fees | 0.03 | 0.08 | ||||||
| Total expenses | $ | 0.39 | $ | 1.04 | ||||
Total expenses for the three and nine months ended September 30, 2022 included $0.04 million and $0.11 million of deferred offering costs, respectively.
Net Unrealized Gains (Losses) on Investments
We fair value our portfolio investments quarterly and any changes in fair value are recorded as unrealized gains or losses. During the three and nine months ended September 30, 2022, net unrealized gains (losses) on our investment portfolio were comprised of the following. The change in unrealized depreciation for the three and nine months ended September 30, 2022 was primarily attributable to accretion of discounts on investments. We commenced investment operations on December 16, 2021.
| For the three months ended | For the nine months ended | |||||||
| September 30, 2022 | September 30, 2022 | |||||||
| ($ in millions) | ($ in millions) | |||||||
| Unrealized gains on investments | $ | 0.61 | $ | 0.99 | ||||
| Unrealized (losses) on investments | (0.14 | ) | (0.08 | ) | ||||
| Net change in unrealized gains (losses) on investments | $ | 0.47 | $ | 0.91 | ||||
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The change in unrealized appreciation for the three and nine months ended September 30, 2022 totaled $0.61 million and $0.99 million, respectively, which primarily related to our investments in the following table. We commenced investment operations on December 16, 2021.
| For the three months ended | ||||
| September 30, 2022 | ||||
| ($ in millions) | ||||
| Portfolio Company | ||||
| Genuine Cable Group, LLC | $ | 0.17 | ||
| Improving Acquisition LLC | 0.09 | |||
| AIDC Intermediate Co 2, LLC (Peak Technologies) | 0.07 | |||
| American Soccer Company, Incorporated (SCORE) | 0.07 | |||
| Gulf Pacific Holdings, LLC | 0.05 | |||
| Allcat Claims Service, LLC | 0.04 | |||
| CGI Automated Manufacturing, LLC | 0.04 | |||
| FCA, LLC (FCA Packaging) | 0.04 | |||
| PVI Holdings, Inc. | 0.03 | |||
| Guardian Dentistry Partners | 0.01 | |||
| Total Unrealized Appreciation | $ | 0.61 | ||
| For the nine months ended | ||||
| September 30, 2022 | ||||
| ($ in millions) | ||||
| Genuine Cable Group, LLC | $ | 0.17 | ||
| AIDC Intermediate Co 2, LLC (Peak Technologies) | 0.12 | |||
| Improving Acquisition LLC | 0.09 | |||
| CGI Automated Manufacturing, LLC | 0.09 | |||
| American Soccer Company, Incorporated (SCORE) | 0.07 | |||
| OMH-HealthEdge Holdings, LLC | 0.06 | |||
| Gulf Pacific Acquisition, LLC | 0.05 | |||
| BLP Buyer, Inc. (Bishop Lifting Products) | 0.05 | |||
| Allcat Claims Service, LLC | 0.04 | |||
| FCA, LLC (FCA Packaging) | 0.04 | |||
| Atria Wealth Solutions, Inc. | 0.03 | |||
| Other portfolio companies | 0.18 | |||
| Total Unrealized Appreciation | $ | 0.99 | ||
The change in unrealized depreciation for the three and nine months ended September 30, 2022 totaled $0.14 million and $0.08 million, respectively, which was primarily related to our investments in the following table. We commenced investment operations on December 16, 2021.
| For the three months ended | ||||
| September 30, 2022 | ||||
| ($ in millions) | ||||
| Portfolio Company | ||||
| Allentown, LLC | $ | (0.07 | ) | |
| Corbett Technology Solutions, Inc. | (0.02 | ) | ||
| Light Wave Dental Management LLC | (0.01 | ) | ||
| Atria Wealth Solutions, Inc. | (0.01 | ) | ||
| Other portfolio companies | (0.03 | ) | ||
| Total Unrealized Depreciation | $ | (0.14 | ) | |
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| For the nine months ended | ||||
| September 30, 2022 | ||||
| ($ in millions) | ||||
| Portfolio Company | ||||
| Allentown, LLC | $ | (0.04 | ) | |
| Brightview, LLC | (0.01 | ) | ||
| Corbett Technology Solutions, Inc. | (0.01 | ) | ||
| Siegel Egg Co., LLC | (0.01 | ) | ||
| Other portfolio companies | (0.01 | ) | ||
| Total Unrealized Depreciation | $ | (0.08 | ) | |
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are generated primarily from the net proceeds of any offering of our Shares and from cash flows from interest and fees earned from our investments and principal repayments and proceeds from sales of our investments. Our primary use of cash will be investments in portfolio companies, payments of our expenses and payment of cash distributions to our stockholders.
In accordance with the 1940 Act, we are required to meet a coverage ratio of total assets (less total liabilities other than indebtedness) to total borrowings and other senior securities (and any preferred stock that we may issue in the future) of at least 150%. If this ratio declines below 150%, we cannot incur additional leverage and could be required to sell a portion of our investments to repay some leverage when it is disadvantageous to do so. As of September 30, 2022, our asset coverage ratio was 648%.
Over the next twelve months, we expect that cash and cash equivalents, taken together with our undrawn capital commitments and available capacity under our credit facilities, will be sufficient to conduct anticipated investment activities. Beyond twelve months, we expect that our cash and liquidity needs will continue to be met by cash generated from our ongoing operations as well as financing activities.
As of September 30, 2022, we had $10.0 million borrowed under our Subscription Credit Facility and cash and cash equivalents of $6.7 million (including short-term investments). As of November 9, 2022, we had no borrowings outstanding under our Subscription Credit Facility and cash and cash equivalents of $4.7 million (including short-term investments).
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Capital Contributions
During the nine months ended September 30, 2022, we issued and sold 1,996 shares of our common stock related to capital called at an aggregate purchase price of $10.0 million. As of November 9, 2022, we had aggregate capital commitments of $353.5 million and undrawn capital commitments from investors of $275.5 million ($78 million or 22.1% funded).
Credit Facility
Subscription Credit Facility. On February 25, 2022, we entered into a senior secured revolving credit facility (the “Subscription Credit Facility”) that has a total commitment of $25 million and a maturity date of February 25, 2023. The Subscription Credit Facility permits us to borrow up to $25 million, subject to availability under the borrowing base which is calculated based on the unused capital commitments of the investors meeting various eligibility requirements. The interest rate on the Subscription Credit Facility is equal to SOFR plus an applicable spread of 1.975% per annum with no floor. We are also required to pay a commitment fee of 0.25% per annum on any unused portion of the Subscription Credit Facility.
Contractual Obligations
A summary of our significant contractual principal payment obligations related to the repayment of our outstanding indebtedness at September 30, 2022 is as follows:
| Payments Due by Period ($ in millions) | ||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
| Subscription Credit Facility | $ | 10.0 | $ | 10.0 | $ | - | - | - | ||||||||||||
| Total contractual obligations | $ | 10.0 | $ | 10.0 | $ | - | $ | - | $ | - | ||||||||||
Off-Balance Sheet Arrangements
As of September 30, 2022 and December 31, 2021, we had an aggregate $13.6 million and $5.3 million, respectively, of unfunded commitments to provide debt financing to our portfolio companies. Such commitments are generally subject to the satisfaction of certain financial and nonfinancial covenants and involve, to varying degrees, elements of credit risk in excess of the amount recognized in our financial statements. Other than contractual commitments and other legal contingencies incurred in the normal course of our business, we do not have any other off-balance sheet financings or liabilities.
Critical Accounting Estimates
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting policies, including those relating to the valuation of our investment portfolio, are described below. The critical accounting policies should be read in conjunction with our risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and in this Quarterly Report. See Note 2 to our consolidated financial statements for the nine months ended September 30, 2022, for more information on our critical accounting policies.
Investment Valuation
Traded Investments (Level 1 or Level 2)
Investments for which market quotations are readily available will typically be valued at those market quotations. Traded investments such as corporate bonds, preferred stock, bank notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker, the agent bank, syndicate bank or principal market maker. When price quotes for investments are not available, or such prices are stale or do not represent fair value in the judgment of our Advisor, fair market value will be determined using our Advisor’s valuation process for investments that are privately issued or otherwise restricted as to resale.
Infrequently, we may also invest, to a lesser extent, in equity securities purchased in conjunction with debt investments. While we anticipate these equity securities to be issued by privately held companies, we may hold equity securities that are publicly traded. Equity securities listed on any exchange other than the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities admitted to trade on the NASDAQ are valued at the NASDAQ official closing price. Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Equity securities traded in the over-the-counter market, but excluding securities admitted to trading on the NASDAQ, are valued at the closing bid prices.
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Non-Traded Investments (Level 3)
Investments that are privately issued or otherwise restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment of our Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment of our Advisor is stale or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the security on the valuation date. We expect that a significant majority of our investments will be Level 3 investments. Unless otherwise determined by the Advisor, the following valuation process is used for our Level 3 investments:
| ● | Valuation Designee. The applicable investments will be valued no less frequently than quarterly by the Advisor, with new investments valued at the time such investment was made. The value of each Level 3 investment will be initially reviewed by the persons responsible for such portfolio company or investment. The Advisor will use a standardized template designed to approximate fair market value based on observable market inputs, updated credit statistics and unobservable inputs to determine a preliminary value. The Advisor will specify the titles of the persons responsible for determining the fair value of Company investments, including by specifying the particular functions for which they are responsible, and will reasonably segregate fair value determinations from the portfolio management of the Company such that the portfolio manager(s) may not determine, or effectively determine by exerting substantial influence on, the fair values ascribed to portfolio investments. |
| ● | Valuation Firm. Quarterly, a third-party valuation firm engaged by the Advisor reviews the valuation methodologies and calculations employed for each of the Company’s investments that the Advisor has placed on the “watch list” and approximately 25% of the Company’s remaining investments. The third-party valuation firm will review and independently value all of the Level 3 investments at least once per year, on a rolling twelve-month basis. The quarterly report issued by the third-party valuation firm will provide positive assurance on the fair values of the investments reviewed. |
| ● | Oversight. The Board has appointed the Advisor as the valuation designee for the Company for purposes of making determinations of fair value as permitted by Rule 2a-5 under the 1940 Act. The Audit Committee shall aid the Board in overseeing the Advisor’s fair valuation of securities that are not publicly traded or for which current market values are not readily available. The Audit Committee shall meet quarterly to review the fair value determinations, processes and written reports of the Advisor as part of the Board’s oversight responsibilities. |
Refer to Note 5 – Fair Value – for more information on the Company’s valuation process.
Revenue Recognition
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the principal balance, we generally will not accrue PIK interest for accounting purposes if the portfolio company valuation indicates that such PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities for accounting purposes if we have reason to doubt our ability to collect such interest. OIDs, market discounts or premiums are accreted or amortized using the effective interest method as interest income. We record prepayment premiums on loans and debt securities as interest income.
Related Party Transactions
Administration Agreement. On December 16, 2021, we entered into an Administration Agreement with our Advisor, which serves as our Administrator, pursuant to which the Administrator will furnish us with administrative services necessary to conduct our day-to-day operations. The Administrator will be reimbursed for administrative expenses it incurs on our behalf in performing its obligations. As we reimburse the Administrator for its expenses, we will indirectly bear such cost. The Administrator engaged U.S. Bank Global Fund Services under a sub-administration agreement to assist the Administrator in performing certain of its administrative duties. The Administrator may enter into additional sub-administration agreements with third-parties to perform other administrative and professional services on behalf of the Administrator.
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Investment Advisory Agreement. On December 16, 2021, we entered into the Investment Advisory Agreement with our Advisor. Our Advisor serves as our investment advisor in accordance with the terms of our Investment Advisory Agreement. Payments under our Investment Advisory Agreement in each reporting period will consist of a management fee equal to a percentage of the fair market value of investments, including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase.
For services rendered under the Investment Advisory Agreement, we will pay a management fee quarterly in arrears to our Advisor based on the of the fair market value of our investments including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are subject to financial market risks, including changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we fund a portion of our investments with borrowings, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
Assuming that the consolidated statement of assets and liabilities as of September 30, 2022 were to remain constant and that we took no actions to alter our existing interest rate sensitivity, the following table shows the annualized impact ($ in millions) of hypothetical base rate changes in interest rate (considering interest rate floors for floating rate instruments).
| Change in Interest Rates | Increase (Decrease) in Interest Income | Increase (Decrease) in Interest Expense | Net Increase (Decrease) in Net Investment Income | |||||||||
| Down 25 basis points | $ | (0.1 | ) | $ | (0.0 | ) | $ | (0.1 | ) | |||
| Up 75 basis points | $ | 0.4 | $ | 0.1 | $ | 0.3 | ||||||
| Up 100 basis points | $ | 0.6 | $ | 0.1 | $ | 0.5 | ||||||
| Up 200 basis points | $ | 1.2 | $ | 0.2 | $ | 1.0 | ||||||
| Up 300 basis points | $ | 1.7 | $ | 0.3 | $ | 1.4 | ||||||
The data in the table is based on the Company’s current statement of assets and liabilities.
We may hedge against interest rate fluctuations by using standard hedging instruments such as futures, options and forward contracts subject to the requirements of the 1940 Act. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As of September 30, 2022 (the end of the period covered by this report), we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic United States Securities and Exchange Commission filings is recorded, processed, summarized and reported within the time periods specified in the United States Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
Neither we nor our Advisor is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Advisor.
From time to time, we, or our Advisor, may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
From time to time we are involved in various legal proceedings, lawsuits and claims incidental to the conduct of our business. Our businesses are also subject to extensive regulation, which may result in regulatory proceedings against us.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the risk factors described below and in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, including risk factors related to the ongoing COVID-19 pandemic, which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
Global economic, political and market conditions, including uncertainty about the financial stability of the United States, could have a significant adverse effect on our business, financial condition and results of operations.
The current worldwide financial markets situation, as well as various social and political tensions in the United States and around the world (including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may contribute to increased market volatility, may have long term effects on the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide.
For example, the COVID-19 pandemic continues to adversely impact global commercial activity and has contributed to significant volatility in financial markets.
In addition, the continuing conflict between Russia and Ukraine, and resulting market volatility, could adversely affect our business, financial condition or results of operations. In response to the conflict between Russia and Ukraine, the U.S. and other countries have imposed sanctions or other restrictive actions against Russia. The ongoing conflict and the rapidly evolving measures in response could be expected to have a negative impact on the economy and business activity globally and could have a material adverse effect on our portfolio companies and our business, financial condition, cash flows and results of operations. The severity and duration of the conflict and its impact on global economic and market conditions are impossible to predict. In addition, sanctions could also result in Russia taking counter measures or retaliatory actions which could adversely impact our business or the business of our portfolio companies, including, but not limited to, cyberattacks targeting private companies, individuals or other infrastructure upon which our business and the business of our portfolio companies rely.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
As set forth in the table below (dollars in thousands, except per share and share amounts), during the nine months ended September 30, 2022, we issued and sold 1,996 shares of common stock at an aggregate offering amount of approximately $10.0 million. The issuance of the shares of common stock was exempt from the registration requirements of the Securities Act, pursuant to Section 4(a)(2) and Rule 506(b) of Regulation D thereof and previously reported by us on our current reports on Form 8-K. The Company relied, in part, upon representations from the investors in the subscription agreements that each investor was an accredited investor as defined in Regulation D under the Securities Act. We did not engage in general solicitation or advertising, and did not offer securities to the public, in connection with such issuances and sales.
| Common stock issue date | Offering price per share | Common stock shares issued | Aggregate offering amount | |||||||||
| June 29, 2022 | $ | 5,011 | 1,996 | $ | 10,000 | |||||||
Item 3. Default Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
33
Item 6. Exhibits.
The exhibits required by this item are set forth in the Exhibit Index attached hereto and are filed or incorporated as part of this Report.
Exhibit Index
| * | Filed herewith. |
| (1) | Incorporated by reference from the Company’s Amendment No. 1 to Form 10, as filed with the Securities and Exchange Commission on May 11, 2021. |
| (2) | Incorporated by reference from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2022, as filed with the Securities and Exchange Commission on August 15, 2022. |
| (3) | Incorporated by reference from the Company’s Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the Securities and Exchange Commission on March 3, 2022. |
34
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Kayne DL 2021, Inc. | |
| Date: November 14, 2022 | /s/ James C. Baker, Jr. |
| Name: James C. Baker, Jr. | |
| Title: Chief Executive Officer (Principal Executive Officer) | |
| Date: November 14, 2022 | /s/ Terry A. Hart |
| Name: Terry A. Hart | |
| Title: Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
35
Exhibit 31.1
Certification of Chief Executive Officer
I, James C. Baker, Jr. Chief Executive Officer of Kayne DL 2021, Inc., certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Kayne DL 2021, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022
| By: | /s/ JAMES C. BAKER, JR. | |
|
Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
Certification of Chief Financial Officer
I, Terry A. Hart, Chief Financial Officer of Kayne DL 2021, Inc., certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Kayne DL 2021, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (c) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022
| By: | /s/ TERRY A. HART | |
|
Chief Financial Officer (Principal Financial and Accounting Officer) |
Exhibit 32.1
Certification of Chief Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Quarterly Report on Form 10-Q for the three months ended September 30, 2022 (the “Report”) of Kayne DL 2021, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, James C. Baker, Jr. the Chief Executive Officer of the Registrant, hereby certify, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| /s/ JAMES C. BAKER, JR. | ||
| Name: | James C. Baker Jr. | |
| Date: | November 14, 2022 |
Exhibit 32.2
Certification of Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350)
In connection with the Quarterly Report on Form 10-Q for the three months ended September 30, 2022 (the “Report”) of Kayne DL 2021, Inc. (the “Registrant”), as filed with the Securities and Exchange Commission on the date hereof, I, Terry A. Hart, the Chief Financial Officer of the Registrant, hereby certify, to the best of my knowledge, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
| /s/ TERRY A. HART | ||
| Name: | Terry A. Hart | |
| Date: | November 14, 2022 |
Consolidated Statements of Assets and Liabilities (Parentheticals) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Long-term investments (amortized cost) (in Dollars) | $ 56,987 | $ 11,499 |
| Short-term investments (amortized cost) (in Dollars) | $ 3,853 | $ 31,239 |
| Common Shares, par value (in Dollars per share) | $ 0.001 | $ 0.001 |
| Common Shares, shares authorized | 100,000 | 100,000 |
| Common Shares, shares issued | 10,668 | 8,600 |
| Common Shares, shares outstanding | 10,668 | 8,600 |
Consolidated Statements of Operations (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
|
| Income Statement [Abstract] | ||
| Basic and diluted net increase in net assets resulting from operations (in Dollars per share) | $ 113 | $ 210 |
| Weighted Average Common Shares Outstanding - Basic and Diluted (in Shares) | 10,647 | 9,305 |
N-2 |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Cover [Abstract] | |
| Entity Central Index Key | 0001850787 |
| Amendment Flag | false |
| Securities Act File Number | 814-01393 |
| Document Type | 10-Q |
| Entity Registrant Name | Kayne DL 2021, Inc. |
| Entity Address, Address Line One | 811 Main Street |
| Entity Address, Address Line Two | 14th Floor |
| Entity Address, City or Town | Houston |
| Entity Address, State or Province | TX |
| Entity Address, Postal Zip Code | 77002 |
| City Area Code | (713) |
| Local Phone Number | 493-2020 |
| Entity Emerging Growth Company | true |
| Entity Ex Transition Period | false |
Organization |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Accounting Policies [Abstract] | |
| Organization | Note 1. Organization
Organization
Kayne DL 2021, Inc. (the “Company”) is an externally managed, closed-end, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, for U.S. federal income tax purposes, the Company intends to continue to be treated as and to qualify as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
The Company was formed as a Delaware corporation to make investments in middle-market companies and commenced operations on December 16, 2021.
As of September 30, 2022, the Company has entered into subscription agreements with investors for an aggregate capital commitment of $353,535 to purchase shares of the Company’s common stock. See Note 11 – Subsequent Events.
KA Credit Advisors II, LLC (the “Advisor”) serves as the Company’s investment advisor. The Advisor is an indirect subsidiary of Kayne Anderson Capital Advisors, L.P. (“KACALP” or “Kayne Anderson”). The Advisor is registered with the Securities and Exchange Commission (“SEC”) as an investment advisor under the Investment Advisers Act of 1940, as amended. Subject to the overall supervision of the Company’s board of directors (the “Board”), the Advisor is responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring investments and monitoring its investments and portfolio companies on an ongoing basis. The Board consists of five directors, four of whom are independent (including the Board’s chairperson). See Note 11 – Subsequent Events.
The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through debt investments in middle-market companies.
The Company conducts private offerings of its Common Stock to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). At the closing of any private offering, each investor will make a capital commitment (a “Capital Commitment”) to purchase shares of its Common Stock (“Shares”) pursuant to a subscription agreement entered into with the Company. Investors will be required to fund drawdowns to purchase Shares up to the amount of their respective Capital Commitments each time the Company delivers a notice to the investors. The Company commenced its loan origination and investment activities on December 16, 2021 contemporaneously with the initial drawdown from investors in the private offering. |
Significant Accounting Policies |
9 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||
| Accounting Policies [Abstract] | ||||||||||
| Significant Accounting Policies | Note 2. Significant Accounting Policies
A. Basis of Presentation—the accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company is an investment company and follows accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 — “Financial Services — Investment Companies.” In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair statement of the financial statements for the periods presented, have been included.
B. Consolidation—As provided under Regulation S-X and ASC Topic 946 – “Financial Services – Investment Companies”, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of KDL Corp, LLC in its consolidated financial statements. As of September 30, 2022, KDL Corp, LLC held no investments.
C. Use of Estimates—the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the period. Actual results could differ materially from those estimates.
D. Cash and Cash Equivalents—cash and cash equivalents include short-term, liquid investments with an original maturity of three months or less and include money market fund accounts.
E. Investment Valuation, Fair Value—the Company conducts the valuation of its investments consistent with GAAP and the 1940 Act. The Company’s investments will be valued no less frequently than quarterly, in accordance with the terms of Topic 820 of the Financial Accounting Standards Board’s Accounting Standards Codification, Fair Value Measurement and Disclosures (“ASC 820”).
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. Pursuant to Rule 2a-5 and effective September 1, 2022, the Board of Directors designated the Advisor as the “valuation designee” to perform fair value determinations of the Company’s portfolio holdings, subject to oversight by and periodic reporting to the Board. The valuation designee will perform fair valuation of the Company’s portfolio holdings in accordance with the Company’s Valuation Program, as adopted by the Board. The Advisor’s internal valuation process did not materially change as a result of Rule 2a-5.
Traded Investments (Level 1 or Level 2)
Investments for which market quotations are readily available will typically be valued at those market quotations. Traded investments such as corporate bonds, preferred stock, bank notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker, the agent bank, syndicate bank or principal market maker. When price quotes for investments are not available, or such prices are stale or do not represent fair value in the judgment of the Company’s Advisor, fair market value will be determined using the Advisor’s valuation process for investments that are privately issued or otherwise restricted as to resale.
Infrequently, the Company may also invest, to a lesser extent, in equity securities purchased in conjunction with debt investments. While the Company anticipates these equity securities to be issued by privately held companies, the Company may hold equity securities that are publicly traded. Equity securities listed on any exchange other than the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities admitted to trade on the NASDAQ are valued at the NASDAQ official closing price. Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Equity securities traded in the over-the-counter market, but excluding securities admitted to trading on the NASDAQ, are valued at the closing bid prices.
Non-Traded Investments (Level 3)
Investments that are privately issued or otherwise restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment of the Company’s Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment of the Company’s Advisor is stale or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the security on the valuation date. The Company expects that a significant majority of its investments will be Level 3 investments. Unless otherwise determined by the Advisor, the following valuation process is used for the Company’s Level 3 investments:
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements will express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
F. Interest Income Recognition— Interest income is recorded on an accrual basis and includes the accretion of discounts, amortization of premiums and payment-in-kind (“PIK”) interest. Discounts from and premiums to par value on investments purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. To the extent loans contain PIK provisions, PIK interest, computed at the contractual rate specified in each applicable agreement, is accrued and recorded as interest income and added to the principal balance of the loan. PIK interest income added to the principal balance is generally collected upon repayment of the outstanding principal. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends for the year the income was earned, even though the Company has not yet collected the cash. The amortized cost of investments represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest.
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon the Company’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer any reasonable doubt that such principal or interest will be collected in full and, in the Company’s judgment, principal and interest are likely to remain current. The Company may make exceptions to this policy if the loan has sufficient collateral value (i.e., typically measured as enterprise value of the portfolio company) or is in the process of collection.
G. Debt Issuance Costs – Costs incurred by the Company related to the issuance of its debt (credit facility) are capitalized and amortized over the period the debt is outstanding. For the purpose of calculating the Company’s asset coverage ratios pursuant to the 1940 Act, deferred issuance costs are not deducted from the carrying value of debt.
H. Dividends to Common Stockholders—Distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Company’s board of directors each quarter and is generally based upon the earnings estimated by management and considers the level of undistributed taxable income carried forward from the prior year for distribution in the current year. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such capital gains for investment.
I. Organizational Costs—organizational expenses include costs and expenses relating to the formation and organization of the Company. The Company has reimbursed the Advisor for these costs which are expensed as incurred.
J. Offering Costs – offering costs include costs and expenses incurred in connection with the offering of the Company’s common stock. These costs were capitalized as deferred offering expenses and included in prepaid expenses and other assets on the Statement of Assets and Liabilities. These costs were amortized over a twelve-month period beginning with the commencement of operations. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s share offerings, the preparation of the Company’s registration statement and registration fees. The Company reimbursed the Advisor for these costs. The aggregate amount of organizational expenses and offering costs shall not exceed $350 for such reimbursement to the Advisor.
K. Income Taxes – it is the Company’s intention to continue to be treated as and to qualify each year for special tax treatment afforded a RIC under the Code. As long as the Company meets certain requirements that govern its sources of income, diversification of assets and timely distribution of earnings to stockholders, the Company will not be subject to U.S. federal income tax.
The Company must pay distributions equal to 90% of its investment company taxable income (ordinary income and short-term capital gains) to qualify as a RIC and it must distribute all of its taxable income (ordinary income, short-term capital gains and long-term capital gains) to avoid federal income taxes. The Company will be subject to federal income tax on any undistributed portion of income. For purposes of the distribution test, the Company may elect to treat as paid on the last day of its taxable year all or part of any distributions that are declared after the end of its taxable year if such distributions are declared before the due date of its tax return, including any extensions.
All RICs are subject to a non-deductible 4% excise tax on income that is not distributed on a timely basis in accordance with the calendar year distribution requirements. To avoid the tax, the Company must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of its net capital gains for the one-year period ending on December 31, the last day of our taxable year, and (iii) undistributed amounts from previous years on which the Company paid no U.S. federal income tax. A distribution will be treated as paid during the calendar year if it is paid during the calendar year or declared by the Company in October, November or December of such year, payable to stockholders of record on a date during such months and paid by the Company no later than January of the following year. Any such distributions paid during January of the following year will be deemed to be received by stockholders on December 31 of the year the distributions are declared, rather than when the distributions are actually received.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
L. LIBOR Transition — The U.K. Financial Conduct Authority (“FCA”) announced that certain London Interbank Offered Rate (“LIBOR”) tenors in certain currencies ceased to be provided at the end of 2021 with all remaining tenors ceasing in June 2023. Alternatives to LIBOR have been established, or are in development in most major currencies, including the Secured Overnight Financing Rate (“SOFR”) that is intended to replace U.S. dollar LIBOR. Markets are developing in response to these new reference rates. The LIBOR transition has become increasingly well-defined in advance of its anticipated discontinuation, but uncertainty remains related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the time of transition. At this time, it is not possible to predict fully the ultimate outcome of these changes.
M. Commitments and Contingencies – in the normal course of business, the Company may enter into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications. |
Agreements and Related Party Transactions |
9 Months Ended |
|---|---|
Sep. 30, 2022 | |
| Related Party Transactions [Abstract] | |
| Agreements and Related Party Transactions | Note 3. Agreements and Related Party Transactions
A. Administration Agreement – on December 16, 2021, the Company entered into an Administration Agreement with its Advisor, which serves as its Administrator and will provide or oversee the performance of its required administrative services and professional services rendered by others, which will include (but are not limited to), accounting, payment of our expenses, legal, compliance, operations, technology and investor relations, preparation and filing of its tax returns, and preparation of financial reports provided to its stockholders and filed with the SEC.
The Company will reimburse the Administrator for its costs and expenses incurred in performing its obligations under the Administration Agreement. As the Company reimburses the Administrator for its expenses, the Company will indirectly bear such cost. The Administration Agreement may be terminated by either party with 60 days’ written notice.
B. Investment Advisory Agreement – on December 16, 2021, the Company entered into an Investment Advisory Agreement with its Advisor. Pursuant to the Investment Advisory Agreement with its Advisor, the Company will pay its Advisor a management fee for investment advisory and management services. The Investment Advisory Agreement may be terminated by either party with 60 days’ written notice.
The Company has agreed to reimburse the Advisor and its affiliates for the third-party costs incurred on its behalf in connection with the formation and the offering of shares of the Company’s common stock. Amounts shown as payables to affiliates on the Statement of Assets and Liabilities represent organizational expenses and offering costs of the Company that were paid by the Advisor and its affiliates on behalf of the Company.
Management Fee
The management fee will be calculated at an annual rate of 0.75% of the fair market value of the Company’s investments including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase.
The management fee will be payable quarterly in arrears and calculated based on the average value, at the end of the two most recently completed calendar quarters, of our fair market value of investments, including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase. Management fees for any partial quarter will be appropriately pro-rated.
For the three and nine months ended September 30, 2022, the Company incurred management fees of $90 and $181, respectively.
C. Other – KACALP, an affiliate of the Advisor, made equity contributions of $100 during the nine months ended September 30, 2022. See Note 11 – Subsequent Events. |
Investments |
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| Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investments | Note 4. Investments
The following table presents the composition of the Company’s investment portfolio at amortized cost and fair value as of September 30, 2022 and December 31, 2021:
As of September 30, 2022 and December 31, 2021, all of the Company’s investments were qualifying assets as defined by Section 55(a) of the 1940 Act.
Beginning with the three months ended March 31, 2022, the Company uses Global Industry Classification Standards (GICS), Level 3 – Industry, for classifying the industry groupings of its portfolio companies. As of December 31, 2021, the Company used GICS, Level 2 – Industry Group.
The industry composition of long-term investments based on fair value as of September 30, 2022 and December 31, 2021 was as follows:
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Fair Value |
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| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value | Note 5. Fair Value
The Fair Value Measurement Topic of the FASB Accounting Standards Codification (ASC 820) defines fair value as the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants under current market conditions at the measurement date. As required by ASC 820, the Company has performed an analysis of all investments measured at fair value to determine the significance and character of all inputs to their fair value determination. Inputs are the assumptions, along with considerations of risk, that a market participant would use to value an asset or a liability. In general, observable inputs are based on market data that is readily available, regularly distributed and verifiable that the Company obtains from independent, third-party sources. Unobservable inputs are developed by the Company based on its own assumptions of how market participants would value an asset or a liability.
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories.
Level 1 — Valuations based on quoted unadjusted prices for identical instruments in active markets traded on a national exchange to which the Company has access at the date of measurement.
Level 2 — Valuations based on quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.
Level 3 — Model derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Company’s own assumptions that market participants would use to price the asset or liability based on the best available information.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the determination of which category within the fair value hierarchy is appropriate for any given financial instrument is based on the lowest level of input that is significant to the fair value measurement. Assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the financial instrument.
The following table presents the fair value hierarchy of investments as of September 30, 2022 and December 31, 2021. Note that the valuation levels below are not necessarily an indication of the risk or liquidity associated with the underlying investment.
The following tables present 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. There were no investments in the Company for the three and nine months ended September 30, 2021.
For the three and nine months ended September 30, 2022, the Company did not recognize any transfers to or from Level 3. The increase in unrealized gain (loss) relates to investments that were held during the period. The Company includes these unrealized gains and losses on the Statement of Operations – Net Change in Unrealized Gains (Losses).
Valuation Techniques and Unobservable Inputs
Non-traded debt investments are typically valued using either a market yield analysis or an enterprise value analysis. For debt investments that are not considered to be credit impaired, the Company uses a market yield analysis to determine fair value. If the debt investment is considered to be credit impaired (which is determined by performing an enterprise value analysis), the Company will use the enterprise value analysis or a liquidation basis analysis to determine fair value. As of September 30, 2022, none of the Company’s non-traded debt investments were considered to be credit impaired, and the Company used a market yield analysis to determine fair value on these investments.
To determine the estimated market yield for our debt investments, the Company analyzes changes in the risk/reward (measured by yields and leverage) of middle market indices as compared to changes in risk/reward for the underlying investment (the “Market Approach”) and estimates the appropriate credit spread for such debt investment. In this context, the fair market value of the investment is impacted by the structure and pricing of the security relative to current market yields and credit spreads for similar investments in similar businesses as well as the financial performance of such business. In performing this analysis, the Company considers data sources including, but not limited to: (i) industry publications, such as S&P Global’s High-End Middle Market Lending Review; Thomson Reuter’s Refinitiv Middle Market Monthly Stats; CapitalIQ; Pitchbook News; The Lead Left, and other data sources; (ii) comparable investments reviewed or completed by affiliates of the Advisor, and (iii) information obtained and provided by the Advisor’s independent valuation managers.
To determine if a debt investment is credit impaired, the Company estimates the enterprise value of the business and compares such estimate to the outstanding indebtedness of such business. The Company utilizes the following valuation methodologies to determine the estimated enterprise value of the company: (i) analysis of valuations of publicly traded companies in a similar line of business (“public company analysis”), (ii) analysis of valuations of M&A transaction valuations for companies in a similar line of business (“precedent transaction analysis”), (iii) discounted cash flows (“DCF analysis”) and (iv) other valuation methodologies.
In determining the non-traded debt investment valuations, the following factors are considered, where relevant: the nature and realizable value of any collateral; the company’s ability to make interest payments, amortization payments (if any) and other fixed charges; call features, put features and other relevant terms of the debt security; the company’s historical and projected financial results; the markets in which the company does business; changes in the interest rate environment and the credit markets generally that may affect the price at which similar investments may be valued; and other relevant factors.
Equity investments in private companies are typically valued using one of or a combination of the following valuation techniques: (i) public company analysis, (ii) precedent transaction analysis and (iii) DCF analysis.
Under all of these valuation techniques, the Advisor estimates operating results of the companies in which it invests, including earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”) and free cash flow. These estimates utilize unobservable inputs such as historical operating results, which may be unaudited, and projected operating results, which will be based on operating assumptions for such company. Investment performance data utilized will be the most recently available as of the measurement date which in many cases may reflect up to a one quarter lag in information. These estimates will be sensitive to changes in assumptions specific to such company as well as general assumptions for the industry. Other unobservable inputs utilized in the valuation techniques outlined above include: discounts for lack of marketability, selection of publicly traded companies, selection of similar precedent transactions, selected ranges for valuation multiples and expected required rates of return (discount rates).
Quantitative Table for Valuation Techniques
The following tables presents quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of September 30, 2022 and December 31, 2021. The table is not intended to be all-inclusive but instead captures the significant unobservable inputs relevant to the Company’s determination of fair value.
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Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | Note 6. Debt
On February 25, 2022, the Company entered into a senior secured revolving credit facility (the “Subscription Credit Facility”), that has a total commitment of $25,000 and a maturity date of February 25, 2023. The Subscription Credit Facility permits the Company to borrow up to $25,000, subject to availability under the borrowing base which is calculated based on the unused capital commitments of the investors meeting various eligibility requirements. The interest rate on the Subscription Credit Facility is equal to SOFR plus an applicable spread of 1.975% with no floor. The Company is also required to pay a commitment fee of 0.25% per annum on any unused portion of the Subscription Credit Facility.
For the nine months ended September 30, 2022, the Company had $5,000 borrowed under its Subscription Credit Facility on each day from March 23, 2022 to April 5, 2022 at an interest rate of 2.29% and $10,000 borrowed under its Subscription Credit Facility on each day from September 29, 2022 to September 30, 2022 at an interest rate of 5.04%.
Debt obligations consisted of the following as of September 30, 2022:
For the three and nine months ended September 30, 2022, the components of interest expense were as follows. There was no Subscription Credit Facility in place at September 30, 2021 as the Company had not yet commenced investment operations.
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Share Transactions |
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| Share Transactions | Note 7. Share Transactions
Common Stock Issuances
The following table summarizes the number of common stock shares issued and aggregate proceeds received from such issuances related to the Company’s capital call notices pursuant to subscription agreements with investors for the nine months ended September 30, 2022. See Note 11 – Subsequent Events.
As of September 30, 2022, the Company had subscription agreements with investors for an aggregate capital commitment of $353,535 to purchase shares of common stock. Of this amount, the Company had $300,535 of undrawn commitments at September 30, 2022.
Dividends and Dividend Reinvestment
The following table summarizes the dividends declared and payable by the Company for the nine months ended September 30, 2022. See Note 11 – Subsequent Events.
The following table summarizes the amounts received and shares of common stock issued to shareholders pursuant to the Company’s dividend reinvestment plan for the nine months ended September 30, 2022. See Note 11 – Subsequent Events.
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Commitments and Contingencies |
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| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | Note 8. Commitments and Contingencies
The Company had an aggregate of $13,610 and $5,300, respectively, of unfunded commitments to provide debt financing to its portfolio companies as of September 30, 2022 and December 31, 2021. Such commitments are generally subject to the satisfaction of certain financial and nonfinancial covenants and certain operational metrics. The commitment period for these amounts may be shorter than the maturity date if drawn or funded. These commitments are not reflected in the Company’s consolidated statement of assets and liabilities. Consequently, such commitments result in an element of credit risk in excess of the amount recognized in the Company’s consolidated statement of assets and liabilities.
A summary of the composition of the unfunded commitments as of September 30, 2022 and December 31, 2021 is shown in the table below:
From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. As of September 30, 2022 and December 31, 2021, management was not aware of any material pending or threatened litigation that would require accounting recognition or financial statement disclosure. |
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Earnings Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share | Note 9. Earnings Per Share
In accordance with the provisions of ASC Topic 260, Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common stockholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis. As of September 30, 2022, there were no dilutive shares.
The following table sets forth the computation of basic and diluted earnings per share of common stock for the three and nine months ended September 30, 2022. The Company commenced investment operations on December 16, 2021.
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Financial Highlights |
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| Financial Highlights [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Financial Highlights | Note 10. Financial Highlights
The following per share of common stock data has been derived from information provided in the unaudited financial statements. The following is a schedule of financial highlights for the nine months ended September 30, 2022. The Company commenced investment operations on December 16, 2021.
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Subsequent Events |
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| Subsequent Events [Abstract] | |
| Subsequent Events | Note 11. Subsequent Events
The Company’s management has evaluated subsequent events through the date of issuance of the financial statements included herein. There have been no subsequent events that require recognition or disclosure in these financial statements except as described below.
On October 14, 2022, the Company sold 4,933 shares of its common stock for a total aggregate offering price of $25,000. KACALP, an affiliate of the Advisor, made an equity contribution of $250 associated with its 1% commitment for this October 14, 2022 share issuance. The Company has subscription agreements with investors for an aggregate capital commitment of $353,535 to purchase shares of common stock ($275,535 is undrawn).
On October 25, 2022, the Company paid a distribution of $72.00 per share to each common stockholder of record as of October 13, 2022. The total distribution was $768 and $760 was reinvested into the Company through the purchase of 150 shares of common stock.
On November 8, 2022, the Board of Directors (the “Board”) of the Company elected Rhonda Smith as a member of the Board. Ms. Smith will serve as an independent director of the Company until she stands for re-election at the 2024 Annual Meeting of Stockholders of the Company. |
Accounting Policies, by Policy (Policies) |
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| Accounting Policies [Abstract] | ||||||||||
| A. Basis of Presentation | A. Basis of Presentation—the accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Company is an investment company and follows accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 946 — “Financial Services — Investment Companies.” In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair statement of the financial statements for the periods presented, have been included.
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| B. Consolidation | B. Consolidation—As provided under Regulation S-X and ASC Topic 946 – “Financial Services – Investment Companies”, the Company will generally not consolidate its investment in a company other than a wholly-owned investment company or controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the accounts of KDL Corp, LLC in its consolidated financial statements. As of September 30, 2022, KDL Corp, LLC held no investments.
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| C. Use of Estimates | C. Use of Estimates—the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of income and expenses during the period. Actual results could differ materially from those estimates.
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| D. Cash and Cash Equivalents | D. Cash and Cash Equivalents—cash and cash equivalents include short-term, liquid investments with an original maturity of three months or less and include money market fund accounts.
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| E. Investment Valuation, Fair Value | E. Investment Valuation, Fair Value—the Company conducts the valuation of its investments consistent with GAAP and the 1940 Act. The Company’s investments will be valued no less frequently than quarterly, in accordance with the terms of Topic 820 of the Financial Accounting Standards Board’s Accounting Standards Codification, Fair Value Measurement and Disclosures (“ASC 820”).
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. Pursuant to Rule 2a-5 and effective September 1, 2022, the Board of Directors designated the Advisor as the “valuation designee” to perform fair value determinations of the Company’s portfolio holdings, subject to oversight by and periodic reporting to the Board. The valuation designee will perform fair valuation of the Company’s portfolio holdings in accordance with the Company’s Valuation Program, as adopted by the Board. The Advisor’s internal valuation process did not materially change as a result of Rule 2a-5.
Traded Investments (Level 1 or Level 2)
Investments for which market quotations are readily available will typically be valued at those market quotations. Traded investments such as corporate bonds, preferred stock, bank notes, loans or loan participations are valued by using the bid price provided by an independent pricing service, by an independent broker, the agent bank, syndicate bank or principal market maker. When price quotes for investments are not available, or such prices are stale or do not represent fair value in the judgment of the Company’s Advisor, fair market value will be determined using the Advisor’s valuation process for investments that are privately issued or otherwise restricted as to resale.
Infrequently, the Company may also invest, to a lesser extent, in equity securities purchased in conjunction with debt investments. While the Company anticipates these equity securities to be issued by privately held companies, the Company may hold equity securities that are publicly traded. Equity securities listed on any exchange other than the NASDAQ Stock Market, Inc. (“NASDAQ”) are valued, except as indicated below, at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities admitted to trade on the NASDAQ are valued at the NASDAQ official closing price. Equity securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Equity securities traded in the over-the-counter market, but excluding securities admitted to trading on the NASDAQ, are valued at the closing bid prices.
Non-Traded Investments (Level 3)
Investments that are privately issued or otherwise restricted as to resale, as well as any security for which (a) reliable market quotations are not available in the judgment of the Company’s Advisor, or (b) the independent pricing service or independent broker does not provide prices or provides a price that in the judgment of the Company’s Advisor is stale or does not represent fair value, shall each be valued in a manner that most fairly reflects fair value of the security on the valuation date. The Company expects that a significant majority of its investments will be Level 3 investments. Unless otherwise determined by the Advisor, the following valuation process is used for the Company’s Level 3 investments:
Determination of fair value involves subjective judgments and estimates. Accordingly, the notes to our financial statements will express the uncertainty with respect to the possible effect of such valuations, and any change in such valuations, on our financial statements.
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| F. Interest Income Recognition | F. Interest Income Recognition— Interest income is recorded on an accrual basis and includes the accretion of discounts, amortization of premiums and payment-in-kind (“PIK”) interest. Discounts from and premiums to par value on investments purchased are accreted/amortized into interest income over the life of the respective security using the effective yield method. To the extent loans contain PIK provisions, PIK interest, computed at the contractual rate specified in each applicable agreement, is accrued and recorded as interest income and added to the principal balance of the loan. PIK interest income added to the principal balance is generally collected upon repayment of the outstanding principal. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to stockholders in the form of dividends for the year the income was earned, even though the Company has not yet collected the cash. The amortized cost of investments represents the original cost adjusted for any accretion of discounts, amortization of premiums and PIK interest.
Loans are generally placed on non-accrual status when principal or interest payments are past due 30 days or more or when there is reasonable doubt that principal or interest will be collected in full. Accrued and unpaid interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon the Company’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest are paid or there is no longer any reasonable doubt that such principal or interest will be collected in full and, in the Company’s judgment, principal and interest are likely to remain current. The Company may make exceptions to this policy if the loan has sufficient collateral value (i.e., typically measured as enterprise value of the portfolio company) or is in the process of collection.
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| G. Debt Issuance Costs | G. Debt Issuance Costs – Costs incurred by the Company related to the issuance of its debt (credit facility) are capitalized and amortized over the period the debt is outstanding. For the purpose of calculating the Company’s asset coverage ratios pursuant to the 1940 Act, deferred issuance costs are not deducted from the carrying value of debt.
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| H. Dividends to Common Stockholders | H. Dividends to Common Stockholders—Distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Company’s board of directors each quarter and is generally based upon the earnings estimated by management and considers the level of undistributed taxable income carried forward from the prior year for distribution in the current year. Net realized capital gains, if any, are generally distributed, although the Company may decide to retain such capital gains for investment.
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| I. Organizational Costs | I. Organizational Costs—organizational expenses include costs and expenses relating to the formation and organization of the Company. The Company has reimbursed the Advisor for these costs which are expensed as incurred.
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| J. Offering Costs | J. Offering Costs – offering costs include costs and expenses incurred in connection with the offering of the Company’s common stock. These costs were capitalized as deferred offering expenses and included in prepaid expenses and other assets on the Statement of Assets and Liabilities. These costs were amortized over a twelve-month period beginning with the commencement of operations. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s share offerings, the preparation of the Company’s registration statement and registration fees. The Company reimbursed the Advisor for these costs. The aggregate amount of organizational expenses and offering costs shall not exceed $350 for such reimbursement to the Advisor.
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| L. LIBOR Transition | L. LIBOR Transition — The U.K. Financial Conduct Authority (“FCA”) announced that certain London Interbank Offered Rate (“LIBOR”) tenors in certain currencies ceased to be provided at the end of 2021 with all remaining tenors ceasing in June 2023. Alternatives to LIBOR have been established, or are in development in most major currencies, including the Secured Overnight Financing Rate (“SOFR”) that is intended to replace U.S. dollar LIBOR. Markets are developing in response to these new reference rates. The LIBOR transition has become increasingly well-defined in advance of its anticipated discontinuation, but uncertainty remains related to the liquidity impact of the change in rates, and how to appropriately adjust these rates at the time of transition. At this time, it is not possible to predict fully the ultimate outcome of these changes.
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| M. Commitments and Contingencies | M. Commitments and Contingencies – in the normal course of business, the Company may enter into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications. |
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| K. Income Taxes | K. Income Taxes – it is the Company’s intention to continue to be treated as and to qualify each year for special tax treatment afforded a RIC under the Code. As long as the Company meets certain requirements that govern its sources of income, diversification of assets and timely distribution of earnings to stockholders, the Company will not be subject to U.S. federal income tax.
The Company must pay distributions equal to 90% of its investment company taxable income (ordinary income and short-term capital gains) to qualify as a RIC and it must distribute all of its taxable income (ordinary income, short-term capital gains and long-term capital gains) to avoid federal income taxes. The Company will be subject to federal income tax on any undistributed portion of income. For purposes of the distribution test, the Company may elect to treat as paid on the last day of its taxable year all or part of any distributions that are declared after the end of its taxable year if such distributions are declared before the due date of its tax return, including any extensions.
All RICs are subject to a non-deductible 4% excise tax on income that is not distributed on a timely basis in accordance with the calendar year distribution requirements. To avoid the tax, the Company must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of its net capital gains for the one-year period ending on December 31, the last day of our taxable year, and (iii) undistributed amounts from previous years on which the Company paid no U.S. federal income tax. A distribution will be treated as paid during the calendar year if it is paid during the calendar year or declared by the Company in October, November or December of such year, payable to stockholders of record on a date during such months and paid by the Company no later than January of the following year. Any such distributions paid during January of the following year will be deemed to be received by stockholders on December 31 of the year the distributions are declared, rather than when the distributions are actually received.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
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Investments (Tables) |
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| Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of investment portfolio at amortized cost and fair value |
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| Schedule of industry composition of long-term investments based on fair value |
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Fair Value (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair value hierarchy of investments |
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| Schedule of fair value of investments for which Level 3 inputs |
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| Schedule of significant unobservable inputs of Level 3 investments |
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Debt (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of debt obligations |
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| Schedule of the components of interest expense |
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Share Transactions (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Share Transactions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of common stock shares issued and aggregate proceeds |
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| Schedule of dividends declared and payable by the Company |
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| Schedule of dividend reinvestment plan |
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Commitments and Contingencies (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of summary of composition of the unfunded commitments |
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Earnings Per Share (Tables) |
9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of computation of basic and diluted earnings per share of common stock |
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Financial Highlights (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Investment Company, Financial Highlights [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of financial highlights |
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Organization (Details) |
Sep. 30, 2022
USD ($)
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| Accounting Policies [Abstract] | |
| Purchase of common stock shares value | $ 353,535 |
Significant Accounting Policies (Details) $ in Thousands |
9 Months Ended |
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Sep. 30, 2022
USD ($)
| |
| Accounting Policies [Abstract] | |
| Investments percentage | 25.00% |
| Reimbursement to the advisor (in Dollars) | $ 350 |
| Distributions percentage | 90.00% |
| Non-deductible excise tax | All RICs are subject to a non-deductible 4% excise tax on income that is not distributed on a timely basis in accordance with the calendar year distribution requirements. To avoid the tax, the Company must distribute during each calendar year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of its net capital gains for the one-year period ending on December 31, the last day of our taxable year, and (iii) undistributed amounts from previous years on which the Company paid no U.S. federal income tax. |
Agreements and Related Party Transactions (Details) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
|---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
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| Related Party Transactions [Abstract] | ||||
| Management fee, description | The management fee will be calculated at an annual rate of 0.75% of the fair market value of the Company’s investments including, in each case, assets purchased with borrowed funds or other forms of leverage, but excluding cash, U.S. government securities and commercial paper instruments maturing within one year of purchase. | |||
| Management fee | $ 90 | $ 181 | ||
| Equity contributions | $ 100 | |||
Investments (Details) - Schedule of investment portfolio at amortized cost and fair value - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Investments (Details) - Schedule of investment portfolio at amortized cost and fair value [Line Items] | ||
| Amortized Cost | $ 60,840 | $ 42,738 |
| Fair Value | 62,014 | 43,000 |
| First-lien senior secured debt investments [Member] | ||
| Investments (Details) - Schedule of investment portfolio at amortized cost and fair value [Line Items] | ||
| Amortized Cost | 56,987 | 11,499 |
| Fair Value | 58,161 | 11,761 |
| Short-term investments [Member] | ||
| Investments (Details) - Schedule of investment portfolio at amortized cost and fair value [Line Items] | ||
| Amortized Cost | 3,853 | 31,239 |
| Fair Value | $ 3,853 | $ 31,239 |
Investments (Details) - Schedule of industry composition of long-term investments based on fair value |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
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| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 100.00% | 100.00% |
| Health care providers & services [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 22.70% | 39.80% |
| Trading companies & distributors [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 14.60% | |
| Commercial services & supplies [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 8.90% | |
| Food products [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 7.70% | |
| IT services [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 7.10% | |
| Machinery [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 5.20% | |
| Software [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 5.20% | |
| Textiles, Apparel & Luxury Goods [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 4.60% | |
| Containers & packaging [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 4.40% | |
| Building products [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 4.20% | |
| Diversified telecommunication services [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 3.00% | |
| Auto components [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 3.00% | |
| Electronic equipment, instruments & components [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 2.50% | |
| Leisure products [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 2.50% | |
| Insurance [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 1.90% | |
| Wireless telecommunication services [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 1.20% | |
| Aerospace & defense [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 0.50% | |
| Chemicals [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 0.40% | |
| Asset management & custody banks [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 0.40% | |
| Food & beverage [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 22.70% | |
| Consumer durables & apparel [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 19.90% | |
| Telecommunication services [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 8.00% | |
| Capital goods [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 6.00% | |
| Software & services [Member] | ||
| Schedule of Investments [Line Items] | ||
| Long-term investments fair value percentage | 3.60% |
Fair Value (Details) - Schedule of fair value hierarchy of investments - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | $ 62,014 | $ 43,000 |
| First-lien senior secured debt investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | 58,161 | 11,761 |
| Short-term investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | 3,853 | 31,239 |
| Fair Value Hierarchy, Level 1 | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | 3,853 | 31,239 |
| Fair Value Hierarchy, Level 1 | First-lien senior secured debt investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | ||
| Fair Value Hierarchy, Level 1 | Short-term investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | 3,853 | 31,239 |
| Fair Value Hierarchy, Level 2 | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | ||
| Fair Value Hierarchy, Level 2 | First-lien senior secured debt investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | ||
| Fair Value Hierarchy, Level 2 | Short-term investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | ||
| Fair Value Hierarchy, Level 3 | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | 58,161 | 11,761 |
| Fair Value Hierarchy, Level 3 | First-lien senior secured debt investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments | 58,161 | 11,761 |
| Fair Value Hierarchy, Level 3 | Short-term investments [Member] | ||
| Fair Value (Details) - Schedule of fair value hierarchy of investments [Line Items] | ||
| Total Investments |
Fair Value (Details) - Schedule of fair value of investments for which Level 3 inputs - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
|
| Schedule Of Fair Value Of Investments For Which Level3 Inputs Abstract | ||
| Fair value, beginning of period | $ 36,904 | $ 11,761 |
| Purchases of investments | 22,021 | 47,057 |
| Proceeds from sales of investments and principal repayments | (1,281) | (1,683) |
| Net change in unrealized gain (loss) | 464 | 912 |
| Net accretion of discount on investments | 53 | 114 |
| Transfers into (out of) Level 3 | ||
| Fair value, end of period | $ 58,161 | $ 58,161 |
Fair Value (Details) - Schedule of significant unobservable inputs of Level 3 investments - First-lien senior secured debt investments [Member] - USD ($) $ in Thousands |
9 Months Ended | 12 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
|
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Fair Value (in Dollars) | $ 58,161 | $ 11,761 |
| Valuation Technique | Market Approach - Yield Analysis | Market Approach - Yield Analysis |
| Unobservable Input | Credit Spreads | Credit Spreads |
| Weighted Average | 6.05% | 5.77% |
| Minimum [Member] | ||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Range | 5.00% | 5.00% |
| Maximum [Member] | ||
| Fair Value Measurement Inputs and Valuation Techniques [Line Items] | ||
| Range | 7.50% | 6.50% |
Debt (Details) - USD ($) |
9 Months Ended | |||
|---|---|---|---|---|
Sep. 30, 2022 |
Apr. 05, 2022 |
Feb. 25, 2022 |
Sep. 30, 2022 |
|
| Debt Disclosure [Abstract] | ||||
| Maturity date | Feb. 25, 2022 | |||
| Total commitment | $ 25,000 | |||
| Subscription credit facility borrowed | $ 10,000 | $ 25,000 | $ 5,000 | |
| Interest rate, percentage | 5.04% | 2.29% | 1.975% | |
| Commitment fee, percentage | 0.25% |
Debt (Details) - Schedule of debt obligations $ in Thousands |
Sep. 30, 2022
USD ($)
|
|||
|---|---|---|---|---|
| Debt (Details) - Schedule of debt obligations [Line Items] | ||||
| Aggregate principal committed | $ 25,000 | |||
| Outstanding Principal | 10,000 | |||
| Amount available | 15,000 | [1] | ||
| Subscription Credit Facility [Member] | ||||
| Debt (Details) - Schedule of debt obligations [Line Items] | ||||
| Aggregate principal committed | 25,000 | |||
| Outstanding Principal | 10,000 | |||
| Amount available | $ 15,000 | [1] | ||
| ||||
Debt (Details) - Schedule of the components of interest expense - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
|
| Schedule Of The Components Of Interest Expense Abstract | ||
| Interest expense | $ 18 | $ 44 |
| Amortization of debt issuance costs | 24 | 57 |
| Total interest expense | $ 42 | $ 101 |
Share Transactions (Details) |
Sep. 30, 2022
USD ($)
|
|---|---|
| Share Transactions [Abstract] | |
| Purchase of common stock shares value | $ 353,535 |
| Undrawn commitments | $ 300,535 |
Share Transactions (Details) - Schedule of common stock shares issued and aggregate proceeds - USD ($) $ / shares in Units, $ in Thousands |
9 Months Ended | |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
|
| Share Transactions (Details) - Schedule of common stock shares issued and aggregate proceeds [Line Items] | ||
| Common stock shares issued | 1,996 | |
| Aggregate offering amount | $ 10,000 | |
| June 29, 2022 [Member] | ||
| Share Transactions (Details) - Schedule of common stock shares issued and aggregate proceeds [Line Items] | ||
| Offering price per share | $ 5,011 | |
| Common stock shares issued | 1,996 | |
| Aggregate offering amount | $ 10,000 | |
Share Transactions (Details) - Schedule of dividends declared and payable by the Company |
9 Months Ended |
|---|---|
|
Sep. 30, 2022
$ / shares
| |
| Share Transactions (Details) - Schedule of dividends declared and payable by the Company [Line Items] | |
| Dividend per share | $ 35.8 |
| April 19, 2022 [Member] | |
| Share Transactions (Details) - Schedule of dividends declared and payable by the Company [Line Items] | |
| Dividend record date | Apr. 20, 2022 |
| Dividend per share | $ 6.8 |
| Dividend payment date | Jul. 27, 2022 |
| July 19, 2022 [Member] | |
| Share Transactions (Details) - Schedule of dividends declared and payable by the Company [Line Items] | |
| Dividend record date | Jul. 20, 2022 |
| Dividend per share | $ 29 |
| Dividend payment date | Jul. 27, 2022 |
Share Transactions (Details) - Schedule of dividend reinvestment plan - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
|
| Share Transactions (Details) - Schedule of dividend reinvestment plan [Line Items] | ||
| DRIP shares issued | 72 | |
| DRIP value | $ 362 | $ 362 |
| April 20, 2022 [Member] | ||
| Share Transactions (Details) - Schedule of dividend reinvestment plan [Line Items] | ||
| Dividend payment date | Jul. 27, 2022 | |
| DRIP shares issued | 12 | |
| DRIP value | $ 58 | |
| July 20, 2022 [Member] | ||
| Share Transactions (Details) - Schedule of dividend reinvestment plan [Line Items] | ||
| Dividend payment date | Jul. 27, 2022 | |
| DRIP shares issued | 60 | |
| DRIP value | $ 304 |
Commitments and Contingencies (Details) - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Unfunded Commitments [Member] | ||
| Commitments and Contingencies (Details) [Line Items] | ||
| Unfunded commitments | $ 13,610 | $ 5,300 |
Commitments and Contingencies (Details) - Schedule of summary of composition of the unfunded commitments - USD ($) $ in Thousands |
Sep. 30, 2022 |
Dec. 31, 2021 |
|---|---|---|
| Other Commitments [Line Items] | ||
| Total unfunded commitments | $ 13,610 | $ 5,300 |
| Allcat Claims Service, LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 1,865 | |
| Allentown, LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 606 | |
| American Soccer Company, Incorporated (SCORE) [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 345 | |
| Atria Wealth Solutions, Inc. [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 2,783 | |
| BCI Burke Holding Corp. [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 534 | 654 |
| BLP Buyer, Inc. (Bishop Lifting Products) [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 159 | |
| Brightview, LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 646 | 783 |
| Centerline Communications, LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 2,325 | |
| CGI Automated Manufacturing, LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 160 | |
| FCA, LLC (FCA Packaging) [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 288 | |
| Guardian Dentistry Partners [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 1,977 | |
| Gulf Pacific Holdings, LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 1,248 | |
| Improving Acquisition LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 354 | |
| Light Wave Dental Management LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 842 | |
| MacNeill Pride Group [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 985 | |
| SGA Dental Partners Holdings, LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | 207 | 1,552 |
| Siegel Egg Co., LLC [Member] | ||
| Other Commitments [Line Items] | ||
| Total unfunded commitments | $ 263 | $ 334 |
Earnings Per Share (Details) - Schedule of computation of basic and diluted earnings per share of common stock - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
|
| Schedule Of Computation Of Basic And Diluted Earnings Per Share Of Common Stock Abstract | ||
| Net increase (decrease) in net assets resulting from operations | $ 1,200 | $ 1,954 |
| Weighted average shares of common stock outstanding - basic and diluted | 10,647 | 9,305 |
| Earnings (loss) per share of common stock - basic and diluted | $ 113 | $ 210 |
Earnings Per Share (Details) - Schedule of computation of basic and diluted earnings per share of common stock (Parentheticals) - $ / shares |
3 Months Ended | 9 Months Ended |
|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2022 |
|
| Schedule Of Computation Of Basic And Diluted Earnings Per Share Of Common Stock Abstract | ||
| Weighted average shares of common stock outstanding - diluted | 10,647 | 9,305 |
| Earnings (loss) per share of common stock - diluted | $ 113 | $ 210 |
Financial Highlights (Details) - Schedule of financial highlights $ in Thousands |
9 Months Ended | |||||||
|---|---|---|---|---|---|---|---|---|
|
Sep. 30, 2022
USD ($)
shares
| ||||||||
| Per Common Share Operating Performance (1) | ||||||||
| Net Asset Value, Beginning of Period | $ 4,986 | [1] | ||||||
| Results of Operations: | ||||||||
| Net Investment Income | 112 | |||||||
| Net Realized and Unrealized Gain (Loss) on Investments | 78 | [2] | ||||||
| Net Increase (Decrease) in Net Assets Resulting from Operations | 190 | |||||||
| Distributions to Common Stockholders | ||||||||
| Distributions from Net Investment Income | (36) | |||||||
| Net Decrease in Net Assets Resulting from Distributions | (36) | |||||||
| Net Asset Value, End of Period | $ 5,140 | |||||||
| Shares Outstanding, End of Period (in Shares) | shares | 10,668 | |||||||
| Ratio/Supplemental Data | ||||||||
| Net assets, end of period | $ 54,829 | |||||||
| Weighted-average shares outstanding (in Shares) | shares | 9,305 | |||||||
| Total Return | 3.80% | [3] | ||||||
| Portfolio turnover | 5.10% | |||||||
| Ratio of operating expenses to average net assets | 2.90% | |||||||
| Ratio of net investment income (loss) to average net assets | 2.90% | |||||||
| ||||||||
Subsequent Events (Details) - Subsequent Event [Member] - USD ($) $ / shares in Units, $ in Thousands |
1 Months Ended | |
|---|---|---|
Oct. 14, 2022 |
Oct. 25, 2022 |
|
| Subsequent Events (Details) [Line Items] | ||
| Sale of shares of common stock (in Shares) | 4,933 | |
| Offering of stock | $ 25,000 | |
| Equity contribution | $ 250 | |
| Equity contribution commitment percentage | 1.00% | |
| Aggregate capital commitment | $ 353,535 | |
| Undrawn commitments | $ 275,535 | |
| Distribution per share (in Dollars per share) | $ 72 | |
| Total distribution | $ 768 | |
| Reinvested amount | $ 760 | |
| Purchase of common stock shares (in Shares) | 150 |