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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2024

Investments

The tables below present the fair value hierarchy of financial instruments as of the following periods:


	Fair Value Hierarchy as of September 30, 2024
($ in thousands)	Level 1		Level 2		Level 3		Total
Cash	$	135,279	$	—	$	—	$	135,279
Investments:
First-lien senior secured debt investments(1)	$	—	$	285,109	$	4,070,139	$	4,355,248
Second-lien senior secured debt investments	—		66,493		89,575		156,068
Unsecured debt investments	—		—		111,413		111,413
Preferred equity investments(2)	—		—		306,747		306,747
Common equity investments(3)	—		—		152,306		152,306
Subtotal	$	—	$	351,602	$	4,730,180	$	5,081,782
Investments measured at Net Asset Value(4)	$	—	$	—	$	—	$	2,187
Total Investments at fair value	$	—	$	351,602	$	4,730,180	$	5,083,969
Derivatives:
Interest rate swaps	$	—	$	23,189	$	—	$	23,189

(1)Includes investment in Amergin AssetCo.

(2)Includes equity investment in LSI Financing.

(3)Includes equity investments in Amergin AssetCo and Fifth Season.

(4)Includes equity investment in Credit SLF, which is measured at fair value using the net asset value per share (or its equivalent) practical expedient and has not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Consolidated Statements of Assets and Liabilities.


	Fair Value Hierarchy as of December 31, 2023
($ in thousands)	Level 1		Level 2		Level 3		Total
Cash	$	64,899	$	—	$	—	$	64,899
Investments:
First-lien senior secured debt investments(1)	$	—	$	169,676	$	2,898,716	$	3,068,392
Second-lien senior secured debt investments	—		—		186,796		186,796
Unsecured debt investments	—		20,455		53,368		73,823
Preferred equity investments(2)	—		—		370,458		370,458
Common equity investments(3)	—		—		108,170		108,170
Total Investments at fair value	$	—	$	190,131	$	3,617,508	$	3,807,639

(1)Includes investment in Amergin AssetCo.

(2)Includes equity investment in LSI Financing.

(3)Includes equity investments in Amergin AssetCo and Fifth Season.

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 following periods:


	As of and for the Three Months Ended September 30, 2024
($ in thousands)	First-lien senior secured debt investments		Second-lien senior secured debt investments		Unsecured debt investments		Preferred equity investments		Common equity investments		Total
Fair value, beginning of period	$	3,531,513	$	158,804	$	106,884	$	379,430	$	142,366	$	4,318,997
Purchases of investments, net	524,984		—		3		13,508		7,978		546,473
Payment-in-kind	3,496		—		2,187		12,184		—		17,867
Proceeds from investments, net	(5,122)		(17,646)		—		(100,161)		(3,216)		(126,145)
Net change in unrealized gain (loss)	7,322		(248)		2,334		(5,284)		5,178		9,302
Net realized gains (losses)	2		—		—		4,770		—		4,772
Net amortization/accretion of premium/discount on investments	5,261		210		5		2,300		—		7,776
Transfers into (out of) Level 3(1)	2,683		(51,545)		—		—		—		(48,862)
Fair value, end of period	$	4,070,139	$	89,575	$	111,413	$	306,747	$	152,306	$	4,730,180

(1)Transfers between levels, if any, are recognized at the beginning of the period noted. For the three months ended September 30, 2024, transfers between Level 2 and Level 3 were as a result of changes in the observability of significant inputs for certain portfolio companies.


	As of and for the Three Months Ended September 30, 2023
($ in thousands)	First-lien senior secured debt investments		Second-lien senior secured debt investments		Unsecured debt investments		Preferred equity investments		Common equity investments		Total
Fair value, beginning of period	$	2,167,254	$	183,925	$	48,376	$	362,105	$	83,234	$	2,844,894
Purchases of investments, net	402,174		—		—		—		10,015		412,189
Payment-in-kind	5,108		—		1,274		1,363		—		7,745
Proceeds from investments, net	(22,996)		—		—		(20,605)		—		(43,601)
Net change in unrealized gain (loss)	3,964		2,545		(1,448)		(2,800)		888		3,149
Net realized gains (losses)	—		—		—		968		—		968
Net amortization/accretion of premium/discount on investments	1,350		153		—		681		—		2,184
Transfers into (out of) Level 3(1)	(34,300)		—		—		—		—		(34,300)
Fair value, end of period	$	2,522,554	$	186,623	$	48,202	$	341,712	$	94,137	$	3,193,228

(1)Transfers between levels, if any, are recognized at the beginning of the period noted. For the three months ended September 30, 2023, transfers between Level 2 and Level 3 were as a result of changes in the observability of significant inputs for certain portfolio companies.


	As of and for the Nine Months Ended September 30, 2024
($ in thousands)	First-lien senior secured debt investments		Second-lien senior secured debt investments		Unsecured debt investments		Preferred equity investments		Common equity investments		Total
Fair value, beginning of period	$	2,898,716	$	186,796	$	53,368	$	370,458	$	108,170	$	3,617,508
Purchases of investments, net	1,319,221		—		51,891		20,386		40,126		1,431,624
Payment-in-kind	15,235		—		5,450		23,781		—		44,466
Proceeds from investments, net	(192,787)		(17,648)		—		(102,190)		(9,473)		(322,098)
Net change in unrealized gain (loss)	15,311		(2,861)		698		(13,042)		13,483		13,589
Net realized gains (losses)	2		—		—		4,770		—		4,772
Net amortization/accretion of premium/discount on investments	19,391		274		6		2,584		—		22,255
Transfers into (out of) Level 3(1)	(4,950)		(76,986)		—		—		—		(81,936)
Fair value, end of period	$	4,070,139	$	89,575	$	111,413	$	306,747	$	152,306	$	4,730,180

(1)Transfers between levels, if any, are recognized at the beginning of the period noted. For the nine months ended September 30, 2024, transfers between Level 2 and Level 3 were as a result of changes in the observability of significant inputs for certain portfolio companies.


	As of and for the Nine Months Ended September 30, 2023
($ in thousands)	First-lien senior secured debt investments		Second-lien senior secured debt investments		Unsecured debt investments		Preferred equity investments		Common equity investments		Total
Fair value, beginning of period	$	1,758,458	$	184,788	$	45,124	$	337,069	$	71,541	$	2,396,980
Purchases of investments, net	895,464		—		—		19,664		21,315		936,443
Payment-in-kind	11,315		—		3,492		19,246		—		34,053
Proceeds from investments, net	(57,070)		—		—		(22,190)		—		(79,260)
Net change in unrealized gain (loss)	13,742		1,393		(428)		(14,000)		1,281		1,988
Net realized gains (losses)	(2)		—		—		968		—		966
Net amortization of discount on investments	3,658		442		14		955		—		5,069
Transfers into (out of) Level 3(1)	(103,011)		—		—		—		—		(103,011)
Fair value, end of period	$	2,522,554	$	186,623	$	48,202	$	341,712	$	94,137	$	3,193,228

(1)Transfers between levels, if any, are recognized at the beginning of the period noted. For the nine months ended September 30, 2023, transfers between Level 2 and Level 3 were as a result of changes in the observability of significant inputs for certain portfolio companies.

The following tables present information with respect to net change in unrealized gains (losses) on investments for which Level 3 inputs were used in determining the fair value that are still held by the Company for the following periods:


($ in thousands)	Net change in unrealized gain (loss) for the Three Months Ended September 30, 2024 on Investments Held at September 30, 2024		Net change in unrealized gain (loss) for the Three Months Ended September 30, 2023 on Investments Held at September 30, 2023
First-lien senior secured debt investments	$	13,085	$	4,191
Second-lien senior secured debt investments	(72)		2,545
Unsecured debt investments	2,334		(1,448)
Preferred equity investments	1,684		(2,800)
Common equity investments	3,570		888
Total Investments	$	20,601	$	3,376


($ in thousands)	Net change in unrealized gain (loss) for the Nine Months Ended September 30, 2024 on Investments Held at September 30, 2024		Net change in unrealized gain (loss) for the Nine Months Ended September 30, 2023 on Investments Held at September 30, 2023
First-lien senior secured debt investments	$	26,109	$	14,293
Second-lien senior secured debt investments	(2,685)		1,393
Unsecured debt investments	698		(428)
Preferred equity investments	(3,595)		(14,000)
Common equity investments	11,875		1,281
Total Investments	$	32,402	$	2,539

The tables below present quantitative information about the significant unobservable inputs of the Company’s Level 3 investments as of the following periods. The weighted average range of unobservable inputs is based on fair value of investments. The table is not intended to be all-inclusive but instead capture the significant unobservable inputs relevant to the Company’s determination of fair value.

September 30, 2024

($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input

First-lien senior secured debt investments

356,498

Recent Transaction

Transaction Price

98.0% - 100.0% (99.0%)

Increase

3,713,641

Yield Analysis

Market Yield

6.6% - 16.8% (10.1%)

Decrease

Second-lien senior secured debt investments

89,575

Yield Analysis

Market Yield

15.7% - 15.9% (15.8%)

Decrease

Unsecured debt investments

3,029

Recent Transaction

Transaction Price

100.0% - 100.0% (100.0%)

Increase

108,384

Yield Analysis

Market Yield

9.1% - 14.4% (10.6%)

Decrease

Preferred equity investments

22,098

Recent Transaction

Transaction Price

81.4% - 100.0% (93.2%)

Increase

223,692

Yield Analysis

Market Yield

10.2% - 21.5% (15.1%)

Decrease

6,878

Market Approach

EBITDA Multiple

8.4x - 8.4x (8.4x)

Increase

54,079

Market Approach

Revenue Multiple

8.0x - 21.0x (12.0x)

Increase

Common equity investments

24,611

Market Approach

EBITDA Multiple

8.2x - 30.5x (11.5x)

Increase

79,219

Market Approach

AUM Multiple

1.1x - 1.1x (1.1x)

Increase

10,882

Market Approach

N/A

1,608

Discounted Cash Flow Analysis

Discount Rate

30.0% - 30.0% (30.0%)

Decrease

147

Option Pricing Model

Volatility

70.0% - 70.0% (70.0%)

Increase

35,839

Market Approach

Revenue Multiple

6.3x - 13.5x (10.1x)

Increase

December 31, 2023

($ in thousands)

Fair Value

Valuation Technique

Unobservable Input

Range (Weighted Average)

Impact to Valuation from an Increase in Input

First-lien senior secured debt investments

423,672

Recent Transaction

Transaction Price

97.0% - 99.3% (98.6%)

Increase

2,475,044

Yield Analysis

Market Yield

8.2% - 17.1% (12.0%)

Decrease

Second-lien senior secured debt investments

186,796

Yield Analysis

Market Yield

11.4% - 17.7% (15.3%)

Decrease

Unsecured debt investments

1,700

Recent Transaction

Transaction Price

100.0% - 100.0% (100.0%)

Increase

51,668

Yield Analysis

Market Yield

10.6% - 10.6% (10.6%)

Decrease

Preferred equity investments

109,877

Recent Transaction

Transaction Price

98.0% - 107.5% (106.9%)

Increase

199,839

Yield Analysis

Market Yield

10.4% - 20.0% (15.2%)

Decrease

60,742

Market Approach

Revenue Multiple

8.5x - 21.5x (14.6x)

Increase

Common equity investments

58,201

Recent Transaction

Transaction Price

100.0% - 100.0% (100.0%)

Increase

17,724

Market Approach

EBITDA Multiple

9.1x - 34.5x (12.5x)

Increase

32,245

Market Approach

Revenue Multiple

6.3x - 14.7x (11.2x)

Increase

The Adviser, as valuation designee, typically determines the fair value of its performing Level 3 debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to the expected life, portfolio company performance since close, and other terms and risks associated with an investment. Among other factors, a determinant of risk is the amount of leverage used by the portfolio company relative to its total enterprise value, and the rights and remedies of the Company’s investment within the portfolio company’s capital structure.

When the debtor is not performing or when there is insufficient value to cover the investment, the Company may utilize a net recovery approach to determine the fair value of debt investments in subject companies. A net recovery analysis typically consists of two steps. First, the total enterprise value for the subject company is estimated using standard valuation approaches, most commonly the market approach. Second, the fair value for each investment in the subject company is then estimated by allocating the subject company’s total enterprise value to the outstanding securities in the capital structure based upon various factors, including seniority, preferences, and other features if deemed relevant to each security in the capital structure.

Significant unobservable quantitative inputs typically used in the fair value measurement of the Company’s Level 3 debt investments primarily include current market yields, including relevant market indices, but may also include quotes from brokers, dealers, and pricing services as indicated by comparable investments. For the Company’s Level 3 equity investments, a market approach, based on comparable financial performance multiples such as publicly-traded company and comparable market transaction multiples of revenues, earnings before interest, taxes, depreciation and amortization (“EBITDA”) or some combination thereof and comparable market transactions are typically used.

Debt Not Carried at Fair Value

Fair value is estimated by discounting remaining payments using applicable current market rates, which take into account changes in the Company’s marketplace credit ratings, or market quotes, if available. The table below presents the carrying and fair values of the Company’s debt obligations as of the following periods:


	September 30, 2024						December 31, 2023
($ in thousands)	Net Carrying Value		Unamortized Debt Issuance Costs		Fair Value		Net Carrying Value		Unamortized Debt Issuance Costs		Fair Value
Subscription Credit Facility	$	534,157	$	843	$	534,157	$	797,454	$	2,546	$	797,454
Revolving Credit Facility	356,706		8,703		356,706		279,080		9,275		279,080
SPV Asset Facility I	300,381		12,119		300,381		321,387		8,613		321,387
SPV Asset Facility II	(3,609)		3,609		(3,609)		267,647		2,353		267,647
Athena CLO II	285,737		2,263		285,737		285,596		2,404		285,596
Athena CLO IV	237,400		2,600		237,400		—		—		—
2023A Notes	74,280		720		75,000		74,144		856		75,188
April 2029 Notes	705,759		15,664		703,500		—		—		—
Total Debt	$	2,490,811	$	46,521	$	2,489,272	$	2,025,308	$	26,047	$	2,026,352

The table below presents fair value measurements of the Company’s debt obligations as of the following periods:


($ in thousands)	September 30, 2024		December 31, 2023
Level 1	$	—	$	—
Level 2	703,500		—
Level 3	1,785,772		2,026,352
Total Debt	$	2,489,272	$	2,026,352

Financial Instruments Not Carried at Fair Value

As of September 30, 2024 and December 31, 2023, the carrying amounts of the Company’s other assets and liabilities approximate fair value due to their short maturities. These financial instruments would be categorized as Level 3 within the hierarchy.

- Definition

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

+ References

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-Topic 820
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