Investment Valuations and Fair Value Measurements

3 Months Ended

Mar. 31, 2024

Investment Valuations and Fair Value Measurements

Investments at Fair Value: Investments held by the Company are valued at fair value. Fair value is generally determined on the basis of last reported sales prices or official closing prices on the primary exchange in which each security trades, or if no sales are reported, generally based on the midpoint of the valuation range obtained for debt investments from a quotation reporting system, established market makers or pricing service.

Investments for which market quotes are not readily available or are not considered reliable are valued at fair value according to procedures approved by the Board of Directors (the “Board”) based on similar instruments, internal assumptions and the weighting of the best available pricing inputs.

Pursuant to Rule 2a-5 under the 1940 Act, the Board has designated the Adviser as the "valuation designee" with respect to the fair valuation of the Company's portfolio securities, subject to oversight by and periodic reporting to the Board.

Fair Value Hierarchy: Assets and liabilities are classified by the Company into three levels based on valuation inputs used to determine fair value:

Level 1 values are based on unadjusted quoted market prices in active markets for identical assets.

Level 2 values are based on significant observable market inputs, such as quoted prices for similar assets and quoted prices in inactive markets or other market observable inputs.

Level 3 values are based on significant unobservable inputs that reflect the Company’s determination of assumptions that market participants might reasonably use in valuing the assets.

Categorization within the hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The valuation levels are not necessarily an indication of the risk associated with investing in those securities.

Investment Valuations and Fair Value Measurements (Continued)

Level 1 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Equity, (Level 1), generally includes common stock valued at the closing price on the primary exchange in which the security trades.

Level 2 Assets (Investments): The valuation techniques and significant inputs used to determine fair value are as follows:

Equity, (Level 2), generally include warrants valued using quotes for comparable investments.

Level 3 Assets (Investments): The following valuation techniques and significant inputs are used to determine the fair value of investments in private debt and equity for which reliable market quotations are not available. Some of the inputs are independently observable however, a significant portion of the inputs and the internal assumptions applied are unobservable.

Debt, (Level 3), include investments in privately originated senior secured debt. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. An income method approach incorporating a weighted average cost of capital and discount rate or a market method approach using prices and other relevant information generated by market transactions involving identical or comparable assets are generally used to determine fair value, though some cases use an enterprise value waterfall method. Valuation may also include a shadow rating method. Standard pricing inputs include but are not limited to the financial health of the issuer, place in the capital structure, value of other issuer debt, credit, industry, and market risk and events.

Equity, (Level 3), may include common stock, preferred stock and warrants. Such securities are valued based on specific pricing models, internal assumptions and the weighting of the best available pricing inputs. A market approach is generally used to determine fair value. Pricing inputs include, but are not limited to, financial health and relevant business developments of the issuer; EBITDA; market multiples of comparable companies; comparable market transactions and recent trades or transactions; issuer, industry and market events; and contractual or legal restrictions on the sale of the security. When a Black-Scholes pricing model is used it follows the income approach. The pricing model takes into account the contract terms as well as multiple inputs, including: time value, implied volatility, equity prices and interest rates. A liquidity discount based on current market expectations, future events, minority ownership position and the period management reasonably expects to hold the investment may be applied.

Pricing inputs and weightings applied to determine value require subjective determination. Accordingly, valuations do not necessarily represent the amounts that may eventually be realized from sales or other dispositions of investments.

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of March 31, 2024:


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	132,238	$	132,238
Short- term investments		29,577		—		—		29,577
Cash equivalents		4,735		—		—		4,735
Total	$	34,312	$	—	$	132,238	$	166,550

The following is a summary by major security type of the fair valuations according to inputs used in valuing investments listed in the Consolidated Schedule of Investments as of December 31, 2023:


Investments	Level 1		Level 2		Level 3		Total
Debt	$	—	$	—	$	118,178	$	118,178
Short- term investments		34,438		—		—		34,438
Cash equivalents		4,676		—		—		4,676
Total	$	39,114	$	—	$	118,178	$	157,292

Investment Valuations and Fair Value Measurements (Continued)

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three months ended March 31, 2024:


	Debt			Equity		Total
Balance, January 1, 2024	$	118,178		$	—	$	118,178
Purchases, including payments received in-kind		16,920			—		16,920
Sales and paydowns of investments		(2,443	)		—		(2,443	)
Amortization of premium and accretion of discount, net		179			—		179
Net realized gains		26			—		26
Net change in unrealized appreciation/(depreciation)		(622	)		—		(622	)
Balance, March 31, 2024	$	132,238		$	—	$	132,238
Change in net unrealized appreciation/(depreciation) in investments held as of March 31, 2024	$	(622	)	$	—	$	(622	)

The following table provides a reconciliation of the beginning and ending balances for total investments that use Level 3 inputs for the three months ended March 31, 2023:


	Debt			Equity		Total
Balance, January 1, 2023	$	10,150		$	—	$	10,150
Purchases, including payments received in-kind		26,410			—		26,410
Sales and paydowns of investments		(52	)		—		(52	)
Amortization of premium and accretion of discount, net		13			—		13
Net change in unrealized appreciation/(depreciation)		(14	)		—		(14	)
Balance, March 31, 2023	$	36,507		$	—	$	36,507
Change in net unrealized appreciation/(depreciation) in investments held as of March 31, 2023	$	57		$	—	$	57

The Company did not have any transfers between levels during the three months ended March 31, 2024 and 2023.

Level 3 Valuation and Quantitative Information: The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of March 31, 2024:

        Investment Type

        Fair Value

        Valuation
Technique

        Unobservable
Input

        Range

        Weighted
Average*

        Impact to
Valuation if
Input Increases

Debt

119,381

Income Method

Discount Rate

10.7% to 17.5%

13.0%

Decrease

Debt

12,857

Market Method

Indicative Bid

96.0% to 100.0%

N/A

Increase

* Weighted based on fair value

The following table summarizes the valuation techniques and quantitative information utilized in determining the fair value of the Level 3 investments as of December 31, 2023:

        Investment Type

        Fair Value

        Valuation
Technique

        Unobservable
Input

        Range

        Weighted
Average*

        Impact to
Valuation if
Input Increases

Debt

118,178

Income Method

Discount Rate

10.3% to 16.3%

12.7%

Decrease

* Weighted based on fair value

Investment Valuations and Fair Value Measurements (Continued)

The Company generally utilizes the midpoint of a valuation range provided by an external, independent valuation firm in determining fair value.

- 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.

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