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10-Q ☒ June 30, 2022 ☐ 814-12345 ZYX CAPITAL Delaware 22-1234567 8080 Floppy Disk Drive Suite 99 Santa Sashimi California 90425 (415) 415-1000 Yes Yes Large accelerated filer ☐ ☐ No 75,097,443 ZYX TCP Capital Corp. (the “Company”), formerly known as ZZZ Capital Corp., is a Delaware corporation formed on April 2, 2012 as an externally managed, closed-end, non-diversified management investment company. The Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company’s investment objective is to achieve high total returns through current income and capital appreciation, with an emphasis on principal protection. The Company invests primarily in the debt of middle-market companies as well as small businesses, including senior secured loans, junior loans, mezzanine debt and bonds. Such investments may include an equity component, and, to a lesser extent, the Company may make equity investments directly. The Company was formed through the conversion on April 2, 2012 of the Company’s predecessor, Special Value Continuation Fund, LLC, from a limited liability company to a corporation in a non-taxable transaction, leaving the Company as the surviving entity. On April 3, 2012, the Company completed its initial public offering.

4. Debt

Debt is comprised of unsecured notes due August 2024 issued by the Company (the “2024 Notes”), unsecured notes due February 2026 issued by the Company (the “2026 Notes”), amounts outstanding under a senior secured revolving, multi-currency credit facility issued by SVCP (the “Operating Facility”), amounts outstanding under a senior secured revolving credit facility issued by Funding II (“Funding Facility II”). Prior to being repaid on March 1, 2022, debt included $182.0 million in convertible senior unsecured notes due March 2022 issued by the Company (the "2022 Convertible Notes"). Prior to being repaid on September 17, 2021, debt included $227.5 million in unsecured notes due August 2022 issued by the Company (the "2022 Notes").

Total debt outstanding and available at June 30, 2022 was as follows:

|  | Maturity |  | Rate |  |  | Carrying Value (1) |  |  | Available |  |  | Total Capacity |  |
Operating Facility |  | 2026 |  | L+2.27% | (2) |  | $ | 288,268,138 |  |  | $ | 101,731,861 |  |  | $ | 390,000,000 |  | (3)
Funding Facility II |  | 2025 |  | L+2.60% | (4) |  |  | 131,300,000 |  |  |  | 128,700,000 |  |  |  | 260,000,000 |  | (5)
2024 Notes ($250 million par) |  | 2024 |  | 5.070% |  |  |  | 323,319,612 |  |  |  | — |  |  |  | 323,319,612 |  |
2026 Notes ($325 million par) |  | 2026 |  | 3.705% |  |  |  | 424,272,318 |  |  |  | — |  |  |  | 424,272,318 |  |
Total leverage |  |  |  |  |  |  |  | 1,167,160,068 |  |  | $ | 243,431,861 |  |  | $ | 1,605,591,930 |  |
Unamortized issuance costs |  |  |  |  |  |  |  | (7,688,228 | ) |  |  |  |  |  |  |
Debt, net of unamortized issuance costs |  |  |  |  |  |  | $ | 1,159,471,840 |  |  |  |  |  |  |  |

(1) | Except for the 2024 Notes and the 2026 Notes, all carrying values are the same as the principal amounts outstanding.
(2) | As of June 30, 2022, $10.0 million of the outstanding amount bore interest at a rate of EURIBOR + 2.60% and $2.6 million of the outstanding amount bore interest at a rate of Prime + 1.30%.
(3) | Operating Facility includes a $130.0 million accordion which allows for expansion of the facility to up to $520.0 million subject to consent from the lender and other customary conditions.
(4) | Subject to certain funding requirements.
(5) | Facility II includes a $65.0 million accordion which allows for expansion of the facility to up to $325.0 million subject to consent from the lender and other customary conditions.
(6) | Weighted-average interest rate, excluding fees of 0.45% or 0.47%.

Total debt outstanding and available at December 31, 2021 was as follows:

|  | Maturity |  | Rate |  |  | Carrying Value (1) |  |  | Available |  |  | Total Capacity |  |
Operating Facility |  | 2026 |  | L+2.27% | (2) |  | $ | 200,823,407 |  |  | $ | 189,176,592 |  |  | $ | 390,000,000 |  | (3)
Funding Facility II |  | 2025 |  | L+2.60% | (4) |  |  | — |  |  |  | 260,000,000 |  |  |  | 260,000,000 |  | (5)
2022 Convertible Notes ($140 million par) |  | 2022 |  | 6.013% |  |  |  | 181,852,983 |  |  |  | — |  |  |  | 181,852,983 |  |
2024 Notes ($250 million par) |  | 2024 |  | 5.070% |  |  |  | 322,950,121 |  |  |  | — |  |  |  | 322,950,121 |  |
2026 Notes ($325 million par) |  | 2026 |  | 3.705% |  |  |  | 424,514,773 |  |  |  | — |  |  |  | 424,514,773 |  |
Total leverage |  |  |  |  |  |  |  | 1,325,141,285 |  |  | $ | 449,176,592 |  |  | $ | 1,579,317,877 |  |
Unamortized issuance costs |  |  |  |  |  |  |  | (8,941,543 | ) |  |  |  |  |  |  |
Debt, net of unamortized issuance costs |  |  |  |  |  |  | $ | 1,121,199,741 |  |  |  |  |  |  |  |

(1) | Except for the 2022 Convertible notes, the 2022 Notes and the 2024 Notes, all carrying values are the same as the principal amounts outstanding.
(2) | As of December 31, 2021, $10.9 million of the outstanding amount bore interest at a rate of EURIBOR + 2.60% and $44.3 million of the outstanding amount bore interest at a rate of Prime + 1.30%
(3) | Operating Facility includes a $130.0 million accordion which allows for expansion of the facility to up to $520.0 million subject to consent from the lender and other customary conditions.
(4) | Subject to certain funding requirements
(5) | Funding Facility II includes a $65.0 million accordion which allows for expansion of the facility to up to $325.0 million subject to consent from the lender and other customary conditions.

The combined weighted-average interest rates on total debt outstanding at June 30, 2022 and December 31, 2021 were 4.15% and 4.24%, respectively.

Total expenses related to debt included the following:

|  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |
Interest expense |  | $ | 21,789,417 |  |  | $ | 23,621,852 |
Amortization of deferred debt issuance costs |  |  | 2,020,175 |  |  |  | 2,396,280 |
Commitment fees |  |  | 519,144 |  |  |  | 1,045,582 |
Total |  | $ | 24,328,736 |  |  | $ | 27,063,715 |

Outstanding debt is carried at amortized cost in the Consolidated Statements of Assets and Liabilities. As of June 30, 2022, the estimated fair values of the Operating Facility, and Funding Facility II approximated their carrying values, and the 2024 Notes and the 2026 Notes had estimated fair values of $313.9 million and $381.4 million, respectively. As of December 31, 2021, the estimated fair values of the Operating Facility, and Funding Facility II approximated their carrying values, and the 2022 Convertible Notes, the 2024 Notes and the 2026 Notes had estimated fair values of $183.6 million, $340.3 million and $424.7 million, respectively. The estimated fair values of the Operating Facility, and Funding Facility II were determined by discounting projected remaining payments using market interest rates for borrowings of the Company and entities with similar credit risks at the measurement date. The estimated fair values of the 2022 Convertible Notes, 2024 Notes and 2026 Notes were determined using market quotations. The estimated fair values of the Operating Facility, Funding Facility II, the 2022 Convertible Notes, the 2024 Notes, and the 2026 Notes as prepared for disclosure purposes were deemed to be Level 3 in the GAAP valuation hierarchy.

Convertible Unsecured Notes

On August 30, 2016, the Company issued $182.0 million of convertible senior unsecured notes, which matured on March 1, 2022. The 2022 Convertible Notes were general unsecured obligations of the Company, and ranked structurally junior to the Operating Facility, and Funding Facility II. The Company did not have the right to redeem the 2022 Convertible Notes prior to maturity. The 2022 Convertible Notes bore interest at an annual rate of 6.013%, paid semi-annually. In certain circumstances, the 2022 Convertible Notes could have been converted into cash, shares of the Company’s common stock or a combination of cash and shares of common stock (such combination to be at the Company’s election), at an initial conversion rate of 70.8525 shares of common stock per one thousand dollar principal amount of the 2022 Convertible Notes, which is equivalent to an initial conversion price of approximately $23.86 per share of common stock, subject to customary anti-dilutional adjustments. The initial conversion price was approximately 10.0% above the $16.68 per share closing price of the Company’s common stock on August 30, 2016. Prior to its maturity on March 1, 2022, the principal amount of the 2022 Convertible Notes exceeded the value of the conversion rate multiplied by the per share closing price of the Company’s common stock. Therefore, no additional shares were added to the calculation of diluted earnings per common share and weighted average common shares outstanding.

The 2022 Convertible Notes were accounted for in accordance with ASC Topic 470-20 – Debt with Conversion and Other Options. Upon conversion of any of the 2022 Convertible Notes, the Company intended to pay the outstanding principal amount in cash and, to the extent that the conversion value exceeds the principal amount, had the option to pay the excess amount in cash or shares of the Company’s common stock (or a combination of cash and shares), subject to the requirements of the respective indenture. Prior to the adoption of ASU 2020-06, the Company had determined that the embedded conversion options in 2022 Convertible Notes were not required to be separately accounted for as derivatives under GAAP. At the time of issuance the estimated values of the debt and equity components of the 2022 Convertible Notes were approximately 97.6% and 2.4%, respectively. During the six months ended June 30, 2022, the Company adopted ASU 2020-06 using the modified retrospective basis. In accordance with this guidance, the Company has recombined the equity conversion component of our 2022 Convertible Notes outstanding, and now accounts for the 2022 Convertible Notes as a single liability measured at amortized cost. This resulted in a cumulative decrease to additional paid in capital of $3.3 million, partially offset by a decrease to accumulated loss of $3.2 million as of January 1, 2022 (see Note 2).

Prior to the close of business on the business day immediately preceding September 1, 2021, holders were permitted to convert their 2022 Convertible Notes only under certain circumstances set forth in the indenture governing the terms of the 2022 Convertible Notes. On or after September 1, 2021 until the close of business on the scheduled trading day immediately preceding March 1, 2022, holders may have converted their 2022 Convertible Notes at any time. Upon conversion, the Company would pay or deliver, as the case may be, at its election, cash, shares of the Company’s common stock or a combination of cash and shares of the Company’s common stock, subject to the requirements of the indenture. No notes were converted prior to the notes maturing on March 1, 2022.

The original issue discounts equal to the equity components of the 2022 Convertible Notes were recorded in “paid-in capital in excess of par” in the accompanying Consolidated Statements of Assets and Liabilities. As a result, the Company records interest expense comprised of both stated interest and amortization of the original issue discounts. At the time of issuance, the equity components of the 2022 Convertible Notes were $4.3 million. As of June 30, 2022 and December 31, 2021, the components of the carrying values of the 2022 Convertible Notes were as follows:

|  | June 30, 2022 |  | December 31, 2021 |
Principal amount of debt |  | NA |  | $ | 182,000,000 |
Original issue discount, net of accretion |  | NA |  |  | (147,017 | )
Carrying value of debt |  | NA |  | $ | 181,852,983 |

For the six months ended June 30, 2022 and 2021, the components of interest expense for the convertible notes were as follows:

|  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |
Stated interest expense |  | $ | 1,402,917 |  |  | $ | 4,208,750 |
Amortization of original issue discount |  |  | — |  |  |  | 429,009 |
Total interest expense |  | $ | 1,402,917 |  |  | $ | 4,637,759 |

The estimated effective interest rate of the debt component of the 2022 Convertible Notes, equal to the stated interest of 6.013% plus the accretion of the original issue discount, was approximately 6.663% for the six months ended June 30, 2022 and June 30, 2021. The Company adopted ASU 2020-06 under the modified retrospective basis as of January 1, 2022. As a result of the adoption, the Company has not recognized any amortization of original discount on the 2022 Convertible Notes during the six months ended June 30, 2022 (see Note 2).

Unsecured Notes

On August 4, 2017, the Company issued $162.5 million of unsecured notes that mature on August 11, 2022, unless previously repurchased or redeemed in accordance with their terms. On November 3, 2017, the Company issued an additional $65.0 million of the 2022 Notes. The 2022 Notes bore interest at an annual rate of 5.362%, payable semi-annually, and all principal were due upon maturity. The 2022 Notes were general unsecured obligations of the Company and ranked structurally junior to the Operating Facility, Funding Facility I, and Funding Facility II, and ranked pari passu with the 2022 Convertible Notes, the 2024 Notes and the 2026 Notes.

On September 17, 2021 and pursuant to the indenture governing the 2022 Notes, the Company redeemed all $227.5 million of the 2022 Notes then outstanding at a price equal to par plus a "make whole" premium, and accrued and unpaid interest. In connection with the redemption, the Company recognized a $8.1 million loss on extinguishment of debt as reflected in the Consolidated Statement of Operations.

On August 23, 2019, the Company issued $195.0 million of unsecured notes that mature on August 23, 2024, unless previously repurchased or redeemed in accordance with their terms. On November 26, 2019, the Company issued an additional $65.0 million of the 2024 Notes and on October 2, 2020, the Company issued an additional $65.0 million of the 2024 Notes for a total outstanding aggregate principal amount of $325.0 million. The 2024 Notes bear interest at an annual rate of 5.070%, payable semi-annually, and all principal is due upon maturity. The 2024 Notes are general unsecured obligations of the Company and rank structurally junior to the Operating Facility, Funding Facility I, and Funding Facility II, and rank pari passu with the 2022 Convertible Notes and the 2026 Notes. The 2024 Notes may be redeemed in whole or part at the Company's option at a redemption price equal to par plus a "make whole" premium, as determined pursuant to the indenture governing the 2024 Notes, and any accrued and unpaid interest. The 2024 Notes were issued at a discount to the principal amount.

On February 9, 2021, the Company issued $227.5 million of unsecured notes that mature on February 9, 2026, unless previously repurchased or redeemed in accordance with their terms. The 2026 Notes were issued at a discount to the principal amount. On August 27, 2021, the Company issued an additional $195.0 million of the 2026 Notes, at a premium to par, for a total outstanding aggregate principal amount of $422.5 million. The 2026 Notes bear interest at an annual rate of 3.705%, payable semi-annually, and all principal is due upon maturity. The 2026 Notes are general unsecured obligations of the Company and rank structurally junior to the Operating Facility, Funding Facility I, and Funding Facility II, and rank pari passu with the 2022 Convertible Notes and the 2024 Notes. The 2026 Notes may be redeemed in whole or part at the Company's option at a redemption price equal to par plus a "make whole" premium, as determined pursuant to the indenture governing the 2026 Notes, and any accrued and unpaid interest.

As of June 30, 2022 and December 31, 2021, the components of the carrying value of 2024 Notes and 2026 Notes were as follows:

|  | June 30, 2022 |  |  | December 31, 2021 |
|  | 2024 Notes |  |  | 2026 Notes |  |  | 2024 Notes |  |  | 2026 Notes |
Principal amount of debt |  | $ | 325,000,000 |  |  | $ | 422,500,000 |  |  | $ | 325,000,000 |  |  | $ | 422,500,000 |
Original issue (discount)/ premium, net of accretion |  |  | (1,680,387 | ) |  |  | 1,772,318 |  |  |  | (2,049,879 | ) |  |  | 2,014,773 |
Carrying value of debt |  | $ | 323,319,612 |  |  | $ | 424,272,318 |  |  | $ | 322,950,121 |  |  | $ | 424,514,773 |

For the six months ended June 30, 2022 and 2021, the components of interest expense for the 2022 Notes, 2024 Notes and 2026 Notes were as follows:

|  | Six Months Ended June 30, |
|  | 2022 |  |  | 2021 |
|  | 2022 Notes |  | 2024 Notes |  |  | 2026 Notes |  |  | 2022 Notes |  |  | 2024 Notes |  |  | 2026 Notes |
Stated interest expense |  | NA |  | $ | 6,337,500 |  |  | $ | 6,020,625 |  |  | $ | 4,692,187 |  |  | $ | 6,337,500 |  |  | $ | 2,557,479 |
Amortization of original issue discount/ (premium) |  | NA |  |  | 369,492 |  |  |  | (242,455 | ) |  |  | 86,392 |  |  |  | 354,671 |  |  |  | 68,264 |
Total interest expense |  | NA |  | $ | 6,706,992 |  |  | $ | 5,778,169 |  |  | $ | 4,778,580 |  |  | $ | 6,692,171 |  |  | $ | 2,625,743 |

Operating Facility

The Operating Facility consists of a revolving, multi-currency credit facility which provides for amounts to be drawn up to $390.0 million, subject to certain collateral and other restrictions. The Operating Facility includes a $130.0 million accordion feature which allows for expansion of the facility to up to $520.0 million subject to consent from the lender and other customary conditions. Most of the cash and investments held directly by YZX, as well as the net assets of Funding I and Funding II, are included in the collateral for the facility.

On June 22, 2021, the Operating Facility was amended to (i) extend the maturity date by two years from May 6, 2024 to May 6, 2026, (ii) change the interest rate applicable to borrowings to (a) LIBOR plus an applicable margin equal to either 1.75% or 2.00%, or (b) in the case of ABR borrowings, generally the prime rate in effect plus an applicable margin of either 0.75% or 1.00% depending on a ratio of the borrowing base to the facility commitments in both cases, and (iii) reduce commitment fees on the undrawn portion of the Operating Facility above the minimum utilization amount from 0.50% per annum to 0.375% per annum. Undrawn portions of the Operating Facility below the minimum utilization amount continued to accrue commitment fees at a rate of 0.50% per annum until March 1, 2022, the date on which the March 2022 Convertible Notes were terminated in full, after which time they accrue at a rate of 2.00% per annum. The Operating Facility may be terminated, and any outstanding amounts there under may become due and payable, should SVCP fail to satisfy certain financial or other covenants. As of June 30, 2022, SVCP was in full compliance with such covenants.

Funding Facility I

Funding Facility I was a senior secured revolving credit facility which provided for amounts to be drawn up to $390.0 million, subject to certain collateral and other restrictions and had a maturity of May 31, 2023. Borrowings under Funding Facility I bore interest at a rate of LIBOR plus either 2.60% or 3.06% per annum, subject to certain funding requirements, plus an administrative fee of 0.33% per annum. In addition to amounts due on outstanding debt, the facility accrued commitment fees of 0.33% per annum on the unused portion of the facility, or 0.65% per annum when the unused portion is greater than 33% of the total facility, plus an administrative fee of 0.33% per annum. The facility was terminated in August 2020 and replaced with Funding Facility II.

Funding Facility II

Funding Facility II is a senior secured revolving credit facility which provides for amounts to be drawn up to $260.0 million, subject to certain collateral and other restrictions. The facility contains an accordion feature which allows for expansion of the facility to up to $325.0 million subject to consent from the lender and other customary conditions. The cash and investments ofC Funding II are included in the collateral for the facility.

Borrowings under Funding Facility II bear interest at a rate of LIBOR plus 2.60% per annum, subject to certain funding requirements, plus a 0.45% fee on drawn amounts and an administrative fee of 0.20% per annum on the facility. The facility also accrues commitment fees of 0.45% per annum on the unused portion of the facility. The facility may be terminated, and any outstanding amounts thereunder may become due and payable, should Funding II fail to satisfy certain financial or other covenants. As of June 30, 2022,C Funding II was in full compliance with such covenants.

Class and Year |  | Total Amount Outstanding (1) |  |  | Asset Coverage Per Unit (2) |  |  | Involuntary Liquidating Preference Per Unit (3) |  |  | Average Market Value Per Unit (4)
Operating Facility |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | $ | 288,268 |  |  | $ | 6,857 |  |  |  | — |  |  | N/A
Fiscal Year 2021 |  |  | 200,824 |  |  |  | 14,326 |  |  |  | — |  |  | N/A
Fiscal Year 2020 |  |  | 156,590 |  |  |  | 12,360 |  |  |  | — |  |  | N/A
Fiscal Year 2019 |  |  | 141,047 |  |  |  | 7,555 |  |  |  | — |  |  | N/A
Fiscal Year 2018 |  |  | 106,600 |  |  |  | 6,787 |  |  |  | — |  |  | N/A
Fiscal Year 2017 |  |  | 74,100 |  |  |  | 8,466 |  |  |  | — |  |  | N/A
Fiscal Year 2016 |  |  | 130,650 |  |  |  | 5,272 |  |  |  | — |  |  | N/A
Fiscal Year 2015 |  |  | 161,850 |  |  |  | 3,998 |  |  |  | — |  |  | N/A
Fiscal Year 2014 |  |  | 91,000 |  |  |  | 6,962 |  |  |  | — |  |  | N/A
Fiscal Year 2013 |  |  | 58,500 |  |  |  | 10,628 |  |  |  | — |  |  | N/A
Fiscal Year 2012 |  |  | 96,200 |  |  |  | 9,200 |  |  |  | — |  |  | N/A
Preferred Interests |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2021 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2020 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2019 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2018 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2017 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2016 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2015 |  | N/A |  |  | N/A |  |  | N/A |  |  | N/A
Fiscal Year 2014 |  | $ | 174,200 |  |  | $ | 67,069 |  |  | $ | 26,096 |  |  | N/A
Fiscal Year 2013 |  |  | 174,200 |  |  |  | 88,562 |  |  |  | 26,097 |  |  | N/A
Fiscal Year 2012 |  |  | 174,200 |  |  |  | 65,617 |  |  |  | 26,102 |  |  | N/A
Funding Facility I |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2021 |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2020 |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2019 |  | $ | 205,400 |  |  | $ | 7,555 |  |  |  | — |  |  | N/A
Fiscal Year 2018 |  |  | 275,600 |  |  |  | 6,787 |  |  |  | — |  |  | N/A
Fiscal Year 2017 |  |  | 227,500 |  |  |  | 8,466 |  |  |  | — |  |  | N/A
Fiscal Year 2016 |  |  | 227,500 |  |  |  | 5,272 |  |  |  | — |  |  | N/A
Fiscal Year 2015 |  |  | 297,700 |  |  |  | 3,998 |  |  |  | — |  |  | N/A
Fiscal Year 2014 |  |  | 162,500 |  |  |  | 6,962 |  |  |  | — |  |  | N/A
Fiscal Year 2013 |  |  | 65,000 |  |  |  | 10,628 |  |  |  | — |  |  | N/A
Funding Facility II |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | $ | 131,300 |  |  | $ | 6,857 |  |  |  | — |  |  | N/A
Fiscal Year 2021 |  |  | - |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2020 |  |  | 46,800 |  |  |  | 12,360 |  |  |  | — |  |  | N/A
2019 Convertible Notes |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2021 |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2020 |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2019 |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2018 |  | $ | 140,400 |  |  | $ | 2,804 |  |  |  | — |  |  | N/A
Fiscal Year 2017 |  |  | 140,400 |  |  |  | 3,035 |  |  |  | — |  |  | N/A
Fiscal Year 2016 |  |  | 140,400 |  |  |  | 3,057 |  |  |  | — |  |  | N/A
Fiscal Year 2015 |  |  | 140,400 |  |  |  | 3,157 |  |  |  | — |  |  | N/A
Fiscal Year 2014 |  |  | 140,400 |  |  |  | 4,702 |  |  |  | — |  |  | N/A
2022 Convertible Notes |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2021 |  | $ | 182,000 |  |  | $ | 2,532 |  |  |  | — |  |  | N/A
Fiscal Year 2020 |  |  | 182,000 |  |  |  | 2,675 |  |  |  | — |  |  | N/A
Fiscal Year 2019 |  |  | 182,000 |  |  |  | 2,589 |  |  |  | — |  |  | N/A
Fiscal Year 2018 |  |  | 182,000 |  |  |  | 2,804 |  |  |  | — |  |  | N/A
Fiscal Year 2017 |  |  | 182,000 |  |  |  | 3,035 |  |  |  | — |  |  | N/A
Fiscal Year 2016 |  |  | 182,000 |  |  |  | 3,057 |  |  |  | — |  |  | N/A
2022 Notes |  |  |  |  |  |  |  |  |  |  |
Fiscal Year 2021 |  | N/A |  |  | N/A |  |  |  | — |  |  | N/A
Fiscal Year 2020 |  | $ | 227,500 |  |  | $ | 2,675 |  |  |  | — |  |  | N/A
Fiscal Year 2019 |  |  | 227,500 |  |  |  | 2,589 |  |  |  | — |  |  | N/A
Fiscal Year 2018 |  |  | 227,500 |  |  |  | 2,804 |  |  |  | — |  |  | N/A
Fiscal Year 2017 |  |  | 227,500 |  |  |  | 3,035 |  |  |  | — |  |  | N/A
2024 Notes |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | $ | 325,000 |  |  | $ | 2,462 |  |  |  | — |  |  | N/A
Fiscal Year 2021 |  |  | 325,000 |  |  |  | 2,532 |  |  |  | — |  |  | N/A
Fiscal Year 2020 |  |  | 325,000 |  |  |  | 2,675 |  |  |  | — |  |  | N/A
Fiscal Year 2019 |  |  | 260,000 |  |  |  | 2,589 |  |  |  | — |  |  | N/A
2026 Notes |  |  |  |  |  |  |  |  |  |  |
As of June 30, 2022 (Unaudited) |  | $ | 422,500 |  |  | $ | 2,462 |  |  |  | — |  |  | N/A
Fiscal Year 2021 |  |  | 422,500 |  |  |  | 2,532 |  |  |  | — |  |  | N/A

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factor discussed below and the risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “Annual Report”), which could materially affect our business, financial condition and/or operating results. The risks described in our Annual Report and discussed below 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.

Market disruptions and other geopolitical or macroeconomic events could create market volatility that negatively impact our business, financial condition and earnings.

Periods of market volatility remain, and may continue to occur in the future, in response to various political, social and economic events both within and outside of the U.S. These conditions have resulted in, and in many cases continue to result in, greater price volatility, less liquidity, widening credit spreads and a lack of price transparency, with many securities remaining illiquid and of uncertain value. Such market conditions may adversely affect the Company, including by making valuation of some of the Company’s securities uncertain and/or result in sudden and significant valuation increases or declines in the Company’s holdings. If there is a significant decline in the value of the Company’s portfolio, this may impact the asset coverage levels for the Company’s outstanding leverage.

Risks resulting from any future debt or other economic crisis could also have a detrimental impact on the global economic recovery, the financial condition of financial institutions and our business, financial condition and results of operation. Market and economic disruptions have affected, and may in the future affect, consumer confidence levels and spending, personal bankruptcy rates, levels of incurrence and default on consumer debt and home prices, among other factors. To the extent uncertainty regarding the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be significantly and adversely affected. Downgrades to the credit ratings of major banks could result in increased borrowing costs for such banks and negatively affect the broader economy. Moreover, Federal Reserve policy, including with respect to certain interest rates, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. Market volatility, rising interest rates and/or a return to unfavorable economic conditions could impair the Company’s ability to achieve its investment objectives.

The occurrence of events similar to those in recent years, such as localized wars, instability, new and ongoing pandemics (such as COVID-19), epidemics or outbreaks of infectious diseases in certain parts of the world, natural/environmental disasters, terrorist attacks in the U.S. and around the world, social and political discord, debt crises sovereign debt downgrades, increasingly strained relations between the U.S. and a number of foreign countries, new and continued political unrest in various countries, the exit or potential exit of one or more countries from the EU or the EMU, continued changes in the balance of political power among and within the branches of the U.S. government, government shutdowns, among others, may result in market volatility, may have long term effects on the U.S. and worldwide financial markets, and may cause further economic uncertainties in the U.S. and worldwide. In particular, the consequences of the Russian military invasion of Ukraine, including comprehensive international sanctions, the impact on inflation and increased disruption to supply chains may impact our portfolio companies, result in an economic downturn or recession either globally or locally in the U.S. or other economies, reduce business activity, spawn additional conflicts (whether in the form of traditional military action, reignited "cold" wars or in the form of virtual warfare such as cyberattacks) with similar and perhaps wider ranging impacts and consequences and have an adverse impact on the Company's returns and net asset value. We have no way to predict the duration or outcome of the situation, as the conflict and government reactions are rapidly developing and beyond our control. Prolonged unrest, military activities, or broad-based sanctions could have a material adverse effect on our portfolio companies. Such consequences also may increase our funding cost or limit our access to the capital markets.

The current political climate has intensified concerns about a potential trade war between China and the U.S., as each country has imposed tariffs on the other country’s products. These actions may trigger a significant reduction in international trade, the oversupply of certain manufactured goods, substantial price reductions of goods and possible failure of individual companies and/or large segments of China’s export industry, which could have a negative impact on our performance. U.S. companies that source material and goods from China and those that make large amounts of sales in China would be particularly vulnerable to an escalation of trade tensions. Uncertainty regarding the outcome of the trade tensions and the potential for a trade war could cause the U.S. dollar to decline against safe haven currencies, such as the Japanese yen and the euro. Events such as these and their consequences are difficult to predict and it is unclear whether further tariffs may be imposed or other escalating actions may be taken in the future. Any of these effects could have a material adverse effect on our business, financial condition and results of operations.

Rising interest rates or changes in interest rates may adversely affect the value of our portfolio investments which could have an adverse effect on our business, financial condition and results of operations.

Our debt investments are generally based on floating rates, such as London Interbank Offer Rate (“LIBOR”), EURIBOR, Secured Overnight Financing Rate (“SOFR”), the Federal Funds Rate or the Prime Rate. General interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. While we generally expect to invest a limited percentage of our assets in instruments with a fixed interest rate, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, an increase in interest rates could decrease the value of those fixed rate investments. Rising interest rates may also increase the cost of debt for our underlying portfolio companies, which could adversely impact their financial performance and ability to meet ongoing obligations to the Company. Also, an increase in interest rates available to investors could make investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.

Because we have borrowed money, and may issue preferred stock to finance investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds or pay distributions on preferred stock and the rate that our investments yield. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In this period of rising interest rates, our cost of funds may increase except to the extent we have issued fixed rate debt or preferred stock, which could reduce our net investment income. You should also be aware that a change in the general level of interest rates can be expected to lead to a change in the interest rate we receive on many of our debt investments. Accordingly, a change in the interest rate could make it easier for us to meet or exceed the performance threshold and may result in a substantial increase in the amount of Incentive Fees payable to our Advisor with respect to the portion of the Incentive Fee based on income.

Interest rates have risen in recent months, and the risk that they may continue to do so is pronounced.

We are subject to risks related to inflation.

Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money. Recently, inflation has increased to its highest level in decades. As inflation increases, the real value of our shares and distributions therefore may decline. In addition, during any periods of rising inflation, interest rates of any debt securities issued by the Company would likely increase, which would tend to further reduce returns to shareholders. Inflation rates may change frequently and significantly as a result of various factors, including unexpected shifts in the domestic or global economy and changes in economic policies, and our investments may not keep pace with inflation, which may result in losses to our shareholders. This risk is greater for fixed-income instruments with longer maturities.

|  |  |  |  |  |  |  |  |  | Premium/(Discount) |  |  | Premium/(Discount) |  |  |  |
|  |  |  | Stock Price |  |  | of High Sales Price |  |  | of Low Sales Price |  |  |  |
| NAV(1) |  |  | High(2) |  |  | Low(2) |  |  | to NAV (3) |  |  | to NAV (3) |  |  | Declared Distributions |
Fiscal Year ended December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
First Quarter | $ | 18.55 |  |  | $ | 18.59 |  |  | $ | 17.03 |  |  |  | 0.3 | % |  |  | (10.7 | )% |  | $ | 0.39 |
Second Quarter | $ | 18.16 |  |  | $ | 18.67 |  |  | $ | 15.43 |  |  |  | 3.6 | % |  |  | (19.5 | )% |  | $ | 0.39 |
Fiscal Year ended December 31, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
First Quarter | $ | 17.63 |  |  | $ | 19.36 |  |  | $ | 14.47 |  |  |  | 12.7 | % |  |  | (23.3 | )% |  | $ | 0.39 |
Second Quarter | $ | 18.47 |  |  | $ | 19.46 |  |  | $ | 17.86 |  |  |  | 6.9 | % |  |  | (4.3 | )% |  | $ | 0.39 |
Third Quarter | $ | 18.32 |  |  | $ | 18.71 |  |  | $ | 17.37 |  |  |  | 2.7 | % |  |  | (6.8 | )% |  | $ | 0.39 |
Fourth Quarter | $ | 18.67 |  |  | $ | 18.67 |  |  | $ | 17.13 |  |  |  | 0.0 | % |  |  | (10.7 | )% |  | $ | 0.39 |
Fiscal Year ended December 31, 2020 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
First Quarter | $ | 15.29 |  |  | $ | 19.18 |  |  | $ | 5.72 |  |  |  | 33.0 | % |  |  | (81.4 | )% |  | $ | 0.47 |
Second Quarter | $ | 15.89 |  |  | $ | 14.07 |  |  | $ | 6.79 |  |  |  | (15.0 | )% |  |  | (74.5 | )% |  | $ | 0.47 |
Third Quarter | $ | 16.52 |  |  | $ | 13.36 |  |  | $ | 11.38 |  |  |  | (24.8 | )% |  |  | (40.6 | )% |  | $ | 0.39 |
Fourth Quarter | $ | 17.21 |  |  | $ | 16.08 |  |  | $ | 11.99 |  |  |  | (8.6 | )% |  |  | (39.5 | )% |  | $ | 0.39 |