Annual report pursuant to Section 13 and 15(d)

Fair Value of Financial Instruments

v3.24.0.1
Fair Value of Financial Instruments
 12 Months Ended
Dec. 31, 2023
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
3. Fair Value of Financial Instruments
Fair value estimates are made at discrete points in time based on relevant information. These estimates may be subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Investments measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations as of December 31, 2023 and December 31, 2022.
(in thousands) Balance as of
December 31,
2023
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Description
Cash and cash equivalents
Money Market Fund (1)
$ 56,000  $ 56,000  $ —  $ — 
Other assets
Escrow and Other Investment Receivables $ 10,888  $ —  $ —  $ 10,888 
Investments
Senior Secured Debt $ 2,987,577  $ —  $ —  $ 2,987,577 
Unsecured Debt 69,722  —  —  69,722 
Preferred Stock 53,038  —  —  53,038 
Common Stock (2)
99,132  57,342  —  41,790 
Warrants 33,969  —  11,881  22,088 
$ 3,243,438  $ 57,342  $ 11,881  $ 3,174,215 
Investment Funds & Vehicles measured at Net Asset Value (3)
4,608 
Total Investments, at fair value $ 3,248,046 
Derivative Instruments (4)
$ (766)
Total Investments including cash and cash equivalents and derivative instruments $ 3,303,280 
(in thousands) Balance as of
December 31,
2022
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
Significant
Other Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Description
Other assets
Escrow Receivables $ 875  $ —  $ —  $ 875 
Investments
Senior Secured Debt $ 2,741,388  $ —  $ —  $ 2,741,388 
Unsecured Debt 54,056  —  —  54,056 
Preferred Stock 41,488  —  —  41,488 
Common Stock(2)
92,484  66,027  1,398  25,059 
Warrants 30,646  —  11,227  19,419 
$ 2,960,062  $ 66,027  $ 12,625  $ 2,881,410 
Investment Funds & Vehicles measured at Net Asset Value (3)
3,893 
Total Investments, at fair value $ 2,963,955 
(1)This investment is included in Cash and cash equivalents in the accompanying Consolidated Statements of Assets and Liabilities.
(2)Common Stock includes non-voting security in the form of a promissory note with a lien on shares of issuer's Common Stock.
(3)In accordance with U.S. GAAP, certain investments are measured at fair value using the net asset value per share (or its equivalent) as a practical expedient and are not categorized within the fair value hierarchy as per ASC 820. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the accompanying Consolidated Statements of Assets and Liabilities.
(4)Derivative Instruments are carried at fair value and a level 2 security within the Company's fair value hierarchy.
The table below presents a reconciliation of changes for all financial assets and liabilities measured at fair value on a recurring basis, excluding accrued interest components, using significant unobservable inputs (Level 3) for the years ended December 31, 2023 and December 31, 2022.
(in thousands) Balance as of
January 1, 2023
Net Realized Gains (Losses) (1)
Net Change in Unrealized
Appreciation (Depreciation) (2)
Purchases (5)
Sales
Repayments (6)
Gross
Transfers
into
Level 3 (3)
Gross
Transfers
out of
Level 3 (3)
Balance as of
December 31, 2023
Investments
Senior Secured Debt $ 2,741,388  $ (5,350) $ 17,277  $ 1,264,689  $ —  $ (990,448) $ —  $ (39,979) $ 2,987,577 
Unsecured Debt 54,056  —  4,268  11,398  —  —  —  —  69,722 
Preferred Stock 41,488  (3,441) (1,123) 2,851  —  —  13,263  —  53,038 
Common Stock 25,059  —  11,325  6,000  (594) —  —  —  41,790 
Warrants 19,419  (4,295) 4,825  3,894  (1,755) —  —  —  22,088 
Other Assets
Escrow and Other Investment Receivable 875  65  (17,022) 537  (283) —  26,716  —  10,888 
Total $ 2,882,285  $ (13,021) $ 19,550  $ 1,289,369  $ (2,632) $ (990,448) $ 39,979  $ (39,979) $ 3,185,103 
(in thousands) Balance as of
January 1, 2022
Net Realized Gains (Losses) (1)
Net Change in Unrealized
Appreciation (Depreciation) (2)
Purchases (5)
Sales
Repayments (6)
Gross
Transfers
into
Level 3 (4)
Gross
Transfers
out of
Level 3 (4)
Balance as of
December 31, 2022
Investments
Senior Secured Debt $ 2,156,709  $ (1,884) $ (9,788) $ 1,145,048  $ (84,000) $ (461,193) $ —  $ (3,504) $ 2,741,388 
Unsecured Debt 52,890  —  (2,840) 4,006  —  —  —  —  54,056 
Preferred Stock 69,439  7,966  (23,658) 5,264  (11,101) —  —  (6,422) 41,488 
Common Stock 21,968  (74) 6,894  25  (19) —  207  (3,942) 25,059 
Warrants 27,477  (624) (12,412) 7,494  (2,516) —  —  —  19,419 
Other Assets
Escrow Receivable 561  401  (287) 1,148  (948) —  —  —  875 
Total $ 2,329,044  $ 5,785  $ (42,091) $ 1,162,985  $ (98,584) $ (461,193) $ 207  $ (13,868) $ 2,882,285 
(1)Included in net realized gains (losses) in the accompanying Consolidated Statements of Operations.
(2)Included in net change in unrealized appreciation (depreciation) in the accompanying Consolidated Statements of Operations.
(3)Transfers within Level 3 during the year ended December 31, 2023 related to the conversion of Level 3 debt investments into Level 3 preferred stock investments and other assets.
(4)Transfers out of Level 3 during the year ended December 31, 2022 related to the initial public offerings of Gelesis, Inc., Pineapple Energy, LLC, and the conversion of Level 3 debt investments into common stock investments. Transfers into Level 3 during the year ended December 31, 2022 related to the decline of liquidity of Kaleido Biosciences, Inc. shares.
(5)Amounts listed above are inclusive of loan origination fees received at the inception of the loan which are deferred and amortized into fee income as well as the accretion of existing loan discounts and fees during the period. Escrow receivable purchases may include additions due to proceeds held in escrow from the liquidation of level 3 investments. Amounts are net of purchases assigned to the Adviser Funds.
(6)Amounts listed above include the acceleration and payment of loan discounts and loan fees due to early payoffs or restructures along with regularly scheduled amortization.
The following table presents the net unrealized appreciation (depreciation) recorded for preferred stock, common stock, debt and warrant Level 3 investments relating to assets still held at the reporting date.
(in millions) Year Ended December 31,
2023 2022
Debt investments $ 11.5  $ (18.9)
Preferred stock (4.6) (19.4)
Common stock 11.3  6.8 
Warrant investments 1.5  (12.7)
The following tables provide quantitative information about the Company’s Level 3 fair value measurements as of December 31, 2023 and December 31, 2022. In addition to the techniques and inputs noted in the tables below, according to the Company’s valuation policy, the Company may also use other valuation techniques and methodologies when determining the Company’s fair value measurements. The tables below are not intended to be all-inclusive, but rather provide information on the significant Level 3 inputs as they relate to the Company’s fair value measurements. See the accompanying Consolidated Schedule of Investments for the fair value of the Company’s investments. The methodology for the determination of the fair value of the Company’s investments is discussed in “Note 2 – Summary of Significant
Accounting Policies”. The significant unobservable input used in the fair value measurement of the Company’s escrow receivables is the amount recoverable at the contractual maturity date of the escrow receivable.
Investment Type - Level 3
Debt Investments		 Fair Value as of
December 31, 2023
(in thousands)		 Valuation
Techniques/Methodologies
Unobservable Input (1)
Range
Weighted
Average (2)
Pharmaceuticals $ 971,775  Market Comparable Companies Hypothetical Market Yield
10.91% - 21.43%
 13.46%
Premium/(Discount)
(1.00)% - 3.50%
 0.04%
8,455 
Liquidation (3)
Probability weighting of alternative outcomes
10.00% - 50.00%
 41.83%
Technology 1,181,823  Market Comparable Companies Hypothetical Market Yield
11.30% - 20.74%
 15.03%
    Premium/(Discount)
(1.00)% - 5.00%
 0.47%
23,244  Convertible Note Analysis Probability weighting of alternative outcomes
1.00% - 50.00%
 39.32%
— 
Liquidation (3)
Probability weighting of alternative outcomes
100.00% - 100.00%
 100.00%
Sustainable and Renewable Technology 1,678  Market Comparable Companies Hypothetical Market Yield
10.75% - 10.75%
 10.75%
    Premium/(Discount)
0.75% - 0.75%
 0.75%
Lower Middle Market 322,162  Market Comparable Companies Hypothetical Market Yield
12.54% - 20.15%
 14.13%
  Premium/(Discount)
(0.75)% - 2.25%
 0.56%
Debt Investments for which Cost Approximates Fair Value
431,512  Debt Investments originated within 6 months
54,430 
Imminent Payoffs (4)
62,220  Debt Investments Maturing in Less than One Year
$ 3,057,299  Total Level 3 Debt Investments
Other Investment Receivables 9,648  Liquidation Probability weighting of alternative outcomes
10.00% - 50.00%
 41.83%
$ 3,066,947  -94828000 Total Level Three Debt Investments and Other Investment Receivables
(1)The significant unobservable inputs used in the fair value measurement of the Company’s debt securities are hypothetical market yields and premiums/(discounts). The hypothetical market yield is defined as the exit price of an investment in a hypothetical market to hypothetical market participants where buyers and sellers are willing participants. The premiums/(discounts) relate to company specific characteristics such as underlying investment performance, security liens, and other characteristics of the investment. Significant increases (decreases) in the inputs in isolation may result in a significantly lower (higher) fair value measurement, depending on the materiality of the investment.
Debt investments in the industries noted in the Company’s Consolidated Schedule of Investments are included in the industries noted above as         follows:
•Pharmaceuticals, above, is comprised of debt investments in the “Drug Discovery & Development” and “Healthcare Services, Other” industries.
•Technology, above, is comprised of debt investments in the “Communications & Networking”, “Information Services”, “Consumer & Business Services”, “Media/Content/Info” and “Software” industries.
•Sustainable and Renewable Technology, above, is comprised of debt investments in the “Sustainable and Renewable Technology” industry.
•Lower Middle Market, above, is comprised of debt investments in the “Healthcare Services – Other”, “Consumer & Business Services”, “Diversified Financial Services”, “Sustainable and Renewable Technology”, and “Software” industries.
(2)The weighted averages are calculated based on the fair market value of each investment.
(3)The significant unobservable input used in the fair value measurement of impaired debt securities is the probability weighting of alternative outcomes.
(4)Imminent Payoffs represent debt investments that the Company expects to be fully repaid within the next three months, prior to their scheduled maturity date.
Investment Type - Level 3
Debt Investments		 Fair Value as of
December 31, 2022
(in thousands)		 Valuation Techniques/Methodologies
Unobservable Input (1)
Range
Weighted
Average (2)
Pharmaceuticals $ 903,427  Market Comparable Companies Hypothetical Market Yield
11.74% - 19.04%
 15.17%
Premium/(Discount)
(0.75)% - 1.75%
 0.01%
Technology 967,108  Market Comparable Companies Hypothetical Market Yield
12.05% - 18.53%
 15.21%
Premium/(Discount)
(1.00)% - 1.50%
 0.20%
20,356  Convertible Note Analysis Probability weighting of alternative outcomes
1.00% - 50.00%
 35.79%
1,671 
Liquidation (3)
Probability weighting of alternative outcomes
5.00% - 80.00%
 48.29%
Sustainable and Renewable Technology 3,006  Market Comparable Companies Hypothetical Market Yield
14.71% - 14.71%
 14.71%
Premium/(Discount)
0.75% - 0.75%
 0.75%
Lower Middle Market 328,393  Market Comparable Companies Hypothetical Market Yield
13.68% - 18.49%
 14.82%
Premium/(Discount)
(2.00)% - 0.75%
 (0.43)%
8,042 
Liquidation (3)
Probability weighting of alternative outcomes
20.00% - 80.00%
 80.00%
Debt Investments for which Cost Approximates Fair Value
392,168  Debt Investments originated within 6 months
77,676 
Imminent Payoffs(4)
93,597  Debt Investments Maturing in Less than One Year
$ 2,795,444  Total Level 3 Debt Investments
(1)The significant unobservable inputs used in the fair value measurement of the Company’s debt securities are hypothetical market yields and premiums/(discounts). The hypothetical market yield is defined as the exit price of an investment in a hypothetical market to hypothetical market participants where buyers and sellers are willing participants. The premiums/(discounts) relate to company specific characteristics such as underlying investment performance, security liens, and other characteristics of the investment. Significant increases (decreases) in the inputs in isolation may result in a significantly lower (higher) fair value measurement, depending on the materiality of the investment.
Debt investments in the industries noted in the Company’s Consolidated Schedule of Investments are included in the industries noted above as follows:
•Pharmaceuticals, above, is comprised of debt investments in the “Drug Discovery & Development” and “Healthcare Services, Other” industries.
•Technology, above, is comprised of debt investments in the “Communications & Networking”, “Information Services”, “Consumer & Business Services”, “Media/Content/Info” and “Software” industries.
•Sustainable and Renewable Technology, above, is comprised of debt investments in the “Sustainable and Renewable Technology” industry.
•Lower Middle Market, above, is comprised of debt investments in the “Healthcare Services – Other”, “Consumer & Business Services”, “Diversified Financial Services”, “Sustainable and Renewable Technology”, and “Software” industries.
(2)The weighted averages are calculated based on the fair market value of each investment.
(3)The significant unobservable input used in the fair value measurement of impaired debt securities is the probability weighting of alternative outcomes.
(4)Imminent payoffs represent debt investments that the Company expects to be fully repaid within the next three months, prior to their scheduled maturity date.
Investment Type - Level 3 Equity and Warrant Investments Fair Value as of
December 31, 2023
(in thousands)		 Valuation Techniques/
Methodologies
Unobservable Input (1)
Range
Weighted Average (5)
Equity Investments $ 52,094  Market Comparable Companies
EBITDA Multiple (2)
12.3x - 12.3x
12.3x
Revenue Multiple (2)
0.3x - 20.1x
7.2x
Tangible Book Value Multiple (2)
1.8x - 1.8x
1.8x
Discount for Lack of Marketability (3)
7.11% - 92.72%
 31.57%
11,096  Market Adjusted OPM Backsolve
Market Equity Adjustment (4)
(86.14)% - 32.69%
 7.47%
28,713  Discounted Cash Flow
Discount Rate (7)
19.88% - 31.97%
 30.51%
2,925 
Other (6)
Warrant Investments 19,014  Market Comparable Companies
EBITDA Multiple (2)
12.3x - 12.3x
12.3x
 
Revenue Multiple (2)
0.9x - 10.2x
4.2x
 
Discount for Lack of Marketability (3)
6.21% - 33.12%
 21.70%
3,074  Market Adjusted OPM Backsolve
Market Equity Adjustment (4)
(70.67)% - 34.86%
 13.17%
— 
Other (6)
Total Level 3 Equity and
Warrant Investments		 $ 116,916 
(1)The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity securities are revenue and/or earnings multiples (e.g. EBITDA, EBT, ARR), market equity adjustment factors, and discounts for lack of marketability. Significant increases/(decreases) in the inputs in isolation would result in a significantly higher/(lower) fair value measurement, depending on the materiality of the investment. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date. The significant unobservable input used in the fair value measurement of impaired equity securities is the probability weighting of alternative outcomes.
(2)Represents amounts used when the Company has determined that market participants would use such multiples when pricing the investments.
(3)Represents amounts used when the Company has determined market participants would take into account these discounts when pricing the investments.
(4)Represents the range of changes in industry valuations since the portfolio company's last external valuation event.
(5)Weighted averages are calculated based on the fair market value of each investment.
(6)The fair market value of these investments is derived based on recent market private market and merger and acquisition transaction prices.
(7)The discount rate used is based on current portfolio yield adjusted for uncertainty of actual performance and timing in capital deployments.
Investment Type - Level 3 Equity and Warrant Investments Fair Value as of
December 31, 2022
(in thousands)		 Valuation Techniques/
Methodologies
Unobservable Input (1)
Range
Weighted Average (5)
Equity Investments $ 30,086  Market Comparable Companies
EBITDA Multiple(2)
12.4x - 12.4x
12.4x
Revenue Multiple(2)
0.7x - 16.1x
7.4x
Tangible Book Value Multiple(2)
1.6x - 1.6x
1.6x
Discount for Lack of Marketability(3)
8.11% - 28.90%
 19.79%
13,795  Market Adjusted OPM Backsolve
Market Equity Adjustment(4)
(97.82)% - 16.34%
 (16.69)%
19,153  Discounted Cash Flow
Discount Rate(7)
17.72% - 30.13%
 24.46%
—  Liquidation
Revenue Multiple(2)
2.1x - 2.1x
2.1x
 
Discount for Lack of Marketability(3)
85.00% - 85.00%
 85.00%
3,513 
Other(6)
Warrant Investments 12,479  Market Comparable Companies
EBITDA Multiple(2)
12.4x - 12.4x
12.4x
Revenue Multiple(2)
0.6x - 8.8x
3.4x
Discount for Lack of Marketability(3)
8.11% - 32.70%
 18.97%
6,934  Market Adjusted OPM Backsolve
Market Equity Adjustment(4)
(97.82)% - 66.43%
 (8.86)%
—  Liquidation
Revenue Multiple(2)
6.2x - 6.2x
 6.2x
Discount for Lack of Marketability(3)
90.00% - 90.00%
 90.00%
6 
Other(6)
Total Level 3 Equity and Warrant Investments $ 85,966 
(1)The significant unobservable inputs used in the fair value measurement of the Company’s warrant and equity securities are revenue and/or earnings multiples (e.g. EBITDA, EBT, ARR), market equity adjustment factors, and discounts for lack of marketability. Significant increases/(decreases) in the inputs in isolation would result in a significantly higher/(lower) fair value measurement, depending on the materiality of the investment. For some investments, additional consideration may be given to data from the last round of financing or merger/acquisition events near the measurement date. The significant unobservable input used in the fair value measurement of impaired equity securities is the probability weighting of alternative outcomes.
(2)Represents amounts used when the Company has determined that market participants would use such multiples when pricing the investments.
(3)Represents amounts used when the Company has determined market participants would take into account these discounts when pricing the investments.
(4)Represents the range of changes in industry valuations since the portfolio company's last external valuation event.
(5)Weighted averages are calculated based on the fair market value of each investment.
(6)The fair market value of these investments is derived based on recent market transactions.
(7)The discount rate used is based on current portfolio yield adjusted for uncertainty of actual performance and timing in capital deployments.
The Company believes that the carrying amounts of its financial instruments, other than investments and debt, which consist of cash and cash equivalents, receivables including escrow receivables, accounts payable and accrued liabilities, approximate the fair values of such items due to the short maturity of such instruments. The debt obligations of the Company are recorded at amortized cost and not at fair value on the Consolidated Statements of Assets and Liabilities. The fair value of the Company’s outstanding debt obligations are based on observable market trading prices or quotations and unobservable market rates as applicable for each instrument.
As of December 31, 2023 and December 31, 2022, the 2033 Notes were trading on the New York Stock Exchange ("NYSE") at $25.25 and $24.59 per unit at par value. The par value at underwriting for the 2033 Notes was $25.00 per unit. Based on market quotations on or around December 31, 2023 the 2031 Asset-Backed Notes were quoted for 0.950. The fair values of the SBA debentures, July 2024 Notes, February 2025 Notes, June 2025 Notes, June 2025 3-Year Notes, March 2026 A Notes, March 2026 B Notes, September 2026, and January 2027 Notes are calculated based on the net present value of payments over the term of the notes using estimated market rates for similar notes and remaining terms. The fair values of the outstanding debt under the MUFG Bank Facility and the SMBC Facility are equal to their outstanding principal balances as of December 31, 2023 and December 31, 2022.
The following tables provide additional information about the approximate fair value and level in the fair value hierarchy of the Company’s outstanding borrowings as of December 31, 2023 and December 31, 2022:
(in thousands) December 31, 2023
Description Carrying
Value		 Approximate
Fair Value		 Identical Assets
(Level 1)		 Observable Inputs
(Level 2)		 Unobservable Inputs
(Level 3)
SBA Debentures $ 170,323  $ 142,011  $ —  $ —  $ 142,011 
July 2024 Notes 104,828  105,755  —  —  105,755 
February 2025 Notes 49,866  49,144  —  —  49,144 
June 2025 Notes 69,757  67,198  —  —  67,198 
June 2025 3-Year Notes 49,771  48,983  —  —  48,983 
March 2026 A Notes 49,795  47,702  —  —  47,702 
March 2026 B Notes 49,776  47,759  —  —  47,759 
September 2026 Notes 322,339  288,711  —  —  288,711 
January 2027 Notes 345,935  315,832  —  —  315,832 
2031 Asset-Backed Notes 148,544  142,500  —  142,500  — 
2033 Notes 38,935  40,400  —  40,400  — 
MUFG Bank Facility(1)
61,000  61,000  —  —  61,000 
SMBC Facility 94,000  94,000  —  —  94,000 
Total $ 1,554,869  $ 1,450,995  $ —  $ 182,900  $ 1,268,095 
(in thousands) December 31, 2022
Description Carrying
Value		 Approximate
Fair Value		 Identical Assets
(Level 1)		 Observable Inputs
(Level 2)		 Unobservable Inputs
(Level 3)
SBA Debentures $ 169,738  $ 155,257  $ —  $ —  $ 155,257 
July 2024 Notes 104,533  102,019  —  —  102,019 
February 2025 Notes 49,751  47,044  —  —  47,044 
June 2025 Notes 69,595  64,198  —  —  64,198 
June 2025 3-Year Notes 49,616  47,528  —  —  47,528 
March 2026 A Notes 49,700  45,512  —  —  45,512 
March 2026 B Notes 49,673  45,588  —  —  45,588 
September 2026 Notes 321,358  269,509  —  —  269,509 
January 2027 Notes 344,604  296,826  —  —  296,826 
2031 Asset-Backed Notes 147,957  142,620  —  142,620  — 
2033 Notes 38,826  39,344  —  39,344  — 
MUFG Bank Facility(1)
107,000  107,000  —  —  107,000 
SMBC Facility 72,000  72,000  —  —  72,000 
Total $ 1,574,351  $ 1,434,445  $ —  $ 181,964  $ 1,252,481 
(1)In June 2022 the MUFG Bank Facility replaced the Union Bank Facility via an amendment which changed the lead lender.