Annual report pursuant to Section 13 and 15(d)

Investments (Tables)

v3.24.0.1
Investments (Tables)
 12 Months Ended
Dec. 31, 2023
Schedule of Investments [Abstract]  
Schedule of Investments in and Advances to Affiliates
The following table summarizes the Company’s realized gains and losses and changes in unrealized appreciation and depreciation on control and affiliate investments for the years ended December 31, 2023, 2022, and 2021.
(in thousands) For the Year Ended December 31, 2023
Portfolio Company(1)
Type Fair Value as of
December 31, 2023		 Interest Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC Control $ 262  $ —  $ —  $ (57) $ — 
Gibraltar Acquisition LLC (3)
Control 62,512  3,344  95  9,656  — 
Hercules Adviser LLC (4)
Control 40,713  608  —  9,560  — 
Tectura Corporation Control 11,517  690  —  3,475  — 
Total Control Investments $ 115,004  $ 4,642  $ 95  $ 22,634  $ — 
(in thousands)     For the Year Ended December 31, 2022
Portfolio Company(1)
Type Fair Value as of
December 31, 2022		 Interest Income Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC Control $ 319  $ —  $ —  $ (246) $ — 
Gibraltar Business Capital, LLC Control 36,944  3,385  68  (6,968) — 
Hercules Adviser LLC Control 31,153  546  —  7,163  — 
Tectura Corporation Control 8,042  690  —  (227) — 
Total Control Investments $ 76,458  $ 4,621  $ 68  $ (278) $ — 
Affiliate Investments
Black Crow AI, Inc.(2)
Affiliate $ —  $ —  $ —  $ (120) $ 3,772 
Pineapple Energy LLC(2)
Affiliate —  1,204  —  4,209  (2,014)
Total Affiliate Investments $ —  $ 1,204  $ —  $ 4,089  $ 1,758 
Total Control & Affiliate Investments $ 76,458  $ 5,825  $ 68  $ 3,811  $ 1,758 
(in thousands)     For the Year Ended December 31, 2021
Portfolio Company(1)
Type Fair Value as of
December 31, 2021		 Interest
Income		 Fee Income Net Change in Unrealized Appreciation (Depreciation) Realized Gain (Loss)
Control Investments
Coronado Aesthetics, LLC Control $ 565  $ —  $ —  $ 315  $ — 
Gibraltar Business Capital, LLC Control 43,830  3,178  54  (14,616) — 
Hercules Adviser LLC Control 20,840  141  —  11,955  — 
Tectura Corporation Control 8,269  690  5  (331) — 
Total Control Investments $ 73,504  $ 4,009  $ 59  $ (2,677) $ — 
Affiliate Investments
Black Crow AI, Inc. Affiliate $ 1,120  $ —  $ —  $ 1,905  $ — 
Pineapple Energy LLC Affiliate 8,338  10  —  (282) — 
Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.) Affiliate —  —  —  62,183  (62,143)
Total Affiliate Investments $ 9,458  $ 10  $ —  $ 63,806  $ (62,143)
Total Control & Affiliate Investments $ 82,962  $ 4,019  $ 59  $ 61,129  $ (62,143)
(1)In accordance with Rules 3-09, 4-08(g), and Rule 10-01(b)(1) of Regulation S-X, (“Rule 3-09”, “Rule 4-08(g)”, and “Rule 10-01(b)(1)”, respectively), the Company must determine if its unconsolidated subsidiaries are considered “significant subsidiaries”. As of December 31, 2023, December 31, 2022, and December 31, 2021 there were no unconsolidated subsidiaries that are considered “significant subsidiaries”.
(2)As of September 30, 2022, Black Crow AI, Inc. and Pineapple Energy LLC were no longer affiliates as defined under the 1940 Act.
(3)Gibraltar Acquisition LLC is a wholly-owned subsidiary, which is the holding company for their wholly-owned affiliated portfolio companies, Gibraltar Business Capital, LLC and Gibraltar Equipment Finance, LLC. The subsidiary has no significant assets or liabilities, other than their equity and debt investments and equity interest in Gibraltar Business Capital, LLC and Gibraltar Equipment Finance, LLC, respectively.
(4)Hercules Adviser LLC is owned by Hercules Capital Management LLC and presented with Hercules Partner Holdings, LLC which are both wholly owned by the Company. Please refer to “Note 1” for additional disclosure.
Schedule of Investments Portfolio
The following table shows the fair value of the Company’s portfolio of investments by asset class as of December 31, 2023 and December 31, 2022:
(in thousands) December 31, 2023 December 31, 2022
Investments at
Fair Value		 Percentage of
Total Portfolio 		Investments at
Fair Value		 Percentage of
Total Portfolio
Senior Secured Debt $ 2,987,577  92.0  % $ 2,741,388  92.5  %
Unsecured Debt 69,722  2.2  % 54,056  1.8  %
Preferred Stock 53,038  1.6  % 41,488  1.4  %
Common Stock 99,132  3.1  % 92,484  3.1  %
Warrants 33,969  1.0  % 30,646  1.1  %
Investment Funds & Vehicles 4,608  0.1  % 3,893  0.1  %
Total $ 3,248,046  100.0  % $ 2,963,955  100.0  %
A summary of the Company’s investment portfolio, at value, by geographic location as of December 31, 2023 and December 31, 2022 is shown as follows:
(in thousands) December 31, 2023 December 31, 2022
Investments at
Fair Value		 Percentage of
Total Portfolio 		Investments at
Fair Value		 Percentage of
Total Portfolio
United States $ 2,861,615  88.1  % $ 2,670,520  90.1  %
United Kingdom 222,136  6.9  % 171,629  5.8  %
Netherlands 89,995  2.8  % 88,915  3.0  %
Israel 52,868  1.6  % 9,052  0.3  %
Canada 15,730  0.5  % 19,472  0.7  %
Denmark 4,173  0.1  % —  0.0  %
Germany 1,144  0.0  % 990  0.0  %
Other 385  0.0  % 573  0.0  %
Ireland —  0.0  % 2,804  0.1  %
Total $ 3,248,046  100.0  % $ 2,963,955  100.0  %
The following table shows the fair value of the Company’s portfolio by industry sector as of December 31, 2023 and December 31, 2022:
(in thousands) December 31, 2023 December 31, 2022
  Investments at
Fair Value		 Percentage of
Total Portfolio 		Investments at
Fair Value		 Percentage of
Total Portfolio
Drug Discovery & Development $ 1,257,699  38.7  % $ 1,150,707  38.8  %
Software 764,985  23.6  % 798,264  26.9  %
Consumer & Business Services 525,973  16.2  % 439,384  14.8  %
Healthcare Services, Other 300,079  9.3  % 198,763  6.7  %
Communications & Networking 29,400  0.9  % 101,833  3.5  %
Diversified Financial Services 114,722  3.5  % 68,569  2.3  %
Information Services 126,605  3.9  % 60,759  2.1  %
Biotechnology Tools 48,381  1.5  % 32,825  1.1  %
Manufacturing Technology 11,006  0.3  % 46,109  1.6  %
Medical Devices & Equipment 22,096  0.7  % 1,834  0.1  %
Electronics & Computer Hardware 20,324  0.6  % 21,517  0.7  %
Media/Content/Info 12,704  0.4  % 35  0.0  %
Sustainable and Renewable Technology 9,581  0.3  % 15,486  0.5  %
Consumer & Business Products 2,589  0.1  % 2,821  0.1  %
Semiconductors 1,205  0.0  % 21,921  0.7  %
Surgical Devices 676  0.0  % 3,038  0.1  %
Drug Delivery 21  0.0  % 90  0.0  %
Total $ 3,248,046  100.0  % $ 2,963,955  100.0  %
Schedule of Investment Collateral
Concentrations of Credit Risk
The Company’s customers are primarily privately held companies and public companies which are active in the “Drug Discovery & Development", "Software”, “Consumer & Business Services”, “Healthcare Services, Other”, and “Communications & Networking” sectors. These sectors are characterized by high margins, high growth rates, consolidation and product and market extension opportunities. Value for companies in these sectors is often vested in intangible assets and intellectual property.
Industry and sector concentrations vary as new loans are recorded and loans are paid off. Loan revenue, consisting of interest, fees, and recognition of gains on equity and warrant or other equity interests, can fluctuate materially when a loan is paid off or a related warrant or equity interest is sold. Revenue recognition in any given year can be highly concentrated among several portfolio companies.
As of December 31, 2023 and December 31, 2022, the Company’s ten largest portfolio companies represented approximately 29.7% and 29.0% of the total fair value of the Company’s investments in portfolio companies, respectively. As of December 31, 2023 and December 31, 2022, the Company had five and eight portfolio companies, respectively, that represented 5% or more of the Company’s net assets. As of December 31, 2023, the Company had five equity investments representing approximately 56.5% of the total fair value of the Company’s equity investments, and each represented 5% or more of the total fair value of the Company’s equity investments. As of December 31, 2022, the Company had four equity investments which represented approximately 39.8% of the total fair value of the Company’s equity investments, and each represented 5% or more of the total fair value of such investments.
Investment Collateral
In the majority of cases, the Company collateralizes its investments by obtaining a first priority security interest in a portfolio company’s assets, which may include its intellectual property. In other cases, the Company may obtain a negative pledge covering a company’s intellectual property. The Company's investments were collateralized as follows as of December 31, 2023 and December 31, 2022:
Percentage of debt investments (at fair value), as of
December 31, 2023 December 31, 2022
Senior Secured First Lien
All assets including intellectual property 52.3  % 42.0  %
All assets with negative pledge on intellectual property 24.0  % 26.1  %
“Last-out” with security interest in all of the assets 12.5  % 11.6  %
Total senior secured first lien position 88.8  % 79.7  %
Second lien 8.9  % 18.4  %
Unsecured 2.3  % 1.9  %
Total debt investments at fair value 100.0  % 100.0  %
Schedule of Fair Value and Location of the Company's Derivative Instruments The following is a summary of the fair value and location of the Company’s derivative instruments in the Consolidated Statements of Assets and Liabilities held as of December 31, 2023 and December 31, 2022:
(in thousands) Fair Value
Derivative Instrument Statement Location December 31, 2023 December 31, 2022
Foreign currency forward contract Accounts payable and accrued liabilities $ 766  $ — 
Total $ 766  $ — 
Schedule of Net Realized and Unrealized Gains and Losses
Net realized and unrealized gains and losses on derivative instruments recorded by the Company during the years ended December 31, 2023 and December 31, 2022 are in the following locations in the Consolidated Statements of Operations:
(in thousands) Year Ended December 31,
Derivative Instrument Statement Location 2023 2022
Foreign currency forward contract Net realized gain (loss) - Non-control / Non-affiliate investments $ —  $ — 
Foreign currency forward contract Net change in unrealized appreciation (depreciation) - Non-control / Non-affiliate investments (766) — 
Total $ (766) $ — 
Schedule of Investment Interest Income and Fee Income
The Company’s investment portfolio generates interest, fee, and dividend income. The composition of the Company’s interest income and fee income is as follows:
(in thousands) Year Ended December 31,
2023 2022 2021
Contractual interest income $ 351,883  $ 249,375  $ 200,682 
Exit fee interest income 45,747  32,063  37,494 
PIK interest income 24,670  20,455  11,210 
Dividend income 1,400  —  — 
Other investment income (1)
10,725  5,365  3,974 
Total interest and dividend income $ 434,425  $ 307,258  $ 253,360 
Recurring fee income $ 8,835  $ 7,834  $ 7,458 
Fee income - expired commitments 1,695  1,502  3,031 
Accelerated fee income - early repayments 15,713  5,094  17,127 
Total fee income $ 26,243  $ 14,430  $ 27,616 
(1)Other interest income includes OID interest income and interest recorded on other assets.
Schedule of Unamortized Capitalized Fee Income
As of December 31, 2023 and 2022, unamortized capitalized fee income was recorded as follows:
(in millions) As of December 31,
2023 2022
Offset against debt investment cost $ 32.9  $ 43.1 
Deferred obligation contingent on funding or other milestone 9.4  10.9 
Total Unamortized Fee Income $ 42.3  $ 54.0 
Schedule of Loan Exit Fees Receivable
As of December 31, 2023 and 2022, loan exit fees receivable were recorded as follows:
(in millions) As of December 31,
2023 2022
Included within debt investment cost $ 35.9  $ 32.5 
Deferred receivable related to expired commitments 4.3  5.0 
Total Exit Fees Receivable $ 40.2  $ 37.5