| Investment Holdings, Schedule of Investments [Text Block] |
4. Investments
Control and Affiliate Investments
As required by the 1940 Act, the Company classifies its investments by level of control. “Control investments” are defined in the 1940 Act as investments in those companies that the Company is deemed to “control”. Under the 1940 Act, the Company is generally deemed to “control” a company in which it has invested if it owns 25% or more of the voting securities of such company or has greater than 50% representation on its board. “Affiliate investments” are investments in those companies that are “affiliated companies” of the Company, as defined in the 1940 Act, which are not control investments. The Company is deemed to be an “affiliate” of a company in which it has invested if it owns 5% or more, but generally less than 25%, of the voting securities of such company. “Non-control/non-affiliate investments” are investments that are neither control investments nor affiliate investments. For purposes of determining the classification of its investments, the Company has included consideration of any voting securities or board appointment rights held by the Adviser Funds.
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, 2022, 2021, and 2020.
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(in thousands) |
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|
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) |
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Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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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 |
|
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8,042 |
|
|
|
690 |
|
|
|
— |
|
|
|
(227 |
) |
|
|
— |
|
Total Control Investments |
|
$ |
76,458 |
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|
$ |
4,621 |
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|
$ |
68 |
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|
$ |
(278 |
) |
|
$ |
— |
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Affiliate Investments |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Black Crow AI, Inc.(2) |
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Affiliate |
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$ |
— |
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|
$ |
— |
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|
$ |
— |
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|
$ |
(120 |
) |
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$ |
3,772 |
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Pineapple Energy LLC(2) |
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Affiliate |
|
|
— |
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|
1,204 |
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|
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— |
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4,209 |
|
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(2,014 |
) |
Total Affiliate Investments |
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$ |
— |
|
|
$ |
1,204 |
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|
$ |
— |
|
|
$ |
4,089 |
|
|
$ |
1,758 |
|
Total Control & Affiliate Investments |
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$ |
76,458 |
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|
$ |
5,825 |
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$ |
68 |
|
|
$ |
3,811 |
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$ |
1,758 |
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(in thousands) |
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For the Year Ended December 31, 2021 |
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Portfolio Company(1) |
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Type |
|
Fair Value as of
December 31, 2021 |
|
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Interest Income |
|
|
Fee Income |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
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|
Realized Gain (Loss) |
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Control Investments |
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|
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|
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|
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Coronado Aesthetics, LLC |
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Control |
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$ |
565 |
|
|
$ |
— |
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|
$ |
— |
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|
$ |
315 |
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|
$ |
— |
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Gibraltar Business Capital, LLC |
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Control |
|
|
43,830 |
|
|
|
3,178 |
|
|
|
54 |
|
|
|
(14,616 |
) |
|
|
— |
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Hercules Adviser LLC |
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Control |
|
|
20,840 |
|
|
|
141 |
|
|
|
— |
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|
11,955 |
|
|
|
— |
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Tectura Corporation |
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Control |
|
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8,269 |
|
|
|
690 |
|
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|
5 |
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(331 |
) |
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— |
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Total Control Investments |
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$ |
73,504 |
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|
$ |
4,009 |
|
|
$ |
59 |
|
|
$ |
(2,677 |
) |
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$ |
— |
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Affiliate Investments |
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Black Crow AI, Inc. |
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Affiliate |
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$ |
1,120 |
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$ |
— |
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$ |
— |
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$ |
1,905 |
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|
$ |
— |
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Pineapple Energy LLC |
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Affiliate |
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8,338 |
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|
10 |
|
|
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— |
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(282 |
) |
|
|
— |
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Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.) |
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Affiliate |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
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62,183 |
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|
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(62,143 |
) |
Total Affiliate Investments |
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$ |
9,458 |
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|
$ |
10 |
|
|
$ |
— |
|
|
$ |
63,806 |
|
|
$ |
(62,143 |
) |
Total Control & Affiliate Investments |
|
$ |
82,962 |
|
|
$ |
4,019 |
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|
$ |
59 |
|
|
$ |
61,129 |
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|
$ |
(62,143 |
) |
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(in thousands) |
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For the Year Ended December 31, 2020 |
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Portfolio Company(1) |
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Type |
|
Fair Value as of
December 31, 2020 |
|
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Interest
Income |
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|
Fee Income |
|
|
Net Change in Unrealized Appreciation (Depreciation) |
|
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Realized Gain (Loss) |
|
Control Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Gibraltar Business Capital, LLC |
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Control |
|
$ |
48,800 |
|
|
$ |
2,249 |
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$ |
21 |
|
|
$ |
(1,419 |
) |
|
$ |
— |
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Tectura Corporation |
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Control |
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|
8,600 |
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|
608 |
|
|
|
— |
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(852 |
) |
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|
— |
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Total Control Investments |
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$ |
57,400 |
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$ |
2,857 |
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$ |
21 |
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|
$ |
(2,271 |
) |
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$ |
— |
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Affiliate Investments |
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Optiscan BioMedical, Corp. |
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Affiliate |
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$ |
— |
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$ |
13 |
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$ |
— |
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|
$ |
4,532 |
|
|
$ |
(14,146 |
) |
Pineapple Energy LLC |
|
Affiliate |
|
|
8,340 |
|
|
|
— |
|
|
|
— |
|
|
|
(3,927 |
) |
|
|
— |
|
Solar Spectrum Holdings LLC (p.k.a. Sungevity, Inc.) |
|
Affiliate |
|
|
— |
|
|
|
520 |
|
|
|
— |
|
|
|
(346 |
) |
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|
(3 |
) |
Total Affiliate Investments |
|
$ |
8,340 |
|
|
$ |
533 |
|
|
$ |
— |
|
|
$ |
259 |
|
|
$ |
(14,149 |
) |
Total Control & Affiliate Investments |
|
$ |
65,740 |
|
|
$ |
3,390 |
|
|
$ |
21 |
|
|
$ |
(2,012 |
) |
|
$ |
(14,149 |
) |
(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, 2022, December 31, 2021, and December 31, 2020 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.
Portfolio Composition
The following table shows the fair value of the Company’s portfolio of investments by asset class as of December 31, 2022 and December 31, 2021:
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(in thousands) |
December 31, 2022 |
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|
December 31, 2021 |
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Investments at
Fair Value |
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Percentage of
Total Portfolio |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
Senior Secured Debt |
$ |
2,741,388 |
|
|
|
92.5 |
% |
|
$ |
2,156,709 |
|
|
|
88.6 |
% |
Unsecured Debt |
|
54,056 |
|
|
|
1.8 |
% |
|
|
52,890 |
|
|
|
2.2 |
% |
Preferred Stock |
|
41,488 |
|
|
|
1.4 |
% |
|
|
69,439 |
|
|
|
2.8 |
% |
Common Stock |
|
92,484 |
|
|
|
3.1 |
% |
|
|
115,271 |
|
|
|
4.7 |
% |
Warrants |
|
30,646 |
|
|
|
1.1 |
% |
|
|
38,399 |
|
|
|
1.6 |
% |
Investment Funds & Vehicles |
|
3,893 |
|
|
|
0.1 |
% |
|
|
1,814 |
|
|
|
0.1 |
% |
Total |
$ |
2,963,955 |
|
|
|
100.0 |
% |
|
$ |
2,434,522 |
|
|
|
100.0 |
% |
A summary of the Company’s investment portfolio, at value, by geographic location as of December 31, 2022 and December 31, 2021 is shown as follows:
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|
|
|
|
|
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(in thousands) |
December 31, 2022 |
|
|
December 31, 2021 |
|
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Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
United States |
$ |
2,670,520 |
|
|
|
90.1 |
% |
|
$ |
2,138,184 |
|
|
|
87.8 |
% |
United Kingdom |
|
171,629 |
|
|
|
5.8 |
% |
|
|
169,407 |
|
|
|
7.0 |
% |
Netherlands |
|
88,915 |
|
|
|
3.0 |
% |
|
|
82,925 |
|
|
|
3.4 |
% |
Canada |
|
19,472 |
|
|
|
0.7 |
% |
|
|
27,673 |
|
|
|
1.1 |
% |
Israel |
|
9,052 |
|
|
|
0.3 |
% |
|
|
8,980 |
|
|
|
0.4 |
% |
Ireland |
|
2,804 |
|
|
|
0.1 |
% |
|
|
5,459 |
|
|
|
0.2 |
% |
Germany |
|
990 |
|
|
|
0.0 |
% |
|
|
1,894 |
|
|
|
0.1 |
% |
Other |
|
573 |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Total |
$ |
2,963,955 |
|
|
|
100.0 |
% |
|
$ |
2,434,522 |
|
|
|
100.0 |
% |
The following table shows the fair value of the Company’s portfolio by industry sector as of December 31, 2022 and December 31, 2021:
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|
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|
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|
|
|
|
(in thousands) |
December 31, 2022 |
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|
December 31, 2021 |
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|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
|
Investments at
Fair Value |
|
|
Percentage of
Total Portfolio |
|
Drug Discovery & Development |
$ |
1,150,707 |
|
|
|
38.8 |
% |
|
$ |
967,383 |
|
|
|
39.7 |
% |
Software |
|
798,264 |
|
|
|
26.9 |
% |
|
|
585,622 |
|
|
|
24.1 |
% |
Consumer & Business Services |
|
439,384 |
|
|
|
14.8 |
% |
|
|
395,506 |
|
|
|
16.3 |
% |
Healthcare Services, Other |
|
198,763 |
|
|
|
6.7 |
% |
|
|
121,003 |
|
|
|
5.0 |
% |
Communications & Networking |
|
101,833 |
|
|
|
3.5 |
% |
|
|
105,490 |
|
|
|
4.3 |
% |
Diversified Financial Services |
|
68,569 |
|
|
|
2.3 |
% |
|
|
65,073 |
|
|
|
2.7 |
% |
Information Services |
|
60,759 |
|
|
|
2.1 |
% |
|
|
74,417 |
|
|
|
3.1 |
% |
Manufacturing Technology |
|
46,109 |
|
|
|
1.6 |
% |
|
|
14,995 |
|
|
|
0.6 |
% |
Biotechnology Tools |
|
32,825 |
|
|
|
1.1 |
% |
|
|
— |
|
|
|
0.0 |
% |
Semiconductors |
|
21,921 |
|
|
|
0.7 |
% |
|
|
22,498 |
|
|
|
0.9 |
% |
Electronics & Computer Hardware |
|
21,517 |
|
|
|
0.7 |
% |
|
|
1,040 |
|
|
|
0.0 |
% |
Sustainable and Renewable Technology |
|
15,486 |
|
|
|
0.5 |
% |
|
|
39,387 |
|
|
|
1.6 |
% |
Surgical Devices |
|
3,038 |
|
|
|
0.1 |
% |
|
|
1,029 |
|
|
|
0.0 |
% |
Consumer & Business Products |
|
2,821 |
|
|
|
0.1 |
% |
|
|
28,099 |
|
|
|
1.2 |
% |
Medical Devices & Equipment |
|
1,834 |
|
|
|
0.1 |
% |
|
|
12,612 |
|
|
|
0.5 |
% |
Drug Delivery |
|
90 |
|
|
|
0.0 |
% |
|
|
368 |
|
|
|
0.0 |
% |
Media/Content/Info |
|
35 |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Total |
$ |
2,963,955 |
|
|
|
100.0 |
% |
|
$ |
2,434,522 |
|
|
|
100.0 |
% |
No single portfolio investment represents more than 10% of the fair value of the Company’s total investments as of December 31, 2022 or December 31, 2021.
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, 2022 and December 31, 2021, the Company’s ten largest portfolio companies represented approximately 29.0% and 30.5% of the total fair value of the Company’s investments in portfolio companies, respectively. As of December 31, 2022 and December 31, 2021, the Company had eight and six portfolio companies, respectively, that represented 5% or more of the Company’s net assets. As of December 31, 2022, the Company had four equity investments representing 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 the Company’s equity investments. As of December 31, 2021, the Company had six equity investments which represented approximately 49.6% 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, 2022 and December 31, 2021:
|
|
|
|
|
|
|
|
|
Percentage of debt investments (at fair value), as of |
|
|
December 31, 2022 |
|
|
December 31, 2021 |
|
Senior Secured First Lien |
|
|
|
|
|
All assets including intellectual property |
|
42.0 |
% |
|
|
37.5 |
% |
All assets with negative pledge on intellectual property |
|
26.1 |
% |
|
|
31.6 |
% |
“Last-out” with security interest in all of the assets |
|
11.6 |
% |
|
|
7.9 |
% |
Total senior secured first lien position |
|
79.7 |
% |
|
|
77.0 |
% |
Second lien |
|
18.4 |
% |
|
|
20.6 |
% |
Unsecured |
|
1.9 |
% |
|
|
2.4 |
% |
Total debt investments at fair value |
|
100.0 |
% |
|
|
100.0 |
% |
Investment 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, |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
Contractual interest income |
$ |
249,375 |
|
|
$ |
200,682 |
|
|
$ |
208,017 |
|
Exit fee interest income |
|
32,063 |
|
|
|
37,494 |
|
|
|
41,191 |
|
PIK interest income |
|
20,455 |
|
|
|
11,210 |
|
|
|
9,009 |
|
Other interest income (1) |
|
5,365 |
|
|
|
3,974 |
|
|
|
5,162 |
|
Total interest income |
|
307,258 |
|
|
|
253,360 |
|
|
|
263,379 |
|
|
|
|
|
|
|
|
|
|
Recurring fee income |
|
7,834 |
|
|
|
7,458 |
|
|
|
7,768 |
|
Accelerated fee income - expired commitments |
|
1,502 |
|
|
|
3,031 |
|
|
|
3,130 |
|
Accelerated fee income - early repayments |
|
5,094 |
|
|
|
17,127 |
|
|
|
12,981 |
|
Total fee income |
|
14,430 |
|
|
|
27,616 |
|
|
|
23,879 |
|
(1)Other interest income includes OID interest income and interest recorded on other assets.
As of December 31, 2022 and 2021, unamortized capitalized fee income was recorded as follows:
|
|
|
|
|
|
|
|
(in millions) |
As of December 31, |
|
|
2022 |
|
|
2021 |
|
Offset against debt investment cost |
$ |
43.1 |
|
|
$ |
36.5 |
|
Deferred obligation contingent on funding or other milestone |
|
10.9 |
|
|
|
6.4 |
|
Total Unamortized Fee Income |
$ |
54.0 |
|
|
$ |
42.9 |
|
As of December 31, 2022 and 2021, loan exit fees receivable were recorded as follows:
|
|
|
|
|
|
|
|
(in millions) |
As of December 31, |
|
|
2022 |
|
|
2021 |
|
Included within debt investment cost |
$ |
32.5 |
|
|
$ |
29.6 |
|
Deferred receivable related to expired commitments |
|
5.0 |
|
|
|
5.4 |
|
Total Exit Fees Receivable |
$ |
37.5 |
|
|
$ |
35.0 |
|
|