Company: PDCC
Filing Date: 2025-07-18
Form Type: N-2
Source: 0001214659-25-010613
Chunk: 41

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-07-18
Form: N-2
Chunk 41
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 to satisfy
financial covenants, including over-collateralization tests and/or interest coverage tests, could lead to a reduction in its payments
to us. In the event that a CLO fails certain tests, holders of CLO senior debt may be entitled to additional payments that would, in turn,
reduce the payments we, as holder of equity and junior debt tranches, would otherwise be entitled to receive. Separately, we may incur
expenses to the extent necessary to seek recovery upon default or to negotiate new terms, which may include the waiver of certain financial
covenants, with a defaulting CLO or any other investment we may make. If any of these occur, it could materially and adversely affect
our operating results and cashflows.

Negative loan ratings migration may also place pressure on the performance of certain of our investments.

Per the terms of a CLO’s indenture, assets
rated “CCC+” or lower or their equivalent in excess of applicable limits typically do not receive full par credit for purposes
of calculation of the CLO’s overcollateralization tests. As a result, negative rating migration could cause a CLO to be out of compliance
with its overcollateralization tests. This could cause a diversion of cashflows away from the CLO junior debt and equity tranches in favor
of the more senior CLO debt tranches until the relevant overcollateralization test breaches are cured. This could have a negative impact
on our NAV and cashflows.

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Our investments in CLOs and other investment vehicles result in additional expenses to us.

To the extent that we invest in CLO securities,
we will bear our ratable share of a CLO’s expenses, including management and performance fees. In addition to the management and
performance fees borne by our investments in CLOs, we will also remain obligated to pay management and incentive fees to the Adviser.
With respect to each of these investments, each holder of our common stock bears his or her share of the management and incentive fee
of the Adviser as well as indirectly bearing the management and performance fees charged by the underlying CLO advisor.

In the course of our investing activities, we
will pay management and incentive fees to the Adviser and reimburse the Adviser for certain expenses it incurs. As a result, investors
in our securities invest on a “gross” basis and receive distributions on a “net” basis after expenses, potentially
resulting in a lower rate of return than an investor