Company: PDCC
Filing Date: 2025-07-18
Form Type: N-2
Source: 0001214659-25-010613
Chunk: 102

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-07-18
Form: N-2
Chunk 102
---
 we may benefit from the advantages of
such a position where both the Company and other accounts managed by the Adviser collectively hold a substantial position, subject to
any restrictions on the ability to invest alongside such other accounts. The Company may also transact in derivative or other instruments
for the purposes of hedging the portfolio, or to manage risks.

CLO Overview

CLO Structure

We intend to pursue an investment strategy focused
on investing primarily in (i) positions in CLO equity tranches acquired in both primary and secondary market transactions; (ii) CLO debt
tranches; and (iii) other related investments. CLOs are securitization vehicles backed by diversified pools of mostly broadly syndicated
senior secured corporate loans. Such pools of underlying assets are often referred to as CLO “collateral.” While portfolios
of most CLOs consist of broadly syndicated senior secured loans, many CLOs enable the CLO collateral manager to invest up to 10% of the
portfolio in second lien loans, unsecured loans, senior secured bonds, and senior unsecured bonds.

CLOs fund the purchase of their portfolios through
the issuance of equity and debt securities in the form of multiple, primarily floating rate, debt tranches. The CLO debt tranches typically
are rated “AAA” (or its equivalent) at the most senior level down to “BB” or “B” (or its equivalent),
which is below-investment grade, at the junior level by a nationally-recognized rating agency. The interest rate on the CLO debt tranches
is the lowest at the AAA-level and generally increases at each level down the rating scale. The CLO equity tranche is unrated and typically
represents approximately 7% to 10% of a CLO’s capital structure. Below is an illustration to reflect a typical CLO in the market.

CLOs have two priority-of-payment schedules (commonly
called “waterfalls”), which are detailed in a CLO’s indenture and which govern how cash generated from a CLO’s
underlying collateral is distributed to the CLO’s debt and equity investors. One waterfall (the interest waterfall) applies to interest
payments received on a CLO’s underlying collateral. The second waterfall (the principal waterfall) applies to cash generated from
principal on the underlying collateral, primarily through loan repayments and the proceeds from loan sales. Through the interest waterfall,
any excess interest-related cashflow available — after the required quarterly