Company: PDCC
Filing Date: 2025-09-16
Form Type: N-2/A
Source: 0001214659-25-013826
Chunk: 50

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-09-16
Form: N-2/A
Chunk 50
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 debt investments. Further, although CLOs are generally structured to mitigate
the risk of interest rate mismatch, there may be a difference between the timing of interest rate resets on the assets and liabilities
of a CLO. Such a mismatch in timing could have a negative effect on the amount of funds distributed to CLO equity investors. In addition,
CLOs may not be able to enter into hedge agreements, even if it may otherwise be in the best interests of the CLO to hedge such interest
rate risk. Furthermore, in the event of an economic downturn, loan defaults may increase and result in credit losses that may adversely
affect our cashflow, fair value of our assets, and operating results. In the event that our interest expense were to increase relative
to income, or sufficient financing became unavailable, our return on investments and cash available for distribution to stockholders or
to make other payments on our securities would be reduced. In addition, future investments in different types of instruments may carry
a greater exposure to interest rate risk.

Reference Rate Floor Risk. Because
CLOs generally issue debt on a floating rate basis, an increase in the applicable reference rate (typically 3-Month Term SOFR) will increase
the financing costs of CLOs. Many of the senior secured loans held by these CLOs have reference rate floors such that, when the applicable
reference rate is below the stated floor, the stated floor (rather than actual reference rate itself) is used to determine the interest
payable under the loans. Therefore, if the applicable reference rate increases but stays below the average reference rate floor of the
senior secured loans held by a CLO, there would not be a corresponding increase in the investment income of such CLOs. The combination
of increased financing costs without a corresponding increase in investment income in such a scenario could result in the CLO not having
adequate cash to make interest or other payments on the securities which we hold.

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LIBOR Replacement Risk.
LIBOR was intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank
market. The regulatory authority that oversees financial services firms and financial markets in the U.K. announced that, after the end
of 2021, it would no longer persuade or compel contributing banks to make rate submissions for purposes of determining the LIBOR rate.
The publication of LIBOR on a representative basis ceased for the one-week and two-month U.S. dollar LIB