Company: PDCC
Filing Date: 2025-07-18
Form Type: N-2
Source: 0001214659-25-010613
Chunk: 218

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-07-18
Form: N-2
Chunk 218
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 may enter into
credit default swaps as a buyer or a seller. The buyer in a credit default contract is obligated to pay the seller a periodic stream of
payments over the term of the contract provided no event of default has occurred. If an event of default occurs, the seller must pay the
buyer the full notional value (“par value”) of the underlying in exchange for the underlying. If the Company is a buyer and
no event of default occurs, the Company will have made a stream of payments to the seller without having benefited from the default protection
it purchased. However, if an event of default occurs, the Company, as a buyer, will receive the full notional value of the underlying
that may have little or no value following default. As a seller, the Company receives a fixed rate of income throughout the term of the
contract, provided there is no default. If an event of default occurs, the Company would be obligated to pay the notional value of the
underlying in return for the receipt of the underlying. The value of the underlying received by the Company, coupled with the periodic
payments previously received, may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Company.
Credit default swaps involve different risks than if the Company invests in the underlying directly. For example, credit default swaps
would increase credit risk by providing the Company with exposure to both the issuer of the referenced obligation (typically a debt obligation)
and the counterparty to the credit default swap. Credit default swaps may in some cases be illiquid. Furthermore, the definition of a
“credit event” triggering the seller’s payment obligations under a credit default swap may not encompass all of the
circumstances in which the buyer may suffer credit-related losses on an obligation of a referenced entity.

The Company may enter into
total return swap agreements. Total return swap agreements are contracts in which one party agrees to make periodic payments based on
the change in market value of underlying assets, which may include a specified security, basket of securities, defined portfolios of bonds,
loans and mortgages, or securities indexes during the specified period, in return for periodic payments based on a fixed or variable interest
rate or the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market
without owning or taking physical custody of such security or market.

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Total return swap agreements
may effectively add leverage to the Company’s portfolio because, in