Company: PDCC
Filing Date: 2025-09-16
Form Type: N-2/A
Source: 0001214659-25-013826
Chunk: 224

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-09-16
Form: N-2/A
Chunk 224
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 to the counterparty.
Generally, the Company will enter into total return swaps on a net basis (i.e., the two payment streams are netted out with the
Company receiving or paying, as the case may be, only the net amount of the two payments). Fully funded total return swaps have economic
and risk characteristics similar to credit-linked notes, which are described above.

Caps, floors, collars and
swaptions are privately-negotiated option-based derivative products. Like a put or call option, the buyer of a cap or floor pays a premium
to the writer. In exchange for that premium, the buyer receives the right to a payment equal to the differential if the specified index
or rate rises above (in the case of a cap) or falls below (in the case of a floor) a pre-determined strike level. Like swaps, obligations
under caps and floors are calculated based upon an agreed notional amount, and, like most swaps (other than foreign currency swaps), the
entire notional amount is not exchanged. A collar is a combination product in which one party buys a cap from and sells a floor to another
party. Swaptions give the holder the right to enter into a swap. The Company may use one or more of these derivative products in addition
to or in lieu of a swap involving a similar rate or index.

Under current market practice,
swaps, caps, collars and floors between the same two parties are generally documented under a “master agreement.” In some
cases, options and forward contracts between the parties may also be governed by the same master agreement. In the event of a default,
amounts owed under all transactions entered into under, or covered by, the same master agreement would be netted, and only a single payment
would be made.

Generally, the Company would
calculate the obligations of the swap agreements’ counterparties on a “net basis.” Consequently, the Company’s
current obligation (or rights) under a swap agreement will generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each counterparty to the swap agreement (the “net amount”).
The Company’s current obligation under a swap agreement will be accrued daily (offset against any amounts owed to the Company).

The swap market has grown
substantially in recent years with a large number of banks and investment banking firms acting both as principals and as agents using
standardized swap agreements. As a result