Company: PDCC
Filing Date: 2025-03-11
Form Type: N-CSR
Source: 0001398344-25-005419
Chunk: 3

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-03-11
Form: N-CSR
Chunk 3
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 CLO investments managed by 29 CLO managers. The underlying loan portfolio across all CLO investments consisted of over 1,600
loan issuers across more than 30 sectors on a look-through basis. We believe this strategy of broad diversification enables us to manage
risk effectively, providing us with distribution sustainability and downside protection through changing market conditions.

Looking ahead, we expect refinancing and reset activity
to continue into 2025, with the continued tightening adding value to CLO equity. In the fourth quarter of 2024, approximately 17% of our
portfolio was refinanced or reset, and moving into 2025, even as minority equity holders we are taking an activist role and engaging with
CLO managers regarding refinancings of CLO liabilities. Additionally, we believe that we will continue to see opportunities in the primary
market. The reduction in Fed rates in late 2024 is gradually unlocking the path for new primary loan issuances driven by increased M&A
activity. Lower overall rates are also conducive to better free cashflow coverage at the underlying company level. Going forward, lower
base rates should be positive for loan fundamentals, although tails are likely to remain elevated due to idiosyncratic distress.

Included within this report you will find detailed
portfolio information as well as certain look-through information related to the collateral characteristics of the Company’s investments
as of December 31, 2024.

Market Overview

The U.S. leveraged loan market in H2 2024 experienced
a surge in activity, driven by strong investor demand and record issuance, reaching $1.337 trillion by year-end. Secondary loan prices
rallied, with 63% of performing index names priced at par or higher by December. CLO creation and retail investors fueled this growth.

A record $800 billion in repricing activity lowered
borrowing costs, cutting annual interest expenses by $4.1 billion for speculative-grade borrowers. December alone saw $153 billion in
repricings, making it the busiest month on record. This wave of refinancing significantly reduced near-term debt maturities, with 2025
obligations decreasing by 84% to $13.4 billion and 2026 maturities falling 75% to $44 billion.

At the same time, net supply remained extremely limited
in the fourth quarter. Syndicated loan issuance to finance LBOs, sponsored add-ons, and corporate mergers and acquisitions declined from
$46 billion in the third