Company: PDCC
Filing Date: 2025-09-16
Form Type: N-2/A
Source: 0001214659-25-013826
Chunk: 223

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-09-16
Form: N-2/A
Chunk 223
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 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 addition to its total net assets, the Company would be subject
to investment exposure on the notional amount of the swap. Total return swaps are a mechanism for the user to accept the economic benefits
of asset ownership without utilizing the balance sheet. The other leg of the swap, is spread to reflect the non-balance sheet nature of
the product. Total return swaps can be designed with any underlying asset agreed between two parties. Typically, no notional amounts are
exchanged with total return swaps. Total return swap agreements entail the risk that a party will default on its payment obligations to
the Company thereunder. Swap agreements also entail the risk that the Company will not be able to meet its obligation