Company: PDCC
Filing Date: 2025-09-16
Form Type: N-2/A
Source: 0001214659-25-013826
Chunk: 62

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-09-16
Form: N-2/A
Chunk 62
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 counterparty risk.

We may be exposed to counterparty risk, which
could make it difficult for us or the CLOs in which we invest to collect on the obligations represented by investments and result in significant
losses.

We may hold investments (including synthetic securities)
that would expose us to the credit risk of our counterparties or the counterparties of the CLOs in which it invests. In the event of a
bankruptcy or insolvency of such a counterparty, we or a CLO in which such an investment is held could suffer significant losses, including
the loss of that part of our or the CLO’s portfolio financed through such a transaction, declines in the value of our investment.

We are subject to risks associated with defaults on an underlying asset held by a CLO.

A default and any resulting loss as well as other
losses on an underlying asset held by a CLO may reduce the fair value of our corresponding CLO investment. A wide range of factors could
adversely affect the ability of the borrower of an underlying asset to make interest or other payments on that asset. To the extent that
actual defaults and losses on the collateral of an investment exceed the level of defaults and losses factored into its purchase price,
the value of the anticipated return from the investment will be reduced. The more deeply subordinated the tranche of securities in which
we invest, the greater the risk of loss upon a default. For example, CLO equity is the most subordinated tranche within a CLO and is therefore
subject to the greatest risk of loss resulting from defaults on the CLO’s collateral, whether due to bankruptcy or otherwise. Any
defaults and losses in excess of expected default rates and loss model inputs will have a negative impact on the fair value of our investments,
will reduce the cashflows that we receive from our investments, adversely affect the fair value of our assets, and could adversely impact
our ability to pay dividends. Furthermore, the holders of the equity and junior debt tranches typically have limited rights with respect
to decisions made with respect to collateral following an event of default on a CLO. In some cases, the senior-most class of notes can
elect to liquidate the collateral even if the expected proceeds are not expected to be able to pay in full all classes of notes. We could
experience a complete loss of our investment in such a scenario.

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In addition, the collateral of CLOs may require
substantial workout negotiations or restructuring in