Company: PNNT
Filing Date: 2025-05-12
Form Type: 10-Q
Source: 0000950170-25-069165
Chunk: 9

Company: PENNANTPARK INVESTMENT CORP
Filing Date: 2025-05-12
Form: 10-Q
Item: Part I, Item 3
Chunk 9
---
We are subject to financial market risks, including changes in interest rates. As of March 31, 2025, our debt portfolio consisted of 91% variable-rate investments and 9% fixed rate investments. The variable-rate loans are usually based on a SOFR (or an alternative risk-free floating interest rate index) rate and typically have durations of three months after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.

Assuming that the most recent Consolidated Statements of Assets and Liabilities was to remain constant, and no actions were taken to alter the interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates:

     Change in Interest Rates
      
     Change in Interest Income, Net of Interest Expense (in thousands)

     Change in Interest Income, Net of Interest Expense Per Share

     Down 1%
      
     $
     (3,710
     )
      
     $
     (0.06
     )

     Up 1%

     3,710

     0.06

     Up 2%

     7,419

     0.11

     Up 3%

     11,129

     0.17

     Up 4%

     14,863

     0.23

Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect net increase in net assets resulting from operations, or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.

Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds as well as our level of leverage. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on