Company: PDCC
Filing Date: 2025-07-18
Form Type: N-2
Source: 0001214659-25-010613
Chunk: 219

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-07-18
Form: N-2
Chunk 219
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 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 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,