Company: PDCC
Filing Date: 2025-07-18
Form Type: N-2
Source: 0001214659-25-010613
Chunk: 49

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-07-18
Form: N-2
Chunk 49
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 a significant portion of the broadly syndicated secured
loan market in which CLOs invest. Alternative reference rates for other currencies have also been announced or have already begun publication.
There is no assurance that the composition or characteristics of SOFR, or any other alternative reference rate, will be similar to or
produce the same value or economic equivalence as LIBOR or that it will have the same volume or liquidity as did LIBOR prior to its discontinuance
or unavailability. This, in turn, may affect the value or liquidity or return on our investments, result in costs incurred in connection
with closing out positions and entering into new trades and reduce the effectiveness of related fund transactions such as hedges. These
risks may also apply with respect to potential changes in connection with other interbank offering rates (e.g., Euribor) and other
indexes, rates and values that may be used as “benchmarks” and are the subject of recent regulatory reform. The replacement
of LIBOR with SOFR as the preferred refence rate for CLOs and their underlying investments could have a significant impact on our investments
and the market for CLO securities generally. Accordingly, it is difficult to predict the full impact of the transition away from LIBOR
on the Company until new reference rates and fallbacks for both legacy and new products, instruments and contracts have a longer term
track record.

| 29 |

Interest Rate Mismatch. Many
underlying corporate borrowers can elect to pay interest based on various reference rates (such as 1-month term SOFR or 3-month term SOFR)
in respect of the loans held by CLOs in which we intend to invest, in each case plus an applicable spread, whereas CLOs generally pay
interest to holders of the CLO’s debt tranches based on 3-month term SOFR plus a spread. Because SOFR was developed relatively recently,
there is little historical information regarding the spread between its various terms. The development of a material mismatch in the rate
at which CLOs earn interest and the rate at which they pay interest on their debt tranches could negatively impact the cashflows on a
CLO’s equity tranche, which may in turn adversely affect our cashflows and results of operations.

Fluctuations in Interest Rates.
In 2022 and 2023, the U.S. Federal Reserve increased certain interest rates as part of its efforts to combat rising inflation, and in
September 2024 the U.S. Federal Reserve decreased such