Company: PDCC
Filing Date: 2025-07-18
Form Type: N-2
Source: 0001214659-25-010613
Chunk: 13

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-07-18
Form: N-2
Chunk 13
---
,
and so on, with any remaining principal being distributed to the equity tranche investors. In limited instances, principal may be reinvested
after the end of the reinvestment period.

| 6 |

CLOs contain structural features and covenants
designed to enhance the credit protection of CLO debt investors, including overcollateralization tests and interest coverage tests. The
overcollateralization tests require CLOs to maintain certain levels of overcollateralization (measured as par value of assets compared
to principal amount of liabilities, subject to certain adjustments). Interest coverage tests require CLOs to maintain certain levels of
interest coverage (measured as expected interest revenues on the assets compared to interest payments on the liabilities). If a CLO breaches
an overcollateralization test or interest coverage test, excess interest-related cash flow that would otherwise be available for distribution
to the CLO equity tranche investors is diverted to acquire new loan collateral until the test is satisfied or after the end of the reinvestment
period of the CLO, prepay CLO debt investors in order of seniority until such time as the covenant breach is cured. If the covenant breach
is not or cannot be cured, the CLO equity investors (and potentially other debt tranche investors) may continue to experience a deferral
of cashflow, a partial or total loss of their investment and/or the CLO may eventually experience an event of default. For this reason,
CLO equity investors are often referred to as being in a first loss position. The Adviser will have no control over whether or not the
CLO is able to satisfy its relevant interest coverage tests or overcollateralization tests.

The acquisition of new loan collateral in this
manner may increase the total amount of assets held by the CLO and hence the resulting cash flows to the CLO equity tranche.

Cashflow CLOs do not have mark-to-market triggers
and, with limited exceptions (such assets rated “CCC+” or lower (or their equivalent) to the extent such assets exceed a
specified concentration limit, deeply discounted purchases and defaulted assets), CLO covenants are generally calculated using the par
value of collateral, not the market value or purchase price. As a result, a decrease in the market price of a CLO’s performing
collateral portfolio does not generally result in a requirement for the CLO collateral manager to sell assets (i.e., no forced
sales) or for CLO equity investors to