Company: PDCC
Filing Date: 2025-09-19
Form Type: 424B2
Source: 0001214659-25-013974
Chunk: 72

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-09-19
Form: 424B2
Chunk 72
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 defaults may increase and result in credit losses that may adversely affect our cashflow, fair value of our assets, and operating results. In the event that our interest expense were to increase relative to income, or sufficient financing became unavailable, our return on investments and cash available for distribution to stockholders or to make other payments on our securities would be reduced. In addition, future investments in different types of instruments may carry a greater exposure to interest rate risk. Reference Rate Floor Risk. Because CLOs generally issue debt on a floating rate basis, an increase in the applicable reference rate (typically 3-Month Term SOFR) will increase the financing costs of CLOs. Many of the senior secured loans held by these CLOs have reference rate floors such that, when the applicable reference rate is below the stated floor, the stated floor (rather than actual reference rate itself) is used to determine the interest payable under the loans. Therefore, if the applicable reference rate increases but stays below the average reference rate floor of the senior secured loans held by a CLO, there would not be a corresponding increase in the investment income of such CLOs. The combination of increased financing costs without a corresponding increase in investment income in such a scenario could result in the CLO not having adequate cash to make interest or other payments on the securities which we hold.

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LIBOR Replacement Risk. LIBOR was intended to represent the rate at which contributing banks may obtain short-term borrowings from each other in the London interbank market. The regulatory authority that oversees financial services firms and financial markets in the U.K. announced that, after the end of 2021, it would no longer persuade or compel contributing banks to make rate submissions for purposes of determining the LIBOR rate. The publication of LIBOR on a representative basis ceased for the one-week and two-month U.S. dollar LIBOR settings immediately after December 31, 2021 and ceased for the remaining U.S. dollar LIBOR settings immediately after June 30, 2023. The U.S. Federal Reserve, based on the recommendations of the New York Federal Reserve’s Alternative Reference Rate Committee (comprised of major derivative market participants and their regulators), has begun publishing SOFR, which has generally replaced U.S. dollar LIBOR as the reference rate of choice for CLOs as well as for 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