Company: SWKH
Filing Date: 2025-04-29
Form Type: ARS
Source: 0001628280-25-020753
Chunk: 16

Company: SWK Holdings Corp
Filing Date: 2025-04-29
Form: ARS
Chunk 16
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 Act of 2022, which includes the Adjustable Interest Rate (LIBOR) Act (“LIBOR Act”), was signed into law in the United States. This legislation established a uniform benchmark replacement process for certain financial contracts that mature after June 30, 2023 that do not contain clearly defined or practicable LIBOR fallback provisions. The legislation also created a safe harbor that shields lenders from litigation if they choose to utilize a replacement rate recommended by the Board of Governors of the U.S. Federal Reserve. In addition, the U.K. Financial Conduct Authority, which regulates the publisher of LIBOR (ICR Benchmark Administration) has announced that it will require the continued publication of one, three and six month tenors of U.S. dollar LIBOR on a non-representative synthetic basis until the end of September 2024, which may result in certain non-U.S. law-governed contracts and U.S. law-governed contracts not being covered by the federal legislation remaining on synthetic U.S. dollar LIBOR until the end of this period. The transition from LIBOR or the use of synthetic LIBOR in floating-rate debt securities in our portfolio or issued by us could have a material and adverse impact on the value or liquidity of those instruments. The transition away from LIBOR to alternative reference rates is complex and could have a material adverse effect on our business, financial condition and results of operations, including as a result of any changes in the pricing of our investments, changes to the documentation for certain of our investments and the pace of such changes, disputes and other actions regarding the interpretation of current and prospective loan documentation or modifications to processes and systems.

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A rise in the reference rates could have an adverse impact on the ability of our partner companies to service their debt obligations to us.

Many of our debt transactions contain reference rate-based floating interest rates with minimum reference rate floors. The minimum reference rate floor insulates partner companies from an increase in the reference rate until the reference rate reaches the minimum floor threshold. If the reference rate increases above the floor rate, the net effect will be an increase in the interest cost to the borrower. Most of our borrower partners do not hedge their reference rate exposure, and as a result of an increase of reference rate above the minimum floor threshold, they will experience an increase in the effective interest rate of their debt obligations to us. If the reference rate increases materially, the increased cost of debt service will similarly increase materially. If our partner companies are not adequately capitalized or are unable