Company: PDCC
Filing Date: 2025-09-16
Form Type: N-2/A
Source: 0001214659-25-013826
Chunk: 52

Company: Pearl Diver Credit Co Inc.
Filing Date: 2025-09-16
Form: N-2/A
Chunk 52
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s 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 rates. Changes in interest rates (or the expectation of such changes) may adversely
affect the CLO securities that we invest in or increase risks associated with such investments. The senior secured loans underlying CLOs
typically have floating interest rates. A rising interest rate environment may increase loan defaults, resulting in losses for the CLOs
in which we invest. In addition, increasing interest rates may lead to higher prepayment rates, as corporate borrowers look to avoid escalating
interest payments or refinance floating rate loans. See “— Risks Related to Our Investments — Our investments are subject to prepayment risk.” Further, a general rise in interest rates will increase the financing costs of the CLOs.
However, since many of the senior secured loans within CLOs have reference rate floors, if the applicable reference rate is below the
average reference rate floor, there may not be corresponding increases in investment income, which 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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For detailed discussions of the risks
associated with a rising interest rate environment, see “— Risks Related to Our Investments — We and our investments are subject to interest rate risk,” and “— Risks Related to Our Investments — We and our investments are subject to risks associated with investing in high-yield and unrated, or “junk,” securities.”

Inflation or deflation may negatively affect our portfolio.

Inflation risk is the risk that the value of certain
assets, or income from our portfolio investments, will be worth less in the future as inflation decreases the value of money. As inflation
increases, the real value of the interest paid and repayments made in relation to CLOs may decline. In addition, during any periods of
rising inflation, some obligors may not be able to make the interest payments on CLO Collateral instruments or refinance those obligations,
resulting in payment defaults. It should be noted that, in response to recent world events, including