EDGAR 10-K Filing

Company CIK: 1948368
Filing Year: 2025
Filename: 1948368_10-K_2025_0000950170-25-032238.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
The Company
We are a specialty finance company focused on lending to middle-market companies. We are a closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940 (as amended, the "Investment Company Act"). In addition, we have elected to be treated as a RIC (as defined below), and we expect to qualify annually for tax treatment as a RIC, commencing with our taxable year ended December 31, 2022. From our formation in 2022 through December 31, 2024, we have originated approximately $860.72 million in aggregate principal amount of debt investments prior to any subsequent exits and repayments. We seek to generate current income and, to a lesser extent, capital appreciation primarily through direct originations of secured debt, including first lien, unitranche, including last-out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments.
“Unitranche” loans are first lien loans that may extend deeper in a borrower’s capital structure than traditional first lien debt and may provide for a waterfall of cash flow priority between different lenders in such loan. In a number of instances, we may find another lender to provide the “first-out” portion of a unitranche loan while we retain the “last-out” portion of such loan, in which case, the “first-out” portion of the loan would generally receive priority with respect to the payment of principal, interest and any other amounts due thereunder as compared to the “last-out” portion that we would continue to hold. In exchange for taking greater risk of loss, the “last-out” portion generally earns a higher interest rate than the “first-out” portion of the loan. We use the term “mezzanine” to refer to debt that ranks senior in right of payment only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness. We may make multiple investments in the same portfolio company.
We may also originate “covenant-lite” loans, which are loans with fewer financial maintenance covenants than other obligations, or no financial maintenance covenants. Such covenant-lite loans may not include terms that allow the lender to monitor the performance of the borrower or to declare a default if certain criteria are breached. These flexible covenants (or the absence of covenants) could permit borrowers to experience a significant downturn in their results of operations without triggering any default that would permit holders of their debt (such as us) to accelerate indebtedness or negotiate terms and pricing. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants. Therefore, our investments may result in an above-average amount of risk and volatility or loss of principal. We also may invest in other assets, including cash equivalents, U.S. government securities and other short-term investments, as described above. These investments entail additional risks that could adversely affect our investment returns.
We expect to invest, under normal circumstances, at least 90% of our net assets (plus any borrowings for investment purposes) in private middle-market credit obligations and related instruments. We define “credit obligations and related instruments” for this purpose as any fixed-income instrument, including loans to, and bonds, preferred stock and other instruments of, portfolio companies that provide exposure to fixed-income instruments. These other instruments may not by definition be fixed-income instruments, but structurally have the underlying investment risk and return profile and income-payment profile of fixed-income instruments. “Middle market companies” is used to refer to companies with between $5 million and $200 million of annual earnings before interest expense, income tax expense, depreciation and amortization (“EBITDA”), adjusted for certain one-time and non-recurring expenses that are outside the ordinary operations of these companies, along with companies that we determine, based on other metrics, including recurring revenue or tower cash flow, are middle market companies. Following such time that the aggregate amount of capital contributions to us made by our unitholders (the "Unitholders") equals or exceeds $450 million, but subject to market conditions and the availability of suitable investment opportunities, we generally expect to target allocations among private middle-market credit obligations and related instruments in the following ratios: (i) 45% to companies with between $5 million and $25 million of EBITDA and (ii) 55% to companies with between $25 million and $75 million of EBITDA, in each case adjusted for certain one-time and non-recurring expenses that are outside the ordinary operations of these companies. Notwithstanding the foregoing, we may invest on an opportunistic basis in credit
obligations of private middle-market companies with EBITDA outside of the foregoing ranges, including credit obligations of companies that we believe are middle market companies based on metrics such as recurring revenue and tower cash flow, as opposed to EBITDA. In addition, as a result of fluctuations in the asset value of one asset relative to another asset, private middle-market credit obligations and related instruments may not reflect the foregoing targets or may represent less than 90% of our net assets (plus any borrowings for investment purposes) at any time. However, we may not invest, under normal circumstances, more than 20% of our net assets (plus any borrowings for investment purposes) in securities and other instruments that are not private middle-market credit obligations. In addition, we are subject to the investment guidelines, which are further described in “-Investment Criteria.”
We expect to invest in middle-market companies domiciled in the United States. We may from time to time invest opportunistically in large U.S. companies, stressed or distressed debt, structured products, private equity or other opportunities, subject to the investment guidelines and the limits imposed by the Investment Company Act.
While we expect our investment program to focus primarily on debt investments, our investments may include equity or equity features, such as a direct investment in the equity or convertible securities of a portfolio company or warrants or options to buy a minority interest in a portfolio company. Any warrants we may receive with debt securities will generally require only a nominal cost to exercise, so as a portfolio company appreciates in value, we may achieve additional investment return from these equity investments. We may structure the warrants to provide provisions protecting our rights as a minority-interest holder, as well as puts, or rights to sell such securities back to the portfolio company, upon the occurrence of specified events. In many cases, we may also obtain registration rights in connection with these equity investments, which may include demand and “piggyback” registration rights (which would allow us to have equity securities from an investment in a portfolio company registered for public offering in connection with a planned registration of such equity securities by the portfolio company).
For a discussion of the competitive landscape we face, please see “Item 1A. Risk Factors-Risks Relating to Competition-We operate in a highly competitive market for investment opportunities” and “Item 1. Business-Competitive Advantages.”
Available Information
We file with or submit to the SEC periodic and current reports, proxy statements and other information meeting the informational requirements of the Exchange Act. The SEC maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information filed electronically by us with the SEC. Copies of these reports, proxy and information statements and other information may be obtained by electronic request at the following e-mail address: publicinfo@sec.gov.
Investment Strategy
Our origination strategy focuses on leading the negotiation and structuring of the loans or securities in which we invest and holding the investments in our portfolio to maturity. In many cases, we are the sole investor in the loan or security in our portfolio. Where there are multiple investors, we generally seek to control or obtain significant influence over the rights of investors in the loan or security. Our investments typically have maturities of three to ten years and investment size ranges from $10 million to $75 million or above.
Investment Portfolio
Our portfolio (excluding our investment in a money market fund, if any, managed by an affiliate of GS Group Inc.) consisted of the following:
December 31, 2024
Amortized Cost
Fair Value
($ in millions)
First Lien/Senior Secured Debt
$
562.62
$
562.47
First Lien/Last-Out Unitranche
39.67
39.64
Common Stock
2.25
2.31
Total investments
$
604.54
$
604.42
As of December 31, 2024, our portfolio consisted of 173 investments in 65 portfolio companies across 26 different industries. The largest industries in our portfolio based on fair value as of December 31, 2024 were Software, Diversified Consumer Services and Commercial Services & Supplies, which represented 13.3%, 9.1% and 8.0%, respectively.
The geographic composition of our portfolio at fair value as of December 31, 2024 was 100% invested in portfolio companies organized in the United States.
The weighted average yield by asset type of our total portfolio (excluding our investment in money market funds, if any), at amortized cost and fair value, was as follows:
December 31, 2024
Amortized Cost
Fair Value
Weighted Average Yield(1)
First Lien/Senior Secured Debt(2)
10.2
%
10.2
%
First Lien/Last-Out Unitranche(2)(3)
11.1
%
11.1
%
Common Stock(3)
-
-
Total Portfolio
10.2
%
10.2
%
(1)The weighted average yield of our portfolio does not represent the total return to our Unitholders.
(2)Computed based on (a) the annual actual interest rate or yield earned plus amortization of fees and discounts on the performing debt and other income producing investments as of the reporting date, divided by (b) the total investments (including investments on non-accrual status and non-income producing investments) at amortized cost or fair value.
(3)The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments.
The following table presents certain selected information regarding our investment portfolio (excluding our investment in money market funds, if any):
As of
December 31, 2024
December 31, 2023
Number of portfolio companies
Percentage of performing debt bearing a floating rate(1)
100.0
%
100.0
%
Percentage of performing debt bearing a fixed rate(1)(2)
-
%
-
%
Weighted average leverage (net debt/EBITDA)(3)
5.4
x
4.9
x
Weighted average interest coverage(3)
2.1
x
1.7
x
Median EBITDA(3)
$
76.31 million
$
56.78 million
(1)Measured on a fair value basis. Excludes investments, if any, placed on non-accrual status.
(2)Includes income producing preferred stock investments, if applicable.
(3)For a particular portfolio company, we calculate the level of contractual indebtedness net of cash (“net debt”) owed by the portfolio company and compare that amount to measures of cash flow available to service the net debt. To calculate net debt, we include debt that is both senior and pari passu to the tranche of debt owned by us but exclude debt that is legally and contractually subordinated in ranking to the debt owned by us. We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual rights of repayment of the tranche of debt owned by us relative to other senior and junior creditors of a portfolio company. We typically calculate cash flow available for debt service at a portfolio company by taking EBITDA for the trailing twelve-month period. Weighted average net debt to EBITDA is weighted based on the fair value of our debt investments, excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
For a particular portfolio company, we also calculate the level of contractual interest expense owed by the portfolio company, and compare that amount to EBITDA (“interest coverage ratio”). We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual interest obligations of the portfolio company. Weighted average interest coverage is weighted based on the fair value of our performing debt investments, excluding investments where interest coverage may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
Median EBITDA is based on our debt investments, excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.
As of December 31, 2024, investments where net debt to EBITDA may not be the appropriate measure of credit risk represented 11.8% of total debt investments at fair value.
Corporate Structure and Private Offering
We were formed as a Delaware limited liability company on July 13, 2022. We have elected to be regulated as a BDC under the Investment Company Act. In addition, we have elected to be treated as a RIC, and we expect to qualify annually for tax treatment as a RIC, commencing with our taxable year ended December 31, 2022.
An affiliate of the Investment Adviser made a capital commitment to us of $10,000 on October 6, 2022 (commencement of operations) and served as our initial member (the “Initial Member”).
On October 19, 2022, we began accepting subscription agreements (each, a “Subscription Agreement”) from investors acquiring our Units (as defined below). Our Units are offered and sold to investors in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), including Section 4(a)(2) of the Securities Act, and Regulation D and Regulation S under the Securities Act. Pursuant to a Subscription Agreement entered into with us, each investor makes a capital commitment (a “Commitment”) to purchase our Units for an aggregate purchase price equal to its Commitment. Each investor will be required to purchase our Units (up to the amount of their undrawn Commitment) each time we deliver a drawdown notice to our investors, which will be delivered in respect of such Commitment at least ten business days (as defined in Rule 14d-1 of the Exchange Act, “Business Days”) prior to the required funding date (the “Drawdown Date”). New Units will be issued on each Drawdown Date.
On November 2, 2022 (the “Initial Drawdown Date”), we called investor capital and, upon receipt of investor funds, we issued 1.5 million Units.
Subject to certain limited exceptions under the Investment Company Act, on each Drawdown Date, Unitholders will be required to purchase Units at a price equal to our then-current net asset value ("NAV") per Unit as of the end of the most recent calendar month prior to the date of the applicable drawdown notice or issuance date, subject to the limitations of Section 23 under the Investment Company Act (which generally prohibits us from issuing Units at a price below the then-current NAV per Unit as determined within 48 hours, excluding Sundays and holidays, of such issuance, subject to certain exceptions).
Unitholders are entitled to receive dividends or other distributions declared by our board of directors (the “Board of Directors” or the "Board") and are entitled to one vote for each Unit held on all matters submitted to a vote of the Unitholders.
As of the date indicated, we had aggregate Commitments and undrawn Commitments from investors as follows:
December 31, 2024
Capital
Commitments
($ in millions)
Unfunded
Capital
Commitments
($ in millions)
% of Capital
Commitments
Funded
Common Units
$
750.01
$
367.50
%
The following table summarizes the total Units issued and proceeds received related to capital drawdowns:
Unit Issue Date
Units Issued
Proceeds Received
($ in millions)
For the Year Ended December 31, 2024
May 24, 2024
1,134,153
$
22.50
June 17, 2024
1,878,400
37.50
July 5, 2024
1,863,521
37.50
August 15, 2024
3,756,273
75.00
November 15, 2024
1,875,000
37.50
Total capital drawdowns
10,507,347
$
210.00
Commitment Period
We may draw all or any portion of a Unitholder’s Commitment at any time for any permitted purpose prior to the third anniversary of the Initial Drawdown Date with respect to such Commitment (such three-year period, the “Commitment Period”).
Following the end of the Commitment Period with respect to a Unitholder’s Commitment, we will have the right to issue drawdowns with respect to such Commitment only (i) to pay, and/or establish reserves for, actual or anticipated expenses, liabilities, including the payment or repayment of Financings (as defined below) or other obligations, contingent or otherwise (including the Management Fee (as defined below)), whether incurred before or after the end of such Commitment Period, (ii) to fulfill investment commitments made or approved by the Private Credit Investment Committee (as defined below) prior to the expiration of such Commitment Period, or (iii) to make additional investments in existing portfolio companies (each, an “Additional Investment”); provided that drawdowns with respect to such Commitment used to make Additional Investments will not exceed in the aggregate 15% of such Unitholder’s Commitment without such Unitholder’s consent.
“Financings” are indebtedness for borrowed money (including through the issuance of notes and other evidence of indebtedness), other indebtedness, financings or extensions of credit.
Term
We shall continue in existence until dissolved (i) pursuant to the Investment Adviser’s recommendation with the consent of both the Board of Directors and a majority-in-interest of the Unitholders, (ii) pursuant to the Investment Adviser’s recommendation with the approval of the Board of Directors, (iii) if there are no Unitholders, unless our business is continued in accordance with our Amended and Restated Limited Liability Company Agreement (as it may be amended or amended and restated from time to time, the “LLC Agreement”) or applicable law, or (iv) upon the entry of a decree of judicial dissolution under applicable law.
Our Investment Adviser
GSAM serves as our Investment Adviser and has been registered as an investment adviser with the SEC since 1990. Subject to the supervision of our Board of Directors, a majority of which is made up of independent directors (including an independent Chairperson), GSAM manages our day-to-day operations and provides us with investment advisory and management services and certain administrative services. GSAM is a subsidiary of GS Group Inc., a bank holding company (a “BHC”) and a financial holding company (“FHC”), regulated by the board of governors of the federal reserve system (the "Federal Reserve"). GS Group Inc. is a leading global financial institution that delivers a broad range of financial services to a large and diversified client base that includes corporations, financial institutions, governments and individuals. GS Group Inc. is the general partner and owner of GSAM. Goldman Sachs & Co. LLC, a wholly owned subsidiary of GS Group Inc., acts as placement agent for us in connection with the offering and sale of our Units (the “Placement Agent”).
The Goldman Sachs Asset Management Private Credit Team
The Goldman Sachs Asset Management Private Credit Team is dedicated to the direct origination investment strategy of the Company and other Accounts that share a similar investment strategy with us. The Goldman Sachs Asset Management Private Credit Team is comprised of approximately 200 investment professionals across 11 cities and four continents as of December 31, 2024. Within the Goldman Sachs Asset Management Private Credit Team, approximately 80 private credit investment professionals across five offices in the Americas led by Alex Chi and David Miller, our Co-Chief Executive Officers and Co-Presidents, oversee and lead our day-to-day portfolio management. The Goldman Sachs Asset Management Private Credit Team is responsible for identifying investment opportunities, conducting research and due diligence on prospective investments, and negotiating, structuring, monitoring, and servicing our investments. In addition, the Investment Adviser and Goldman Sachs have risk management, legal, accounting, tax, information technology and compliance personnel, among other personnel, who provide services to us. We benefit from the expertise provided by these personnel in our operations.
The Goldman Sachs Asset Management Private Credit Team utilizes a bottom-up, fundamental research approach to lending. The managing directors of this team had an average industry experience of over 19 years coupled with an average tenure at Goldman Sachs of over 12 years as of December 31, 2024.
Private Credit Investment Committee
All investment decisions are made by the investment committee of the Goldman Sachs Asset Management Private Credit Team (the "Private Credit Investment Committee”). As of the date of this report, the Private Credit Investment Committee consists of the following members: Rich Friedman, James Reynolds, Vivek Bantwal, Patrick Armstrong, Amitayush Bahri, Steven Budig, Kevin Sterling, Beat Cabiallavetta, Stephanie Rader, Alex Chi, David Miller, Greg Watts, Nicole Agnew and Moritz Jobke, along with members from Goldman Sachs’ Compliance, Legal, Tax and Controllers groups. The Private Credit Investment Committee is responsible for approving all of our investments. The Private Credit Investment Committee also monitors investments in our portfolio and approves all asset dispositions. We expect to benefit from the extensive and varied relevant experience of the investment professionals serving on the Private Credit Investment Committee, which includes expertise in privately originated and publicly traded leveraged credit, stressed and distressed debt, bankruptcy, mergers and acquisitions and private equity. The size, membership, authority and voting rights of members of the Private Credit Investment Committee are subject to change from time to time without prior notice.
The purpose of our Private Credit Investment Committee is to evaluate and approve, as deemed appropriate, all investments by our Investment Adviser. Our Private Credit Investment Committee process is intended to bring the diverse experience and perspectives of our Private Credit Investment Committee’s members to the analysis and consideration of every investment. Our Private Credit Investment Committee also serves to provide investment consistency and adherence to our Investment Adviser’s investment philosophies and policies. Our Private Credit Investment Committee also determines appropriate investment sizing and suggests ongoing monitoring requirements.
Investments
We seek to create a portfolio that includes primarily direct originations of secured debt, including first lien, unitranche, including last-out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments. We expect to make investments through both primary originations and open-market secondary purchases. We currently do not limit our focus to any specific industry. If we are successful in achieving our investment objective, we believe that we will be able to provide our Unitholders with consistent dividend distributions and attractive risk adjusted total returns.
As of December 31, 2024, our portfolio (which term does not include our investments in money market funds, if any) on a fair value basis, was comprised of approximately 100% secured debt investments (100% in first lien debt). We expect that our portfolio will continue to include secured debt, including first lien, unitranche, including last-out portions of such loans, and second lien debt, unsecured debt (including mezzanine debt) and, to a lesser extent, equities. In addition to investments in U.S. middle-market companies, we may invest a portion of our capital in opportunistic investments, such as in large U.S. companies, stressed or distressed debt, structured products or private equity. Such investments are intended to enhance our risk adjusted returns to Unitholders, and the proportion of these types of investments will change over time given our views on, among other things, the economic and credit environment in which we are operating, although these types of investments generally will constitute less than 30% of our total assets.
In the future, we may also securitize a portion of our investments in any or all of our assets. We expect that our primary use of funds will be to make investments in portfolio companies, distribute cash to holders of our Units and pay our operating expenses, including debt service to the extent we borrow or issue senior securities to fund our investments.
In certain circumstances, we can make negotiated co-investments pursuant to an exemptive order from the SEC permitting us to do so. On November 16, 2022, the SEC granted to the Investment Adviser, the BDCs advised by the Investment Adviser and certain other affiliated applicants exemptive relief on which we expect to rely to co-invest alongside certain other Accounts, which may include proprietary accounts of Goldman Sachs, in a manner consistent with our investment objectives and strategies, certain Board-established criteria, the conditions of such exemptive relief and other pertinent factors (the “Relief”). On June 25, 2024, the SEC granted an amendment to the Relief, which permits us to participate in follow-on investments in our existing portfolio companies with certain
affiliates covered by the Relief if such affiliates, that are not BDCs or registered investment companies, did not have an investment in such existing portfolio company. If our Investment Adviser forms other funds in the future, we may co-invest alongside such other affiliates, subject to compliance with the Relief, applicable regulations and regulatory guidance, as well as applicable allocation procedures. As a result of the Relief, there could be significant overlap in our investment portfolio and the investment portfolios of other Accounts, including, in some cases, proprietary accounts of Goldman Sachs.
Investment Criteria
Following such time that the aggregate amount of capital contributions to us made by Unitholders equals or exceeds $450 million, but subject to market conditions and the availability of suitable investment opportunities, in making commitments to investments, the Investment Adviser will use commercially reasonable efforts to cause the Company to comply with the following guidelines, at the time the relevant investment is made and to the actual knowledge of the Investment Adviser we will seek to allocate our Total Commitments (as defined below) among investments as follows:
•First lien debt, stretch senior debt and/or unitranche debt: at least 70%
•Second lien debt and/or mezzanine debt: no more than 30%
•Equity and/or payment-in-kind (“PIK”): no more than 10%
Classification of each investment within the foregoing categories will be determined by the Investment Adviser in its sole discretion based on the relevant investment’s offering materials and, if so determined by the Investment Adviser in its sole discretion, on other information regarding the investment that is made available to the Investment Adviser:
•We will seek to commit to invest in at least 60 portfolio companies; provided that, if market conditions reasonably permit, the Investment Adviser will use commercially reasonable efforts to invest in at least 70 portfolio companies prior to the expiration of the Commitment Period.
•We will seek to commit no more than 20% of Total Commitments to a single industry.
•We will seek to commit no more than (i) 3% of Total Commitments to an initial investment in any one investment and (ii) 5% of Total Commitments to any one investment on a cumulative basis (including, for the avoidance of doubt, any Additional Investments in such investment).
•We will seek to commit no more than 10% of Total Commitments to investments in portfolio companies located outside of the United States.
For purposes of determining compliance with the foregoing, a portfolio company will be deemed to be located in the jurisdiction where it is legally domiciled, where it is headquartered, or where the majority of its operations are located, in each case as determined by the Investment Adviser in its sole discretion.
•Subject to the limitations of the Investment Company Act, we will target Company-level leverage equal to 100% to 130% of our NAV; provided that the amount of Company-level leverage employed by us may be higher or lower than such targets.
For purposes of the foregoing investment guidelines, “Total Commitments” shall mean, at any time, the sum of the aggregate Commitments of all Unitholders.
Allocation of Investment Opportunities
Our investment objectives and investment strategies are similar to those of other Accounts, and an investment opportunity appropriate for us may also be appropriate for such other Accounts (which may include proprietary accounts of Goldman Sachs). This creates potential conflicts in allocating investment opportunities among us and such other Accounts, particularly in circumstances where the availability of such investment opportunities is limited, where the liquidity of such investment opportunities is limited or where co-investments by us and such other Accounts are not permitted under applicable law.
To address these and other potential conflicts, a selection of which are outlined below, the Investment Adviser has developed allocation policies and procedures that provide that personnel of the Investment Adviser making portfolio decisions for Accounts will make purchase and sale decisions and allocate investment opportunities among Accounts consistent with its fiduciary obligations. To the extent permitted by applicable law, these policies and procedures may result in the pro rata allocation of limited opportunities across eligible Accounts managed by a particular portfolio management team, but in many other cases, the allocations may reflect numerous other factors as described below. There will be cases where certain Accounts receive an allocation of an investment opportunity when we do not, and vice versa.
In some cases, due to information barriers that may be in place, other Accounts may compete with us for specific investment opportunities without being aware that we are competing against each other. Goldman Sachs has a conflicts system in place, in addition to these information barriers to identify potential conflicts early in the process and determine if an allocation decision needs to be made.
If the conflicts system detects a potential conflict with respect to a particular investment opportunity, such investment opportunity will be assessed to determine whether it must be allocated to, or prohibited from being allocated to, a particular Account.
Personnel of the Investment Adviser involved in decision-making for Accounts may make allocation-related decisions in accordance with the Investment Adviser’s allocation policies and procedures for us and for other Accounts by reference to one or more factors, including but not limited to: the strategy, objectives, guidelines and restrictions (including legal and regulatory restrictions) of potentially in-scope Accounts, as well as those Accounts’ current portfolios and investment horizons; strategic fit and other portfolio management considerations, including different desired levels of investment for different strategies; the expected future capacity of the potentially in-scope Accounts; cash and liquidity considerations; and the availability of other appropriate investment opportunities. The Investment Adviser may also consider reputational matters and other factors. The application of these considerations may cause differences in the portfolios and performance of different Accounts that have similar strategies. In addition, in some cases the Investment Adviser may make investment recommendations to Accounts where the Accounts make the investment independently of the Investment Adviser, which may result in a reduction in the availability of the investment opportunity for other Accounts (including us), irrespective of the Investment Adviser’s policies regarding allocation of investments. Additional information about the Investment Adviser’s allocation policies is set forth in Item 6 (“Performance-Based Fees and Side-by-Side Management-Side-by-Side Management of Advisory Accounts; Allocation of Opportunities”) of the Investment Adviser’s Form ADV.
The Investment Adviser, including the Goldman Sachs Asset Management Private Credit Team, may develop and implement new trading strategies or seek to participate in new investment opportunities and strategies. These opportunities and strategies may not be employed in all Accounts even if the opportunity or strategy is consistent with the objectives of such Accounts.
During periods of unusual market conditions, the Investment Adviser may deviate from its normal trade allocation practices. For example, this may occur with respect to the management of unlevered and/or long-only Accounts that are typically managed on a side-by-side basis with levered and/or long-short Accounts.
We may or may not receive opportunities referred by Goldman Sachs businesses and affiliates, but in no event do we have any rights with respect to such opportunities. Subject to applicable law, including the Investment Company Act, such opportunities or any portion thereof may be offered to other Accounts, Goldman Sachs, certain of our investors, or such other persons or entities as determined by Goldman Sachs in its sole discretion. We will have no rights and will not receive any compensation related to such opportunities. Certain of such opportunities may be referred to us by employees or other personnel of Goldman Sachs, or by third parties. If we invest in any such opportunities, Goldman Sachs, may be entitled, to the extent permitted by applicable law, including the limitations set forth in Section 57(k) of the Investment Company Act, to receive compensation from us or from the borrowers in connection with such investments. Any compensation we pay in connection with such referrals will be an operating expense and will accordingly be borne by us (and will not serve to offset any Management Fee (as defined below) or Incentive Fee (as defined below) payable to the Investment Adviser).
In connection with certain of our investments, the Investment Adviser may determine that the appropriate amount to allocate to us and other Accounts may be less than the full amount of the investment opportunity, due to considerations related to, among other things, diversification, portfolio management, leverage management, investment profile, risk tolerance or other exposure guidelines or limitations, cash flow or other considerations. In such situations, “excess amounts” that can be allocated may be offered to other persons or entities. Subject to applicable law, such opportunities may be structured as an investment alongside us or as a purchase of a portion of the investment from us (through a syndication, participation or otherwise).
In all cases, subject to applicable law, the Investment Adviser has broad discretion in determining to whom and in what relative amounts to offer such opportunities, and factors the Investment Adviser may take into account, in its sole discretion, include whether such potential recipient is able to assist or provide a benefit to us in connection with the potential transaction or otherwise, whether the Investment Adviser believes the potential recipient is able to execute a transaction quickly, whether the potential recipient is expected to provide expertise or other advantages in connection with a particular investment, whether the Investment Adviser is aware of such potential recipient’s expertise or interest in these types of opportunities generally or in a subset of such opportunities or, the potential recipient’s target investment sizing. Recipients of these opportunities may, in accordance with applicable law, include one or more of our investors, one or more investors in other funds managed by the Goldman Sachs Asset Management Private Credit Team, clients or potential clients of Goldman Sachs, or funds or Accounts established for any such persons. These opportunities may give rise to potential conflicts of interest. These opportunities will be offered to the recipients thereof on such terms as the Investment Adviser determines in its sole discretion, subject to applicable law, including on a no-fee basis or at prices higher or lower than those paid by us. As a result of these and other reasons, returns with respect to an opportunity may exceed investors’ returns with respect to our investment in the same opportunity.
Transactions with affiliates. We are prohibited under the Investment Company Act from participating in certain transactions with our affiliates without the prior approval of our independent directors (the “Independent Directors”) and, in some cases, of the SEC. Any person that owns, directly or indirectly, five percent or more of our outstanding voting securities will be an affiliate of the Company for purposes of the Investment Company Act, and we are generally prohibited from buying or selling any assets from or to, or entering into certain “joint” transactions (which could include investments in the same portfolio company) with such affiliates, absent the prior approval of the Independent Directors. The Investment Adviser and its affiliates, including persons that control, or are under common
control with, the Company or the Investment Adviser, are also considered to be our affiliates under the Investment Company Act, and we are generally prohibited from buying or selling any assets from or to, or entering into “joint” transactions with, such affiliates without exemptive relief from the SEC.
Co-Investments Alongside Goldman Sachs and Other Accounts, and the Relief. Subject to applicable law, we may invest alongside Goldman Sachs and other Accounts. The staff of the SEC has issued no-action relief permitting us to purchase a single class of privately placed securities alongside Goldman Sachs and other Accounts, provided that the Investment Adviser negotiates no term other than price and certain other conditions are met. In certain circumstances, we and such other Accounts (which may include proprietary accounts of Goldman Sachs) can make negotiated co-investments pursuant to an exemptive order from the SEC permitting us to do so. On November 16, 2022, the SEC granted the Relief to our Investment Adviser, the BDCs advised by the Investment Adviser, and certain other affiliated applicants. On June 25, 2024, the SEC granted an amendment to the Relief, which permits us to participate in follow-on investments in our existing portfolio companies with certain affiliates covered by the Relief if such affiliates, that are not BDCs or registered investment companies, did not have an investment in such existing portfolio company. If the Investment Adviser forms other funds in the future, we may co-invest alongside such other affiliates, subject to compliance with the Relief, applicable regulations and regulatory guidance, as well as applicable allocation procedures. Any such co-investments are subject to certain conditions, including that co-investments are made in a manner consistent with our investment objectives and strategies, certain Board-established criteria, and the other applicable conditions of the Relief. Under the terms of the Relief, a “required majority” (as defined in Section 57(o) of the Investment Company Act) of our Independent Directors must reach certain conclusions in connection with a co-investment transaction, including that: (i) the terms of the proposed transaction are reasonable and fair to us and our Unitholders and do not involve overreaching in respect of us or our Unitholders on the part of any person concerned; and (ii) the transaction is consistent with the interests of our Unitholders and is consistent with our then-current investment objectives and strategies.
As a result of the Relief, there could be significant overlap in our investment portfolio and the investment portfolios of other Accounts, including, in some cases, proprietary accounts of Goldman Sachs.
If the Investment Adviser identifies an investment and we are unable to rely on the Relief for that particular opportunity, the Investment Adviser will be required to determine which Accounts should make the investment at the potential exclusion of other Accounts. In such circumstances, the Investment Adviser will adhere to its investment allocation policy in order to determine the Account to which to allocate investment opportunities. Accordingly, it is possible that we may not be given the opportunity to participate in investments made by other Accounts.
We may invest alongside other Accounts advised by the Investment Adviser and its affiliates in certain circumstances where doing so is consistent with applicable law and SEC staff guidance and interpretations. For example, we may invest alongside such Accounts consistent with guidance promulgated by the staff of the SEC permitting us and such other Accounts to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that the Investment Adviser, acting on our behalf and on behalf of its other clients, negotiates no term other than price. We may also invest alongside the Investment Adviser’s other clients as otherwise permissible under SEC staff guidance and interpretations, applicable regulations and the allocation policy of the Investment Adviser.
For a further explanation of the allocation of opportunities and other conflicts and the risks related thereto, please see “Item 1A. Risk Factors-Risks Relating to Our Business and Structure-Potential conflicts of interest with other businesses of Goldman Sachs could impact our investment returns.”
Expenses are generally allocated to Accounts (including to us) based on whose behalf the expenses are incurred. Where we and one or more other Accounts participate in a particular investment or collectively incur other expenses, the Investment Adviser generally allocates investment-related and other expenses in a manner the Investment Adviser determines to be fair and equitable, which may be pro rata or on a different basis.
We and other Accounts may contract for and incur expenses in connection with certain services provided by third parties, including valuation agents, rating agencies, attorneys, accountants and other professional service providers, while other Accounts that did not contract for such services may not incur such expenses even though they directly or indirectly receive benefit from such services. For example, the work of valuation firms retained by the Company at the request of the Board benefit certain Accounts that invest in the same assets as the Company, but because such other Accounts did not request such services, they are not allocated any costs associated therewith. While it is generally expected that the Accounts requesting third-party services will bear the full expense associated therewith, GSAM may in its sole discretion determine to bear the portion of such expenses that would be allocable to the non-requesting Accounts had such Accounts requested the services.
Market Opportunity
The Goldman Sachs Asset Management Private Credit Team believes there is an attractive investment opportunity to invest in U.S. middle-market companies. Specifically:
•The middle-market represents a large target market opportunity. According to the National Center for the Middle Market the U.S. middle market is composed of nearly 200,000 companies that represent approximately 33% of the private sector
gross domestic product.1 The Goldman Sachs Asset Management Private Credit Team believes that there is an attractive investment environment for BDCs to provide loans to U.S. middle market companies.
•There is a large amount of un-invested private equity capital for middle-market companies. There is a large amount of un-invested private equity capital for North America buyout funds. The Goldman Sachs Asset Management Private Credit Team believes this creates additional capacity for us as the Goldman Sachs Asset Management Private Credit Team expects private equity firms will seek to leverage their investments by combining equity capital with debt capital.
•Changes in business strategy by banks have further reduced the supply of capital to middle-market companies. The trend of consolidation of regional banks into money center banks has reduced the focus of these businesses on middle-market lending. Money center banks traditionally focus on lending and providing other services to large corporate clients to whom they can deploy larger amounts of capital more efficiently. The Goldman Sachs Asset Management Private Credit Team believes that this has resulted in fewer bank lenders to U.S. middle-market companies and reduced the availability of debt capital to the companies that we expect to target.
•The capital markets have been unable to fill the void in middle-market finance left by banks. While underwritten bond and syndicated loan markets have been robust in recent years, middle-market companies are rarely able to access these markets as participants are generally highly focused on the liquidity characteristics of the bond or loan being issued. For example, mutual funds and exchange traded funds (“ETFs”) are significant buyers of underwritten bonds and broadly syndicated loans. However, mutual funds and ETFs generally require the ability to liquidate their investments quickly in order to fund investor redemptions. Accordingly, the existence of an active secondary market for their investments is an important consideration in the initial investment decision. Because there is typically no active secondary market for the debt of U.S. middle-market companies, mutual funds and ETFs generally do not provide capital to U.S. middle-market companies. The Goldman Sachs Asset Management Private Credit Team believes that this is likely to be a persistent problem for the capital markets and creates an advantage for investors like us who have a more stable capital base and can therefore invest in illiquid assets.
•It is difficult for new lending platforms to enter the middle market and fill the capital void because it is very fragmented. While the middle market is a very large component of the U.S. economy, it is a highly fragmented space with thousands of companies operating in many different geographies and industries. Typically, companies that need capital find lenders and investors based on pre-existing relationships, referrals and word of mouth. Developing the many relationships and wide-spread recognition required to become source of capital to the middle market is a time consuming, highly resource-intensive endeavor. As a result, the Goldman Sachs Asset Management Private Credit Team believes that it is difficult for new lending platforms to successfully enter the middle market, thereby providing insulation from rapid shifts in the supply of capital to the middle market that might otherwise disrupt pricing of capital.
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1 As of year-end December 2024, according to the National Center for the Middle Market, which defined middle market as companies with annual revenue of $10 million-$1 billion. See http://www.middlemarketcenter.org. This website is not incorporated by reference into this annual report on Form 10-K and you should not consider information contained on this website to be part of this annual report on Form 10-K or any other report we file with the SEC.
Competitive Advantages
GS Group Inc. is a leading global financial institution that provides a broad range of financial services to a substantial and diversified client base, including companies and high-net-worth individuals, among others. The firm is headquartered in New York, and maintains offices across the United States and in all major financial centers around the world. Goldman Sachs, with approximately $3.1 trillion in firmwide assets under supervision as of December 31, 2024, provides investment management services to a diverse set of clients worldwide, including private institutions, public entities and individuals.
Within GSAM, the Goldman Sachs Asset Management Private Credit Team is the primary center for private credit investing. Since 1996, the Goldman Sachs Asset Management Private Credit Team and its predecessors have invested over $209 billion, leveraging the Goldman Sachs Asset Management Private Credit Team’s deep expertise and long-standing relationships with financial sponsors, companies, investors, entrepreneurs and financial intermediaries globally. The Goldman Sachs Asset Management Private Credit Team invests across senior credit, mezzanine, hybrid capital and asset finance strategies and has significant experience investing in debt instruments across industries, geographic regions, economic cycles and financing structures.
Our investment strategy is consistent with that of the broader Goldman Sachs Asset Management Private Credit platform, with a focus on capital preservation and capital appreciation and includes:
•Leveraging Goldman Sachs Asset Management Private Credit’s position within GSAM: The Goldman Sachs Asset Management Private Credit Team, which is responsible for sourcing, diligencing, negotiating, structuring, monitoring and harvesting investment opportunities for the Company, is able to draw on the broader Goldman Sachs platform, network and relationships across the investment lifecycle to identify potentially attractive opportunities. Goldman Sachs is a leading
global financial services firm and one of the world’s most experienced alternatives investors, and we expect to benefit not only from the Goldman Sachs network and relationships to identify potentially attractive opportunities, but also from a broad range of other resources offered by Goldman Sachs, including market insights, structuring capabilities and industry experts whose insights can enhance due diligence, structuring and investment monitoring processes.
•Direct origination with borrowers: The Goldman Sachs Asset Management Private Credit Team believes that evaluating investment opportunities through direct discussions with borrowers leads to a better understanding of the underlying drivers of performance and business risks. The Goldman Sachs Asset Management Private Credit Team’s direct origination platform has been developed over its more-than-28-year history of private credit investing and includes approximately 200 investment professionals across 11 cities and four continents as of December 31, 2024. The Goldman Sachs Asset Management Private Credit Team’s investment team’s local relationships with companies, private equity sponsors and advisors combined with deep industry expertise provides us with access to a wide range of opportunities and allows us to gain early and direct access to due diligence materials and management teams. We will seek to lead the structuring and negotiation of the loans or securities in which it invests with a collaborative, solutions-oriented approach.
•Prudent investment selection with intensive due diligence and credit analysis: We believe that Goldman Sachs Asset Management Private Credit’s substantial flow of potential investment opportunities, in combination with diligence practices developed over its more-than-28-year history of private credit investing, will enable us to invest in and selectively develop a diversified portfolio of high-quality companies. Goldman Sachs Asset Management Private Credit’s seasoned team and underwriting approach reflects deep sector expertise and seeks to identify attractive trends and pursue investments accordingly, through its approach to fundamental credit analysis driven by intensive investment research.
•Provision of large-sized commitments: We believe that Goldman Sachs Asset Management Private Credit’s capability to hold large-sized, directly originated investments drives our ability to source, negotiate and commit capital in attractive opportunities. We intend to invest substantially alongside institutional and retail-focused private credit Accounts, which may include proprietary accounts of Goldman Sachs, which we believe will provide us with access to a wide range of opportunities, and allow us to commit to larger investment across the GSAM platform.
•Structuring expertise with a focus on risk mitigation: Goldman Sachs Asset Management Private Credit has significant structuring capabilities with a seasoned team of investment professionals, including the Private Credit Investment Committee, who have over 23 years of experience on average. We seek to mitigate risk by investing primarily in senior secured debt, which is secured by a collateral package that often results in a higher rate of recovery in the event of default as compared to unsecured and subordinated investments. Senior secured debt has favorable characteristics that typically include a senior ranking in the capital structure of the borrower with priority of repayment, security of collateral and protective contractual rights that may include affirmative and negative covenants that restrict the borrower’s ability to incur additional indebtedness, make restricted payments or execute other transactions or implement changes that may be negative to lenders. In addition, the Goldman Sachs Asset Management Private Credit Team has experience investing across the capital structure, which will enable us to consider different investment structures and expand our opportunity funnel.
•Rigorous portfolio management: Goldman Sachs Asset Management Private Credit’s active approach to portfolio management centers on team continuity through the lifecycle of an investment, from sourcing and underwriting through investment monitoring and maturity. Investment professionals actively monitor portfolio companies’ operations and financial condition, and senior secured loan agreements typically provide for regular reporting which includes borrower performance, compliance and notification of adverse events. We believe the Goldman Sachs platform adds additional value to our portfolio companies through its extensive network, research capabilities and connectivity across the global capital markets.
•Focus on companies with attractive business fundamentals: Capital preservation is central to our investment strategy. Generally, we will seek to target companies with the following characteristics: (i) strong and defensible market positions, (ii) stable or growing revenues and free cash flow, (iii) attractive business models, (iv) experienced and well-regarded management teams, (v) reputable private equity or private family sponsors, as applicable, (vi) a meaningful amount of equity cushion or junior capital (i.e., any equity or debt in the capital structure that is subordinated to our investments), and (vii) viable exit strategies. We intend to make investments in companies located primarily in the United States.
Operating and Regulatory Structure
We have elected to be treated as a BDC under the Investment Company Act. As a BDC, we are generally prohibited from acquiring assets other than qualifying assets unless, after giving effect to any acquisition, at least 70% of our total assets are qualifying assets. Qualifying assets generally include securities of eligible portfolio companies, cash, cash equivalents, U.S. government securities and high-quality debt instruments maturing in one year or less from the time of investment. Under the rules of the Investment Company Act, “eligible portfolio companies” include (i) private U.S. operating companies, (ii) public U.S. operating companies whose securities are not listed on a national securities exchange (e.g., the New York Stock Exchange) or registered under the Exchange Act, and (iii) public U.S. operating companies having a market capitalization of less than $250 million. Public U.S. operating companies whose securities
are quoted on the over-the-counter bulletin board and through over-the-counter markets (the "OTC Markets") are not listed on a national securities exchange and therefore are eligible portfolio companies. In addition, we currently are an “emerging growth company,” as defined in the JOBS Act (as defined below). See “-Qualifying Assets.”
We have elected to be treated as a RIC, and we expect to qualify annually for tax treatment as a RIC, commencing with our taxable year ended December 31, 2022. As a RIC, we generally will not be required to pay corporate-level U.S. federal income taxes on any net ordinary income or capital gains that we timely distribute to our Unitholders as dividends if we meet certain source of income, distribution, and asset diversification requirements. We intend to timely distribute to our Unitholders substantially all of our annual taxable income for each year, except that we may retain certain net capital gains for reinvestment and we may choose to carry forward taxable income for distribution in the following year and pay any applicable tax. In addition, the distributions we pay to our Unitholders in a year may exceed our net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. See “Item 5. Market for Registrant’s Common Equity, Related Unitholder Matters and Issuer Purchases of Equity Securities-Distributions.”
Ongoing Relationships with Portfolio Companies
Monitoring
Our Investment Adviser monitors our portfolio companies on an ongoing basis. It monitors the financial trends of each portfolio company to determine if they are meeting their respective business plans and to assess the appropriate course of action for each company. Our Investment Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:
•assessment of success in adhering to the portfolio company’s business plan and compliance with covenants;
•periodic or regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor to discuss financial position, requirements and accomplishments;
•comparisons to our other portfolio companies in the industry, if any;
•attendance at and participation in board meetings or presentations by portfolio companies; and
•review of monthly and quarterly financial statements and financial projections of portfolio companies.
As part of the monitoring process, our Investment Adviser also employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Investment Adviser grades the credit risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account in certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. The grading system for our investments is as follows:
•Grade 1 investments involve the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit;
•Grade 2 investments involve a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 2;
•Grade 3 investments indicate that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 120 days past due; and
•Grade 4 investments indicate that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 4, in most cases, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 4, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit.
Our Investment Adviser grades the investments in our portfolio at least quarterly, and it is possible that the grade of a portfolio investment may be reduced or increased over time. For investments graded 3 or 4, our Investment Adviser enhances its level of scrutiny over the monitoring of such portfolio company.
Managerial Assistance
As a BDC, we must offer, and must provide upon request, significant managerial assistance to certain of our eligible portfolio companies within the meaning of Section 55 of the Investment Company Act. This assistance could involve, among other things, monitoring the operations of our portfolio companies, participating in board and management meetings, consulting with and advising officers of portfolio companies and providing other organizational and financial guidance. Our Investment Adviser or an affiliate thereof may provide such managerial assistance on our behalf to portfolio companies that request such assistance. We may receive fees for these services. See “-Managerial Assistance to Portfolio Companies.”
Competition
Our primary competitors provide financing to middle-market companies and include other BDCs, commercial and investment banks, commercial financing companies, collateralized loan obligations (“CLOs”), private funds, including hedge funds, and, to the extent they provide an alternative form of financing, private equity funds. Some of our existing and potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, some competitors may have a lower cost of funds and access to funding sources that are not available to us.
In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the Investment Company Act imposes on us as a BDC.
While we expect to use the industry information of GSAM’s investment professionals to which we have access to assess investment risks and determine appropriate pricing for our investments in portfolio companies, we do not seek to compete primarily based on the interest rates we offer and GSAM believes that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. Rather, we compete with our competitors based on our reputation in the market, our existing investment platform, the seasoned investment professionals of our Investment Adviser, our experience and focus on middle-market companies, our disciplined investment philosophy, our extensive industry focus and relationships and our flexible transaction structuring.
Staffing
We do not currently have any employees. Our day-to-day operations are managed by our Investment Adviser. Our Investment Adviser has hired and expects to continue to hire professionals with skills applicable to our business plan, including experience in middle-market investing, leveraged finance and capital markets.
Properties
We do not own any real estate or other properties materially important to our operations. Our principal executive offices are located at 200 West Street, New York, New York 10282. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.
Legal Proceedings
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
Our Administrator
Pursuant to our Administration Agreement (as defined below), State Street Bank and Trust Company (the “Administrator”) is responsible for providing various accounting and administrative services to us. Our Administrator is entitled to fees as described in “-Administration Agreement.” To the extent that our Administrator outsources any of its functions, the Administrator will pay any compensation associated with such functions. See “-Administration Agreement.”
Management Agreements
Investment Management and Advisory Agreement
We have entered into an investment management and advisory agreement (the “Investment Management Agreement”) with the Investment Adviser as of October 19, 2022, pursuant to which the Investment Adviser manages our investment program and related activities.
Under the terms of the Investment Management Agreement, the Company will pay the Investment Adviser a base management fee and may also pay an incentive fee. The cost of both the management fee and the incentive fee will ultimately be borne by the Company’s Unitholders.
Management Fee
Pursuant to the Investment Management Agreement, we will pay the Investment Adviser a management fee (the “Management Fee”), payable quarterly in arrears, equal to (i) prior to the calendar quarter-end that the aggregate amount of capital contributions to us made by Unitholders equals or exceeds $450.0 million, 0.325% (i.e., an annual rate of 1.30%), and (ii) on and after such date 0.2375% (i.e., an annual rate of 0.95%), in each case, of our average NAV at the end of the then-current calendar quarter and the prior calendar quarter. For the avoidance of doubt, the Management Fee for our first quarter (i.e., the period beginning on the Initial Drawdown Date and ending on the last day of the quarter in which the Initial Drawdown Date occurred) shall be equal to 0.325% (i.e., an annual rate of 1.30%) of our average NAV at the end of such quarter and zero (i.e., our NAV attributable to third-party investors immediately prior to the Initial Drawdown Date). The Management Fee for any partial quarter will be appropriately prorated.
Management Fees are generally expected to be paid using available funds, in which case these payments will not reduce Undrawn Commitments. However, we may draw down Undrawn Commitments for Management Fees, and any such amounts contributed would reduce Undrawn Commitments.
For the year ended December 31, 2024, Management Fees amounted to $3.49 million and the Investment Adviser waived $0. As of December 31, 2024, $1.25 million remained payable. For the year ended December 31, 2023, Management Fees amounted to $1.44 million and the Investment Adviser waived $0.29 million.
Incentive Fee
Pursuant to the Investment Management Agreement, we will pay to the Investment Adviser a quarterly incentive fee (the “Incentive Fee”) with respect to pre-incentive fee net investment income (as defined below) as follows:
a) First, no Incentive Fee will be payable to the Investment Adviser based on pre-incentive fee net investment income in any calendar quarter in which our pre-incentive fee net investment income does not exceed a hurdle rate of 1.25% of our NAV (5.0% annualized) (“Hurdle Rate”); and
b)Thereafter, the Investment Adviser will be entitled to receive 15% of the pre-incentive fee net investment income, if any, that exceeds 1.25% of our NAV in any calendar quarter (5.0% annualized), which reflects that once the Hurdle Rate is reached, 15% of all pre-incentive fee net investment income in excess of the Hurdle Rate is paid to the Investment Adviser.
The Hurdle Rate will be determined on a quarterly basis, and will be calculated by multiplying 1.25% by our NAV at the beginning of each applicable calendar quarter, adjusted for the Company’s subscriptions and distributions during the applicable calendar quarter. The Incentive Fee will be calculated and paid quarterly in arrears. The Incentive Fee is a fee owed by the Company to the Investment Adviser and is not paid out of distributions made to Unitholders.
“Pre-incentive fee net investment income” means interest income, distribution income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including the base management fee, expenses payable to the Administrator under the Administration Agreement, any interest expense and distributions paid on any issued and outstanding preferred equity securities (the “Preferred Units”), but excluding the Incentive Fee. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as debt instruments with PIK interest and zero-coupon securities), accrued income that we have not yet received in cash. The Investment Adviser is not obligated to return to Unitholders the incentive fee it receives on PIK interest that is later determined to be uncollectible in cash.
If either the Investment Management Agreement or the Company is terminated on a date other than the last day of a calendar quarter, the Incentive Fee shall be calculated as if such date were the last day of a calendar quarter.
For the years ended December 31, 2024 and December 31, 2023, we accrued Incentive Fees of $1.73 million and $0.21 million. As of December 31, 2024, $0.68 million was payable in accordance with the terms of the Investment Advisory Agreement.
Board Approval of the Investment Management Agreement
Our Board of Directors approved the Investment Management Agreement at a meeting held in person on August 3, 2022. In its consideration of the approval of the Investment Management Agreement, the Board of Directors focused on information it had received relating to, among other things:
•the nature, quality and extent of the advisory and other services to be provided to us by the Investment Adviser;
•the contractual terms of the Investment Management Agreement, including the structure of the Management Fee and the Incentive Fee;
•comparative data with respect to the advisory fees and other expenses paid by other externally managed BDCs with similar investment objectives and strategies;
•information about the services performed and the personnel performing such services under the Investment Management Agreement;
•comparative data with respect to our investment performance and the performance of other BDCs with comparable investment objectives and strategies;
•any existing and potential benefits to the Investment Adviser or its affiliates from its relationship with us;
•other potential benefits to us as a result of our relationship with the Investment Adviser; and
•such other matters as the Board of Directors determined were relevant to their consideration of the Investment Management Agreement.
In connection with their consideration of the approval of the Investment Management Agreement, our Board of Directors gave weight to each of the factors described above, but did not identify any one particular factor as controlling their decision. After deliberation and consideration of all of the information provided, including the factors described above, the Board of Directors concluded, in the exercise of their business judgment, that the contractual terms of the Investment Management Agreement, including the structure of the Management Fee and the Incentive Fee, were reasonable in light of the services to be provided to us by the Investment Adviser.
For the year ended December 31, 2024, we paid our Investment Adviser a total of $3.99 million in fees, which consisted of $2.74 million in Management Fees and $1.26 million in Incentive Fees. For the year ended December 31, 2023, we paid our Investment Adviser a total of $0.76 million in fees, which consisted of $0.76 million in Management Fees and $0 in Incentive Fees.
Duration and Termination
The Investment Management Agreement will remain in full force and effect for two years initially and will continue for periods of one year thereafter but only so long as such continuance is specifically approved at least annually by (a) the vote of a majority of our Independent Directors in accordance with the requirements of the Investment Company Act, and (b) a vote of a majority of our Board of Directors or of a majority of our outstanding voting securities, as defined in the Investment Company Act. The Investment Management Agreement may, on 60 days’ written notice to the other party, be terminated in its entirety at any time without the payment of any penalty, by our Board of Directors, by vote of a majority of our outstanding voting securities, on the one hand, or by our Investment Adviser, on the other hand. The Investment Management Agreement also will automatically terminate in the event of its assignment (as defined in the Investment Company Act). See “Item 1A. Risk Factors-Risks Relating to Competition-We depend upon management personnel of our Investment Adviser for our future success.”
Limited Liability of the Investment Adviser
The Investment Management Agreement provides that our Investment Adviser will not be liable for any error of judgment or mistake of law or for any loss suffered by us in connection with the matters to which the Investment Management Agreement relates, except a loss resulting from actual fraud, willful misfeasance, bad faith or gross negligence on our Investment Adviser’s part in the performance of its duties or from reckless disregard by our Investment Adviser of its obligations and duties under the Investment Management Agreement. Any person, even though also employed by our Investment Adviser, who may be or become an employee of and paid by us will be deemed, when acting within the scope of such employment by us, to be acting in such employment solely for us and not as our Investment Adviser’s employee or agent. These protections may lead the Investment Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. See “Item 1A. Risk Factors-Risks Relating to Our Business and Structure-Our Investment Adviser will be paid the Management Fee even if the value of an investment in the Company declines and our Investment Adviser’s Incentive Fee may create incentives for it to make certain kinds of investments.”
The Investment Adviser has not assumed any responsibility to us other than to render the services described in the Investment Management Agreement, and it will not be responsible for any action of the Board of Directors in declining to follow the Investment Adviser’s advice or recommendations.
Organization of our Investment Adviser
Our Investment Adviser is registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The principal executive offices of our Investment Adviser are located at 200 West Street, New York, New York 10282.
Organizational and Operating Expenses
Our primary operating expenses include the payment of the Management Fee and the Incentive Fee to our Investment Adviser, legal and professional fees, interest and other expenses of Financings and other operating and overhead related expenses, but for the avoidance of doubt excludes costs and expenses incurred by us in connection with the payment of salaries, benefits, health insurance, rent or for information technology hardware and software. The Management Fee and Incentive Fee compensate our Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other costs and expenses relating to our operations and transactions, including: (i) operational, offering and organizational expenses; (ii) fees and expenses, including travel expenses, reasonably incurred by our Investment Adviser or payable to third parties related to our investments, including, among others, professional fees (including, without limitation, the fees and expenses of consultants and experts) and fees and expenses relating to evaluating, monitoring, researching and performing due diligence on investments and prospective investments; (iii) interest, fees and other expenses payable on Financings, if any, incurred by us; (iv) fees and expenses incurred by us in connection with membership in investment company organizations; (v) brokers’ commissions; (vi) fees and expenses associated with calculating our NAV (including the costs and expenses of any Independent Valuation Advisor (as defined below)); (vii) legal, auditing or accounting expenses; (viii) taxes or governmental fees; (ix) the fees and expenses of the Administrator, transfer agent and/or agent; (x) the cost of preparing Unit certificates or any other expenses, including clerical expenses of issue, redemption or repurchase of the Units; (xi) the expenses of, and fees for, registering or qualifying Units for sale, maintaining our registration and qualifying and registering us as a broker or a dealer; (xii) the fees and expenses of our Independent Directors; (xiii) the fees or disbursements of custodians of our assets, including expenses incurred in the performance of any obligations enumerated by the LLC Agreement or our other organizational documents insofar as they govern agreements with any such custodian; (xiv) the cost of preparing and distributing reports, proxy statements and notices to holders of our equity interests, the SEC and other regulatory authorities; (xv) insurance premiums related to us or our directors and officers; (xvi) costs of holding Unitholder meetings; and (xvii) costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or dispute in connection with our business and the amount of any judgment or settlement paid in connection therewith, or the enforcement of our rights against any person and indemnification or contribution expenses payable by us to any person and other extraordinary expenses not incurred in the ordinary course of our business. In addition, we shall bear the fees and expenses related to the preparation and maintaining of any necessary registrations with regulators in order to market Units in certain jurisdictions and fees and expenses associated with preparation and maintenance of any key information document or similar document required by law or regulation. Our Investment Adviser is not required to pay expenses of activities which are primarily intended to result in sales of Units, including all costs and expenses associated with the preparation and distribution of the confidential private placement memorandum (the "Confidential Private Placement Memorandum"), dated October 2022 (as supplemented from time to time) and the Subscription Agreements or any key information document or similar document required by law or regulation.
We expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.
Administration Agreement
We have entered into an administration agreement (the “Administration Agreement”) with the Administrator, under which the Administrator is responsible for providing various accounting and administrative services to us.
The Administration Agreement provides that the Administrator will not be liable to us for any damages or other losses arising out of the performance of its services thereunder, except under certain circumstances, and contains provisions for the indemnification of the Administrator by us against liabilities to other parties arising in connection with the performance of its services to us.
We pay the Administrator fees for its services as we determine are commercially reasonable in our sole discretion. We also reimburse the Administrator for all reasonable expenses. To the extent that the Administrator outsources any of its functions, the Administrator will pay any compensation associated with such functions.
We are not obligated to retain the Administrator. The Administration Agreement is terminable by either party without penalty upon 30 days’ written notice to the other party.
The terms of any administration agreement that we may enter with any subsequent administrator may differ materially from the terms of the Administration Agreement with the Administrator in effect prior to such retention, including providing for a fee structure that results in us, directly or indirectly, bearing higher fees for similar services and other terms that are potentially less advantageous to us. Unless otherwise agreed to with a Unitholder, a Unitholder will not be entitled to receive prior notice of the engagement of an alternate administrator or of the terms of any agreement that is entered into with such administrator.
Transfer Agent
State Street Bank and Trust Company serves as our transfer agent and disbursing agent.
Regulation
We have elected to be regulated as a BDC under the Investment Company Act. As with other companies regulated by the Investment Company Act, a BDC must adhere to certain substantive regulatory requirements. The Investment Company Act contains prohibitions
and restrictions relating to transactions between BDCs and their affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the Investment Company Act. In addition, the Investment Company Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of the outstanding voting securities. A majority of the outstanding voting securities of a company is defined under the Investment Company Act as the vote: (i) of 67% or more of the voting securities present at such meeting, if the holders of more than 50% of the outstanding voting securities of such company are present or represented by proxy or (ii) of more than 50% of the outstanding voting securities of such company, whichever is less.
Any issuance of preferred securities must comply with the requirements of the Investment Company Act. Additionally, the Investment Company Act requires, among other things, that (1) immediately after issuance and before any dividend or other distribution is made with respect to the Units and before any purchase of Units is made, such preferred securities together with all other senior securities must not exceed an amount equal to 50% of our total assets after deducting the amount of such dividend, distribution or purchase price, as the case may be, and (2) the holders of preferred securities, if any are issued, must be entitled as a class to elect two directors at all times and to elect a majority of the directors if dividends on such preferred securities are in arrears by two full years or more. Certain other matters under the Investment Company Act require a separate class vote of the holders of any issued and outstanding preferred securities. For example, holders of preferred securities would be entitled to vote separately as a class from the holders of Units on a proposal involving a plan of reorganization adversely affecting such preferred securities.
We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed a “principal underwriter” as that term is defined under the Securities Act. We may purchase or otherwise receive warrants, which offer an opportunity (not a requirement) to purchase common stock of a portfolio company in connection with an acquisition financing or other investments. Similarly, we may acquire rights that obligate an issuer of acquired securities or their affiliates to repurchase the securities at certain times, under certain circumstances.
We do not intend to acquire securities issued by any investment company whereby our investment would exceed the limits imposed by the Investment Company Act. Under these limits, we generally cannot (1) acquire more than 3% of the total outstanding voting stock of any registered investment company or BDC, (2) invest more than 5% of the value of our total assets in the securities of one registered investment company or BDC, or (3) invest more than 10% of the value of our total assets in the securities of registered investment companies and BDCs in general. These limitations do not apply where we acquire interests in a money market fund as long as we do not pay a sales charge or service fee in connection with the purchase. With respect to the portion of our portfolio invested in securities issued by other investment companies, it should be noted that such investments might subject Unitholders to additional expenses. None of the policies described above are fundamental and each such policy may be changed without Unitholder approval, subject to any limitations imposed by the Investment Company Act.
Private funds that are excluded from the definition of “investment company” pursuant to either Section 3(c)(1) or 3(c)(7) of the Investment Company Act and certain other unregistered investment companies are also subject to certain of the limits under the Investment Company Act noted above. Specifically, unless an exemption is available, such private funds and other unregistered funds generally may not acquire directly or through a controlled entity more than 3% of our total outstanding Units (measured at the time of the acquisition). Investment companies registered under the Investment Company Act and BDCs are also subject to the restriction as well as other limitations under the Investment Company Act that would restrict the amount that they are able to invest in our securities. As a result, certain investors would be required to hold a smaller position in the Units than if they were not subject to such restrictions.
We will generally not be able to issue and sell the Units at a price below the then-current net asset value per Unit. We may, however, sell the Units at a price below the then-current net asset value per Unit if the Board of Directors determines that such sale is in our best interests and the best interests of the Unitholders, and the Unitholders approve such sale.
Qualifying Assets
Under the Investment Company Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the Investment Company Act, which are referred to as “qualifying assets,” unless, at the time the acquisition is made, qualifying assets (not including certain assets specified in the Investment Company Act) represent at least 70% of such BDC’s total assets. The principal categories of qualifying assets relevant to our proposed business are the following:
1.Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding thirteen months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules and regulations as may be prescribed by the SEC. An eligible portfolio company is defined in the Investment Company Act as any issuer that:
a)is organized under the laws of, and has its principal place of business in, the United States;
b)is not an investment company (other than a small business investment company wholly owned by the BDC) or a company that would be an investment company but for certain exclusions under the Investment Company Act; and
c)satisfies any of the following:
•does not have any class of securities listed on a national securities exchange or has a class of securities listed on a national securities exchange but has an aggregate market value of outstanding common equity of less than $250 million;
•is controlled by a BDC or a group of companies including a BDC, and the BDC has an affiliated person who is a director of the eligible portfolio company; or
•is a small and solvent company having total assets of not more than $4 million and capital and surplus of not less than $2 million.
2.Securities of any eligible portfolio company that we control.
3.Securities purchased in a private transaction from a U.S. issuer that is not an investment company or from an affiliated person of the issuer, or in transactions incident thereto, if the issuer is in bankruptcy and subject to reorganization or if the issuer, immediately prior to the purchase of its securities was unable to meet its obligations as they came due without material assistance other than conventional lending or financing arrangements.
4.Securities of an eligible portfolio company purchased from any person in a private transaction if there is no ready market for such securities and we already own at least 60% of the outstanding equity of the eligible portfolio company.
5.Securities received in exchange for or distributed on or with respect to securities described in (1) through (4) above, or pursuant to the exercise of options, warrants or rights relating to such securities.
6.Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
Managerial Assistance to Portfolio Companies
A BDC must be organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) under “-Qualifying Assets” above. However, in order to count portfolio securities as qualifying assets for the purpose of the 70% test, the BDC must also either control the issuer of the securities or offer to make available to the issuer of the securities (other than small and solvent companies described above) significant managerial assistance; except that, where the BDC purchases such securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such managerial assistance (as long as the BDC does not make available significant managerial assistance solely in this fashion). Making available significant managerial assistance means, among other things, any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does so provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company.
Temporary Investments
As a BDC, pending investment in other types of “qualifying assets,” as described above, our investments may consist of cash, cash items (such as money market funds), U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as “temporary investments,” so that 70% of our assets are qualifying assets. We may invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we would generally not meet the asset diversification requirements necessary to qualify as a RIC. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Investment Adviser will monitor the creditworthiness of the counterparties with which we enter into repurchase agreement transactions.
Cash and Short-Term Investments
Subject to the tax and regulatory restrictions described in this report, the Investment Adviser may cause us to hold cash or invest our cash balances in cash equivalents and short-term investments, pending allocation of such capital to one or more investments in portfolio companies, in order to meet operational needs or expenses, or otherwise in the discretion of the Investment Adviser. These investments may include money market instruments and other short-term debt obligations, and shares of money market mutual funds. To the extent permitted by applicable law and the LLC Agreement, we will, among other potential cash-equivalent or short-term investments, invest
our cash balances in money markets or similar funds sponsored or managed by Goldman Sachs. Fees accruing to Goldman Sachs in respect of such investment will offset the Management Fee.
Indebtedness and Senior Securities
As a BDC, we are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of equity securities senior to the Units if our asset coverage, as defined in the Investment Company Act, is at least equal to 150% immediately after each such issuance. Both the Initial Member and our Board of Directors approved the adoption of the 150% threshold pursuant to Section 61(a)(2) of the Investment Company Act. As a result, we are currently subject to an asset coverage ratio of 150%, which represents an approximately 2:1 debt-to-equity ratio. This means that, generally, we can borrow up to $2 for every $1 of investor equity. In addition, except in limited circumstances, while any indebtedness and senior securities remain outstanding, we must make provisions to prohibit any distribution to Unitholders or the repurchase of the Units unless we meet the applicable asset coverage ratios at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of its total assets for temporary purposes without regard to asset coverage. A loan is presumed to be made for temporary purposes if it is repaid within 60 days and is not extended or renewed; otherwise it is presumed to not be for temporary purposes. For a discussion of the risks associated with leverage, see “Item 1A. Risk Factors-Risks Relating to Our Business and Structure-We borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.”
Code of Ethics
We have adopted a Code of Ethics pursuant to Rule 17j-1 under the Investment Company Act and we have also approved our Investment Adviser’s Code of Ethics that it adopted in accordance with Rule 17j-1 and Rule 204A-1 under the Advisers Act. These Codes of Ethics establish, among other things, procedures for personal investments and restrict certain personal securities transactions, including transactions in securities that are held by us. Personnel subject to each code may invest in securities for their personal investment accounts, so long as such investments are made in accordance with the code’s requirements. The Codes of Ethics are available on the EDGAR database on the SEC’s Internet site at http://www.sec.gov. Copies may also be obtained by electronic request to publicinfo@sec.gov.
Proxy Voting Policies and Procedures
We have delegated the voting of portfolio securities to our Investment Adviser. For Accounts for which our Investment Adviser has voting discretion, our Investment Adviser has adopted policies and procedures (the “Proxy Voting Policy”) for the voting of proxies. Under the Proxy Voting Policy, our Investment Adviser’s guiding principles in performing proxy voting are to make decisions that favor proposals that tend to maximize a company’s equity-holder value and are not influenced by conflicts of interest. To implement these guiding principles for investments in publicly traded equities, our Investment Adviser has developed customized proxy voting guidelines (the “Guidelines”) that it generally applies when voting on behalf of Accounts. These Guidelines address a wide variety of individual topics, including, among other matters, equity-holder voting rights, anti-takeover defenses, board structures, the election of directors, executive and director compensation, reorganizations, mergers, issues of corporate social responsibility and various equity-holder proposals.
The Proxy Voting Policy, including the Guidelines, is reviewed periodically to assure that it continues to be consistent with our Investment Adviser’s guiding principles. The Guidelines embody the positions and factors our Investment Adviser generally considers important in casting proxy votes.
Our Investment Adviser has retained a third-party proxy voting service (the “Proxy Service”), currently Institutional Shareholder Services, to assist in the implementation and administration of certain proxy voting-related functions including, operational, recordkeeping, and reporting services. The Proxy Service also prepares a written analysis and recommendation (a “Recommendation”) of each proxy vote that reflects the Proxy Service’s application of the Guidelines to particular proxy issues. While it is our Investment Adviser’s policy generally to follow the Guidelines and Recommendations from the Proxy Service, our Investment Adviser’s portfolio management teams (the “Portfolio Management Teams”) may, on certain proxy votes, seek approval to diverge from the Guidelines or a Recommendation by following an “override” process.
Such decisions are subject to a review and approval process, including a determination that the decision is not influenced by any conflict of interest. A Portfolio Management Team that receives approval through the override process to cast a proxy vote that diverges from the Guidelines and/or a Recommendation may vote differently than other Portfolio Management Teams that did not seek to override the vote. In forming their views on particular matters, the Portfolio Management Teams are also permitted to consider applicable regional rules and practices, including codes of conduct and other guides, regarding proxy voting, in addition to the Guidelines and Recommendations. Our Investment Adviser may hire other service providers to replace or supplement the Proxy Service with respect to any of the services our Investment Adviser currently receives from the Proxy Service.
From time to time, our Investment Adviser may face regulatory, compliance, legal or logistical limits with respect to voting securities that it may purchase or hold for Accounts which can affect our Investment Adviser’s ability to vote such proxies, as well as the desirability of voting such proxies. Among other limits, federal, state and foreign regulatory restrictions or company specific ownership limits, as well as legal matters related to consolidated groups, may restrict the total percentage of an issuer’s voting securities that our
Investment Adviser can hold for clients and the nature of our Investment Adviser’s voting in such securities. Our Investment Adviser’s ability to vote proxies may also be affected by, among other things: (i) late receipt of meeting notices; (ii) requirements to vote proxies in person; (iii) restrictions on a foreigner’s ability to exercise votes; (iv) potential difficulties in translating the proxy; (v) requirements to provide local agents with unrestricted powers of attorney to facilitate voting instructions; and (vi) requirements that investors who exercise their voting rights surrender the right to dispose of their holdings for some specified period in proximity to the equity-holder meeting.
Our Investment Adviser conducts periodic due diligence meetings with the Proxy Service which include a review of the Proxy Service’s general organizational structure, new developments with respect to research and technology, work-flow improvements and internal due diligence with respect to conflicts of interest.
Our Investment Adviser has adopted policies and procedures designed to prevent conflicts of interest from influencing the proxy voting decisions that our Investment Adviser makes on behalf of a client Account and to help assure that such decisions are made in accordance with our Investment Adviser’s fiduciary obligations to its clients. These policies and procedures include our Investment Adviser’s use of the Guidelines and Recommendations from the Proxy Service, the override approval process previously discussed, and the establishment of information barriers between our Investment Adviser and other Goldman Sachs businesses. Notwithstanding such proxy voting policies and procedures, actual proxy voting decision of our Investment Adviser may have the effect of benefitting the interest of other clients or businesses of other divisions or units of Goldman Sachs and/or its affiliates, provided that our Investment Adviser believes such voting decisions to be in accordance with its fiduciary obligations. See “Item 13(a). Certain Relationships and Related Transactions, and Director Independence-Transactions with Related Persons; Review, Approval or Ratification of Transaction with Related Persons.”
Voting decisions with respect to fixed income securities and the securities of privately held issuers generally will be made by our Investment Adviser based on its assessment of the particular transactions or other matters at issue.
Information regarding how we vote proxies related to portfolio securities is available upon request by writing to Phillip Street Middle Market Lending Fund LLC, Attention: Austin Neri, Investor Relations, 200 West Street, New York, New York 10282.
Privacy Principles
The following information is provided to help investors understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.
We may collect nonpublic personal information regarding investors from sources such as Subscription Agreements, investor questionnaires and other forms; individual investors’ Account histories; and correspondence between us and individual investors. We may share information that we collect regarding an investor with our affiliates and the employees of such affiliates for everyday business purposes, for example, to service the investor’s Accounts and, unless an investor opts out, provide the investor with information about other products and services offered by us or our affiliates that may be of interest to the investor. In addition, we may disclose information that we collect regarding investors to third parties who are not affiliated with us (i) as authorized by the investors in investor subscription agreements or our organizational documents; (ii) as required by applicable law or in connection with a properly authorized legal or regulatory investigation, subpoena or summons, or to respond to judicial process or government regulatory authorities having property jurisdiction; (iii) as required to fulfill investor instructions; or (iv) as otherwise permitted by applicable law to perform support services for investor Accounts or process investor transactions with us or our affiliates.
Any party not affiliated with us that receives nonpublic personal information relating to investors from us is required to adhere to confidentiality agreements and to maintain appropriate safeguards to protect investor information. Additionally, for our officers, employees and agents and our affiliates, access to such information is restricted to those who need such access to provide services to us and investors. We maintain physical, electronic and procedural safeguards to seek to guard investor nonpublic personal information. For a discussion of the risks associated with cyber incidents, see “Item 1A. Risk Factors-Risks Relating to our Operations-Cybersecurity risks and cyber incidents may adversely affect our business or the business of our portfolio companies by causing a disruption to our operations or the operations of our portfolio companies, a compromise or corruption of our confidential information or the confidential information of our portfolio companies and/or damage to our business relationships or the business relationships of our portfolio companies, all of which could negatively impact the business, financial condition and operating results of us or our portfolio companies.”
Other
As a BDC, the SEC will periodically examine us for compliance with the Investment Company Act.
We are required to provide and maintain a bond issued by a reputable fidelity insurance company in order to protect against larceny and embezzlement, covering each of our officers and employees, who may singly, or jointly with others, have access to our securities or funds. Furthermore, as a BDC, we are prohibited from protecting any director, officer, investment adviser or underwriter against any liability to us or the Unitholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
We and our Investment Adviser are each required to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws, review these policies and procedures annually for their adequacy and the effectiveness of their implementation and designate a chief compliance officer to be responsible for administering the policies and procedures.
Compliance with the Sarbanes-Oxley Act
The Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), imposes a wide variety of regulatory requirements on publicly held companies and their insiders. Many of these requirements affect us. For example:
•our principal executive officer and principal financial officer must certify the accuracy of the financial statements contained in our periodic reports;
•our periodic reports must disclose the conclusions of our principal executive and principal financial officers about the effectiveness of our disclosure controls and procedures;
•our management must prepare an annual report regarding its assessment of our internal control over financial reporting; and
•our periodic reports must disclose whether there were any changes in our internal controls over financing reporting that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
The Sarbanes-Oxley Act requires us to review our policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated thereunder. We will continue to monitor our compliance with all future regulations that are adopted under the Sarbanes-Oxley Act and will take actions necessary to ensure that we are in compliance therewith.
Compliance with the JOBS Act
We are and expect to remain, an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, as it may be amended from time to time (the “JOBS Act”), until the earliest of:
•the last day of the fiscal year in which our total annual gross revenues are $1.235 billion or more;
•the date on which we have issued more than $1 billion in non-convertible debt in the previous three years;
•the last day of a fiscal year in which we have (1) an aggregate worldwide market value of Units held by non-affiliates of $700 million or more (measured at the end of each fiscal year) as of the last business day of our most recently completed second fiscal quarter and (2) been an Exchange Act reporting company for at least one year (and filed at least one annual report under the Exchange Act); or
•the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common equity securities under an effective Securities Act registration statement.
Under the JOBS Act, we are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act, which would require that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting. This may increase the risk that material weaknesses or other deficiencies in our internal control over financial reporting go undetected. See “Item 1A. Risk Factors-Risks Relating to Legal and Regulatory Matters-Efforts to comply with Section 404 of the Sarbanes-Oxley Act involve significant expenditures, and noncompliance with Section 404 of the Sarbanes-Oxley Act may adversely affect us.”
In addition, Section 13(a) of the Exchange Act, as amended by Section 102(b) of the JOBS Act, provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. However, pursuant to Section 107 of the JOBS Act, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.
Compliance with the Bank Holding Company Act
As a BHC and FHC, the activities of GS Group Inc. and its affiliates are subject to certain restrictions imposed by the Bank Holding Company Act of 1956, as amended (the “BHCA”), and related regulations. BHCs and FHCs are subject to supervision and regulation by the Federal Reserve. Because GS Group Inc. may be deemed to “control” us within the meaning of the BHCA, restrictions under the BHCA could apply to us as well. Accordingly, the BHCA and other applicable banking laws, rules, regulations and guidelines, and their interpretation and administration by the appropriate regulatory agencies, including the Federal Reserve, may restrict our investments, transactions and operations and may restrict the transactions and relationships between our Investment Adviser, GS Group Inc. and their affiliates, on the one hand, and us on the other hand. For example, the BHCA regulations applicable to GS Group Inc. and us may, among other things, restrict our ability to make certain investments or the size of certain investments, impose a maximum holding period on some or all of our investments and restrict our and our Investment Adviser’s ability to participate in the management and operations of the companies in which we invest. In addition, certain BHCA regulations may require aggregation of the positions owned, held or
controlled by related entities. Thus, in certain circumstances, positions held by GS Group Inc. and its affiliates (including our Investment Adviser) for client and proprietary accounts may need to be aggregated with positions held by us. In this case, where BHCA regulations impose a cap on the amount of a position that may be held, Goldman Sachs may utilize available capacity to make investments for its proprietary accounts or for the accounts of other clients, which may require us to limit and/or liquidate certain investments. Additionally, Goldman Sachs may in the future, in its sole discretion and without notice to investors, engage in activities impacting us and/or our Investment Adviser in order to comply with the BHCA or other legal requirements applicable to, or reduce or eliminate the impact or applicability of any bank regulatory or other restrictions on, Goldman Sachs, us or other funds and accounts managed by our Investment Adviser and its affiliates. In addition, Goldman Sachs may cease in the future to qualify as a FHC, which may subject us to additional restrictions. Moreover, there can be no assurance that the bank regulatory requirements applicable to Goldman Sachs and us, or the interpretation thereof, will not change, or that any such change will not have a material adverse effect on us. See “Item 1A. Risk Factors-Risks Relating to Legal and Regulatory Matters-Our activities may be limited as a result of potentially being deemed to be controlled by GS Group Inc., a bank holding company.”

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
Investing in our securities involves certain risks relating to our structure and investment objective. You should carefully consider these risk factors, together with all of the other information included in this report, before you decide whether to make an investment in our securities. The risks set forth below are not the only risks we face, and we may face other risks that we have not yet identified, which we do not currently deem material or which are not yet predictable. If any of the following risks occur, our business, financial condition and results of operations could be materially adversely affected. In such case, the NAV of our securities could decline, and you may lose all or part of your investment.
Summary Risk Factors
Investing in our securities involves a high degree of risk. The following is a summary of certain of the principal risks that should be carefully considered before investing in our securities:
•The capital markets may experience periods of disruption and instability. Such market conditions may have materially and adversely affected debt and equity capital markets, which may have a negative impact on our business and operations.
•Political, social and economic uncertainties may create and exacerbate risks.
•Our operation as a BDC imposes numerous constraints on us and significantly reduces our operating flexibility. In addition, if we fail to maintain our status as a BDC, we might be regulated as a registered closed-end investment company, which would subject us to additional regulatory restrictions.
•We will be subject to U.S. federal income tax at corporate rates (and any applicable U.S. state and local taxes) on all of our income if we are unable to maintain our qualification for tax treatment as a RIC, which would have a material adverse effect on our financial performance.
•Regulations governing our operations as a BDC affect our ability to, and the way in which we, raise additional capital. These constraints may hinder our Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.
•Our ability to enter into transactions with our affiliates is restricted.
•Our activities may be limited as a result of potentially being deemed to be controlled by GS Group Inc., a bank holding company.
•Commodity Futures Trading Commission (“CFTC”) rules may have a negative impact on us and our Investment Adviser. Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.
•Certain investors are limited in their ability to make significant investments in us.
•We depend upon management personnel of our Investment Adviser for our future success.
•We operate in a highly competitive market for investment opportunities.
•We are dependent on information systems, and systems failures or cybersecurity incidents, as well as operating failures, could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations.
•Our Investment Adviser, its principals, investment professionals and employees and the members of its Private Credit Investment Committee may have certain conflicts of interest.
•Goldman Sachs’ financial and other interests may incentivize our Investment Adviser to favor other Accounts.
•Our financial condition and results of operations depend on our Investment Adviser’s ability to manage our future growth effectively.
•Our ability to grow depends on our access to adequate capital.
•We borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.
•The Incentive Fee is based on pre-incentive-fee net investment income, and we may be obligated to pay the Investment Adviser incentive compensation even if we incur a net loss due to a decline in the value of our portfolio. The conflicts of interest faced by the Investment Adviser caused by compensation arrangements with us could result in actions that are not in the best interests of our Unitholders.
•Potential conflicts of interest with other businesses of Goldman Sachs could impact our investment returns.
•Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or Unitholder approval.
•We may experience fluctuations in our quarterly results.
•Our investments are very risky and highly speculative.
•Investing in middle-market companies involves a number of significant risks.
•We have exposure to credit risk and other risks related to credit investments.
•Changes in inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
•We are exposed to risks associated with changes in interest rates.
•Many of our portfolio securities do not have a readily available market price, and we value these securities at fair value as determined in good faith in accordance with the Investment Company Act, which valuation is inherently subjective and may not reflect what we may actually realize for the sale of the investment.
•The lack of liquidity in our investments may adversely affect our business.
•Our portfolio may be focused in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies default on their obligations under any of their debt instruments or if there is a downturn in a particular industry.
•We may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
•Our failure or inability to make follow-on investments in our portfolio companies could impair the value of our portfolio.
•Our portfolio companies may prepay loans, which may reduce stated yields in the future if the capital returned cannot be invested in transactions with equal or greater expected yields.
•By originating loans to companies that are experiencing significant financial or business difficulties, we may be exposed to distressed lending risks.
•Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would affect our results of operations.
•Economic recessions or downturns could impair our portfolio companies and harm our operating results.
•Our portfolio companies may be highly leveraged.
•We will have broad discretion over the use of proceeds of the funds we raise from investors and will use proceeds in part to satisfy operating expenses.
•The Units are limited in their transferability; we may repurchase or force a sale of a Unitholder’s Units.
•Investing in Units involves an above-average degree of risk.
•A Unitholder’s interest in us will be diluted if we issue additional Units, which could reduce the overall value of an investment in us.
•We may have difficulty paying our required distributions if we recognize taxable income before or without receiving cash representing such income.
•Investors may face various tax risks and consequences as a result of their investment in us.
•To the extent original issue discount ("OID") and payment-in-kind ("PIK") interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income.
Risks Relating to Market Developments and General Business Environment
The capital markets may experience periods of disruption and instability. Such market conditions may have materially and adversely affected debt and equity capital markets, which may have a negative impact on our business and operations.
From time to time, capital markets may experience periods of disruption and instability. For example, over the past few years, the U.S. capital markets experienced disruption as evidenced by volatility in global stock markets as a result of, among other things: social and political tensions in the United States and around the world; wars and other forms of conflict (including, for example, the ongoing war between Russia and Ukraine and conflict in the Middle East); natural disasters such as fires, floods, earthquakes, tornadoes and hurricanes; global health epidemics, pandemics and emergencies; terrorism; social unrest; fluctuations in interest rates; strikes, work stoppages, labor shortages and labor disputes; supply chain disruptions and accidents; and the fluctuating price of commodities, such as oil. Despite remedial actions of the U.S. federal government and foreign governments, these events contributed to worsening general economic conditions that materially and adversely impacted broader financial and credit markets and reduced the availability of debt and equity capital for the market as a whole, and may continue into the future. These and any other unfavorable economic conditions could increase our funding costs and/or limit our access to the capital markets.
Significant changes or volatility in the capital markets may negatively affect the valuations of our investments and cause our net asset value to decline. While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan to hold an investment to maturity). Significant changes in the capital markets may also affect the pace of our investment activity and the potential for liquidity events involving our investments. Our valuations, and particularly valuations of private investments and private companies, are inherently uncertain, fluctuate over short periods of time and are often based on estimates, comparisons and qualitative evaluations of private information that may not reflect the full impact of market disruptions and measures taken in response thereto. Any public health emergency, including an outbreak of existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
Disruptions in economic activity have limited and could continue to limit our investment originations, limit our ability to grow, increase our funding costs and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our debt and equity investments. Additionally, disruptions in economic activity have had, and may continue to have, a negative effect on the potential for liquidity events involving our investments. The illiquidity of our investments may make it difficult for us to sell such investments to access capital, if required. As a result, we could realize significantly less than the value at which we have recorded our investments if we were required to sell them to increase our liquidity. An inability on our part to raise incremental capital, and any required sale of all or a portion of our investments as a result, could have a material adverse effect on our business, financial condition or results of operations.
Current market conditions may make it difficult to raise equity capital, extend the maturity of or refinance our existing indebtedness or obtain new indebtedness with similar terms and any failure to do so could have a material adverse effect on our business. In addition, market conditions, including inflation, have adversely impacted, and could in the future have further negative impacts on the operations of certain of our portfolio companies. If the financial results of middle-market companies, like those in which we invest, experience deterioration, it could ultimately lead to difficulty in meeting debt service requirements and an increase in defaults. Further deterioration in market conditions may further depress the outlook for those companies. The debt capital available to us in the future, if available at all, may bear a higher interest rate and may be available only on terms and conditions less favorable than those of our existing debt. If we are unable to raise new debt or refinance our existing debt, then our equity investors will not benefit from the potential for increased returns on equity resulting from leverage, and we may be unable to make new commitments or to fund existing commitments to our portfolio companies. Any inability to extend the maturity of or refinance our existing debt, or to obtain new debt, could have a material adverse effect on our business, financial condition or results of operations.
Political, social and economic uncertainties may create and exacerbate risks.
Political, social, economic and other conditions and events in the United States, the United Kingdom, the European Union, Russia, the Middle East and China (such as natural disasters, epidemics and pandemics, terrorism, military conflicts and social unrest) may occur that create uncertainty and have significant impacts on issuers, industries, governments and other systems, including the financial markets, to which companies and their investments are exposed.
The uncertainties caused by these conditions and events could result in or coincide with, among other things: increased volatility in the financial markets for securities, derivatives, loans, credit and currency; a decrease in the reliability of market prices and difficulty in valuing assets (including portfolio company assets); greater fluctuations in spreads on debt investments and currency exchange rates; increased risk of default (by both government and private obligors and issuers); changes to governmental regulation and supervision of the loan, securities, derivatives and currency markets and market participants; limitations on the activities of investors in the financial markets; and substantial, and in some periods extremely high, rates of inflation, which can last many years and have substantial negative effects on credit and securities markets.
Other adverse developments may occur or reoccur, including: (i) the decline in value and performance of us and our portfolio companies; (ii) the ability of our borrowers to continue to meet loan covenants or repay loans provided by us on a timely basis or at all, which may require us to restructure our investments or write down the value of our investments; (iii) our ability to comply with the covenants and other terms of our debt obligations and to repay such obligations, on a timely basis or at all; (iv) our ability to comply with certain regulatory requirements, such as asset coverage requirements under the Investment Company Act; (v) our ability to maintain our distributions at their current level or to pay them at all; or (vi) our ability to source, manage and divest investments and achieve our investment objectives, all of which could result in significant losses to us. We will also be negatively affected if the operations and effectiveness of any of our portfolio companies (or any of the key personnel or service providers of the foregoing) is compromised or if necessary or beneficial systems and processes are disrupted. The U.S. economy, as well as most other major economies, may experience economic recession, and we anticipate our businesses could be materially and adversely affected by a prolonged recession in the United States and other major global markets. See “-The capital markets may experience periods of disruption and instability. Such market conditions may have materially and adversely affected debt and equity capital markets, which may have a negative impact on our business and operations.”
Disruptions in the capital markets, including disruptions resulting from inflation, the uncertain interest rate environment, Russia’s military invasion of Ukraine and conflict in the Middle East, have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets, significant write-offs in the financial sector and re-pricing of credit risk in the broadly syndicated market. These and future market disruptions and/or illiquidity can be expected to have an adverse effect on our business, financial condition, results of operations and cash flows. Unfavorable economic conditions also would be expected to increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could limit our investment originations, limit our ability to grow and have a material negative impact on our and our portfolio companies’ operating results and the fair values of our debt and equity investments.
In addition, fiscal and monetary actions taken by the United States and non-U.S. government and regulatory authorities, including those related to trade policies, treaties or tariffs, could have a material adverse impact on our business. To the extent uncertainty regarding the U.S. or global economy negatively impacts consumer confidence and consumer credit factors, our business, financial condition and results of operations could be adversely affected. Moreover, Federal Reserve policy, including with respect to certain interest rates, along with the general policies of the new presidential administration, may also adversely affect the value, volatility and liquidity of dividend- and interest-paying securities. These conditions, government actions and future developments may cause interest rates and borrowing costs to rise, which may adversely affect our ability to access debt financing on favorable terms and may increase the interest costs of our borrowers, hampering their ability to repay us. Continued or future adverse economic conditions could have a material adverse effect on our business, financial condition and results of operations.
If key economic indicators, such as the unemployment rate or inflation, do not progress at a rate consistent with the Federal Reserve’s objectives, the target range for the federal funds rate may increase, or may not decrease at the pace expected by the market and cause interest rates and borrowing costs to rise, which may negatively impact our ability to access the debt markets on favorable terms and may also increase the costs of our borrowers, hampering their ability to repay us.
Legislation may be adopted that could significantly affect the regulation of U.S. financial markets. Areas subject to potential change, amendment or repeal include the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and the authority of the Federal Reserve and the Financial Stability Oversight Council. These or other regulatory changes could result in greater competition from banks and other lenders with which we compete for lending and other investment opportunities. The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the United States. Such actions could have a material adverse effect on our business, financial condition and results of operations.
These events present material uncertainty and risk with respect to markets globally, which pose potential adverse risks to us and the performance of our investments and operations. Any such market disruptions could affect our portfolio companies’ operations and, as a result, could have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Legal and Regulatory Matters
Our operation as a BDC imposes numerous constraints on us and significantly reduces our operating flexibility. In addition, if we fail to maintain our status as a BDC, we might be regulated as a registered closed-end investment company, which would subject us to additional regulatory restrictions.
The Investment Company Act imposes numerous constraints on the operations of BDCs. For example, BDCs generally are required to invest at least 70% of their total assets primarily in securities of qualifying U.S. private companies or thinly traded public companies, cash, cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less from the time of investment. These constraints may hinder our Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective. Furthermore, any failure to comply with the requirements imposed on BDCs by the Investment Company Act could cause the SEC to bring an enforcement action against us and/or expose us to claims of private litigants.
We may be precluded from investing in what our Investment Adviser believes are attractive investments if such investments are not qualifying assets for purposes of the Investment Company Act. If we do not invest a sufficient portion of our assets in qualifying assets, we will be prohibited from making any additional investment that is not a qualifying asset and could be forced to forgo attractive investment opportunities. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position).
If we fail to maintain our status as a BDC, we might be regulated as a closed-end investment company that is required to register under the Investment Company Act. This would subject us to additional regulatory restrictions and significantly decrease our operating flexibility. In addition, any such failure could cause us to lose our RIC status or cause an event of default under any outstanding indebtedness we might have, which could have a material adverse effect on our business, financial condition or results of operations.
We will be subject to U.S. federal income tax at corporate rates (and any applicable U.S. state and local taxes) on all of our income if we are unable to maintain our qualification for tax treatment as a RIC, which would have a material adverse effect on our financial performance.
Although we have elected to be treated as a RIC, and we expect to qualify annually for tax treatment as a RIC, we cannot assure Unitholders that we will be able to do so. To maintain RIC status and be relieved of U.S. federal income taxes on income and gains distributed to Unitholders, we must meet the annual distribution, source-of-income and quarterly-asset diversification requirements described below.
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The annual distribution requirement for a RIC will generally be satisfied if we distribute to Unitholders on an annual basis at least 90% of our investment company taxable income (generally, our net ordinary income plus the excess of our realized net short-term capital gains over realized net long-term capital losses, determined without regard to the dividends paid deduction) for each taxable year (the “Annual Distribution Requirement”). Because we expect to use debt financing, we expect to be
subject to an asset coverage ratio requirement under the Investment Company Act, and we expect to be subject to certain covenants contained in our credit agreements and other debt financing agreements. This asset coverage ratio requirement and these covenants could, under certain circumstances, restrict us from making distributions to Unitholders that are necessary for us to satisfy the Annual Distribution Requirement. If we are unable to obtain cash in the amount required for us to make, or if we are restricted from making, sufficient distributions to Unitholders, we could fail to maintain for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax (and any applicable U.S. state and local taxes).
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The source-of-income requirement will be satisfied if at least 90% of our gross income for each year is derived from dividends, interest, gains from the sale of stock or securities or foreign currencies, payments with respect to loans of certain securities, net income derived from an interest in a “qualified publicly traded partnership” or other income derived with respect to our business of investing in such stock or securities or foreign currencies.
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The asset diversification requirement will be satisfied if, at the end of each quarter of our taxable year, at least 50% of the value of our assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs and other acceptable securities, and no more than 25% of the value of our assets is invested in (i) the securities (other than U.S. government securities or securities of other RICs) of one issuer, (ii) the securities (other than the securities of other RICs) of two or more issuers that are controlled, as determined under applicable Code rules, by us and that are engaged in the same or similar or related trades or businesses or (iii) the securities of certain “qualified publicly traded partnerships.” Failure to meet these requirements may result in our having to dispose of certain investments quickly in order to prevent the loss of RIC status. Because most of our investments will be in private companies, and therefore will be relatively illiquid, any such dispositions could be made at disadvantageous prices and could result in substantial losses.
If we fail to maintain our qualification for tax treatment as a RIC for any reason, and we do not qualify for certain relief provisions under the Code, we would be subject to U.S. federal income tax at corporate rates (and any applicable U.S. state and local taxes). In this event, the resulting taxes and any resulting penalties could substantially reduce our net assets, the amount of our income available for distribution and the amount of our distributions to Unitholders, which would have a material adverse effect on our financial performance.
Regulations governing our operations as a BDC affect our ability to, and the way in which we, raise additional capital. These constraints may hinder our Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.
Regulations governing our operation as a BDC affect our ability to raise additional capital, and the ways in which we can do so. Raising additional capital may expose us to risks, including the typical risks associated with leverage, and may result in dilution to our current Unitholders. The Investment Company Act limits our ability to borrow amounts or issue debt securities or Preferred Units, which we refer to collectively as “senior securities,” to amounts such that our asset coverage ratio, as defined under the Investment Company Act, equals at least 150% immediately after such borrowing or issuance if certain requirements are met, rather than 200%, as previously required and as described below. Consequently, if the value of our assets declines, we may be required to sell a portion of our investments and, depending on the nature of our leverage, repay a portion of our indebtedness at a time when this may be disadvantageous to us and, as a result, our Unitholders. The Small Business Credit Availability Act modified the applicable provisions of the Investment Company Act to reduce the required asset coverage ratio applicable to BDCs to 150%, subject to certain approval and disclosure requirements. The Initial Member and our Board of Directors each approved a proposal that permits us to have an asset coverage ratio of 150%. As a result, we are currently subject to an asset coverage ratio of 150% which represents an approximately 2:1 debt-to-equity ratio. This means that, generally, we can borrow up to $2 for every $1 of investor equity.
We are generally not able to issue and sell Units at a price per share below the NAV per Unit. We may, however, sell Units, or warrants, options or rights to acquire Units, at a price below the then-current NAV per Unit (i) with the consent of a majority of Unitholders (and a majority of Unitholders who are not affiliates of ours) and (ii) if, among other things, a majority of our Independent Directors and a majority of our directors who have no financial interest in the transaction determine that a sale is in the best interests of us and the Unitholders.
We incur significant costs as a result of being subject to the reporting requirements under the Exchange Act.
We incur legal, accounting and other expenses, including costs associated with the periodic reporting requirements applicable to a company whose securities are registered under the Exchange Act, as well as additional corporate governance requirements, including requirements under the Sarbanes-Oxley Act, and other rules implemented by the SEC. These requirements may place a strain on our systems and resources. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain effective disclosure controls and procedures and internal control over financial reporting, which requires significant resources and management oversight. See “Item 1. Business-Compliance with the Sarbanes-Oxley Act.” We have implemented procedures, processes, policies and practices for the purpose of addressing the standards and requirements applicable to public companies. These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. We have incurred, and expect to continue to incur, significant annual expenses related to these steps and directors’ and officers’ liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, additional administrative expenses payable to our Administrator to compensate it for hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses associated with being subject to these reporting requirements.
The systems and resources necessary to comply with public company reporting requirements will increase further once we cease to be an “emerging growth company” under the JOBS Act. As long as we remain an emerging growth company, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public reporting companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act (“Section 404”).
Efforts to comply with Section 404 of the Sarbanes-Oxley Act involve significant expenditures, and noncompliance with Section 404 of the Sarbanes-Oxley Act may adversely affect us.
We are subject to the Sarbanes-Oxley Act, and the related rules and regulations promulgated by the SEC. Under current SEC rules, we are required to report on internal control over financial reporting pursuant to Section 404. We are required to review on an annual basis our internal control over financial reporting, and on a quarterly and annual basis to evaluate and disclose changes in our internal control over financial reporting. As a result, we incur additional expenses that may negatively impact our financial performance and our ability to make distributions. This process also may result in a diversion of management’s time and attention. We cannot be certain as to the timing of completion of any evaluation, testing and remediation actions or the impact of the same on our operations, and we may not be able to ensure that the process is effective or that our internal control over financial reporting is or will be effective in a timely manner. In the event that we are unable to maintain or achieve compliance with Section 404 and related rules, we may be adversely affected.
Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the date on which we are a “large accelerated filer” or an “accelerated filer” or the date we are no longer classified as an emerging growth company under the JOBS Act.
Changes in laws or regulations governing our operations or the operations of our portfolio companies, changes in the interpretation thereof or newly enacted laws or regulations, or any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.
We and our portfolio companies are subject to regulation at the local, state, federal and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, are likely to change from time to time, and new laws and regulations may be enacted. Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations, or any failure by us or our portfolio companies to comply with these laws or regulations, could require changes to certain of our or our portfolio companies’ business practices, negatively impact our or our portfolio companies’ operations, cash flows or financial condition, impose additional costs on us or our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies. In addition to the legal, tax and regulatory changes that are expected to occur, there may be unanticipated changes and uncertainty regarding any such changes. The legal, tax and regulatory environment for BDCs, investment advisers and the instruments that they utilize (including derivative instruments) is continuously evolving. In addition, there is significant uncertainty regarding certain legislation and the regulations that have been adopted (and future regulations that will need to be adopted pursuant to such legislation) and, consequently, the full impact that such legislation will ultimately have on us and the markets in which we trade and invest is not fully known. Such uncertainty and any resulting confusion may itself be detrimental to the efficient functioning of the markets and the success of certain investment strategies.
Legislative and regulatory proposals directed at the financial services industry that are proposed, pending or might be proposed in the future in the U.S. Congress may negatively impact the operations, cash flows or financial condition of us and our portfolio companies, impose additional costs on us and our portfolio companies, intensify the regulatory supervision of us and our portfolio companies or otherwise adversely affect our business or the business of our portfolio companies.
Over the last several years, there also has been regulatory attention on the extension of credit outside of the traditional banking sector, including the possibility that some portion of the non-bank financial sector will be subject to new regulation. While it cannot be known at this time whether any such regulation will be implemented or what form it would take, increased regulation of non-bank credit extension would negatively impact our operations, cash flows or financial condition, impose additional costs on us, intensify the regulatory supervision of us or otherwise adversely affect our business.
We may be materially affected by market, economic and political conditions globally and in the jurisdictions and sectors in which we invest or operate, including economic outlook, factors affecting interest rates, the availability of credit, currency exchange rates and trade barriers. Recent populist and anti-globalization movements, particularly in the United States, may result in material changes in economic trade and immigration policies, all of which could lead to significant disruption of global markets and could have adverse consequences for our investments.
The LLC Agreement includes exclusive forum and jury-trial-waiver provisions that could limit a Unitholder’s ability to bring a claim, make it more expensive or inconvenient for a Unitholder to bring a claim, or, if such provisions are deemed inapplicable or unenforceable by a court, cause us to incur additional costs associated with such action.
Our LLC Agreement provides that, to the fullest extent permitted by applicable law, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for any legal action or proceeding with respect to the LLC Agreement by a Unitholder seeking any relief whatsoever against us shall be brought only in the Chancery Court of the State of Delaware (or other appropriate state court in the State of Delaware). By execution and delivery of the LLC Agreement, a Unitholder (i) irrevocably accepts the non-exclusive jurisdiction of the Delaware courts and irrevocably waives any claim that such courts lack personal jurisdiction over such Unitholder; (ii) irrevocably waives any objection that the Unitholder have to the laying of venue of any action or proceeding arising out of or in connection with the LLC Agreement brought in the aforesaid courts; and (iii) irrevocably waives his or her rights to plead or claim, and agrees not to plead or claim in any such court, that any such action or proceeding brought in any such court has been brought in an inconvenient forum. As a result, there is a risk that Unitholders may find it inconvenient or expensive to bring a claim against us or our officers or other agents. However, these exclusive forum provisions do not apply to claims arising under the federal securities laws.
The LLC Agreement also includes an irrevocable and unconditional waiver of the right to trial by jury in any claim or cause of action directly based upon or arising out of the LLC Agreement. Each Unitholder shall be deemed to have notice of and to have consented to these provisions of our LLC Agreement. These provisions may limit a Unitholder’s ability to bring a claim in a judicial forum or in a manner that it finds favorable for disputes with us or our officers, which may discourage such lawsuits. Alternatively, if a court were to find the exclusive forum provision or the jury trial waiver provision to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions or in other manners, which could have a material adverse effect on our business, financial condition and results of operations.
We cannot predict how new tax legislation will affect us, our investments, or our Unitholders, and any such legislation could adversely affect our business.
Legislative or other actions relating to taxes could have a negative effect on us. The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the Internal Revenue Service and the U.S. Treasury Department. The likelihood of any new legislation being enacted is uncertain, but new legislation and any U.S. Treasury regulations, administrative interpretations or court decisions interpreting such legislation could significantly and negatively affect our ability to qualify for tax treatment as a RIC or the U.S. federal income tax consequences to us and our Unitholders of such qualification and could have other adverse consequences. Unitholders are urged to consult with their tax advisor regarding tax legislative, regulatory, or administrative developments and proposals and their potential effect on an investment in the Units.
Our ability to enter into transactions with our affiliates is restricted.
As a BDC, we are prohibited under the Investment Company Act from knowingly participating in certain transactions with our affiliates without the prior approval of a majority of our Independent Directors who have no financial interest in the transaction, or in some cases, the prior approval of the SEC. For example, any person that owns, directly or indirectly, 5% or more of our outstanding voting securities is deemed our affiliate for purposes of the Investment Company Act. If this is the only reason such person is our affiliate, we are generally prohibited from buying any asset from, or selling any asset (other than Units) to, such affiliate, absent the prior approval of such directors. The Investment Company Act also prohibits “joint” transactions with an affiliate, which could include joint investments in the same portfolio company, without approval of our Independent Directors or in some cases the prior approval of the SEC. Moreover, except in certain limited circumstances, we are prohibited from buying any asset from or selling any asset to a holder of more than 25% of our voting securities, absent prior approval of the SEC. The analysis of whether a particular transaction constitutes a joint transaction requires a review of the relevant facts and circumstances then existing.
In certain circumstances, we and other Accounts (which may include proprietary accounts of Goldman Sachs) can make negotiated co-investments pursuant to an exemptive order from the SEC permitting us to do so. On November 16, 2022, the SEC granted the Relief to the Investment Adviser, the BDCs advised by the Investment Adviser and certain other affiliated applicants. On June 25, 2024, the SEC granted an amendment to the Relief, which permits us to participate in follow-on investments in our existing portfolio companies with certain affiliates covered by the Relief if such affiliates, that are not BDCs or registered investment companies, did not have an
investment in such existing portfolio company. If our Investment Adviser forms other funds in the future, we may co-invest alongside such other affiliates, subject to compliance with the Relief, applicable regulations and regulatory guidance, as well as applicable allocation procedures. As a result of the Relief, there could be significant overlap in our investment portfolio and the investment portfolios of other Accounts, including, in some cases, proprietary accounts of Goldman Sachs.
Our activities may be limited as a result of potentially being deemed to be controlled by GS Group Inc., a bank holding company.
GS Group Inc. is a BHC under the BHCA and therefore subject to supervision and regulation by the Federal Reserve. In addition, GS Group Inc. is a FHC under the BHCA, which is a status available to BHCs that meet certain criteria. FHCs may engage in a broader range of activities than BHCs that are not FHCs. However, the activities of FHCs and their affiliates remain subject to certain restrictions imposed by the BHCA and related regulations. Because GS Group Inc. may be deemed to “control” us within the meaning of the BHCA, these restrictions could apply to us as well. Accordingly, the BHCA and other applicable banking laws, rules, regulations and guidelines, and their interpretation and administration by the appropriate regulatory agencies, including the Federal Reserve, may restrict our investments, transactions and operations and may restrict the transactions and relationships between our Investment Adviser, GS Group Inc. and their respective affiliates, on the one hand, and us, on the other hand. For example, the BHCA regulations applicable to GS Group Inc. and to us may restrict our ability to make certain investments or the size of certain investments, impose a maximum holding period on some or all of our investments and restrict our and our Investment Adviser’s ability to participate in the management and operations of the companies in which we invest.
In addition, certain BHCA regulations may require aggregation of the positions owned, held or controlled by related entities. Thus, in certain circumstances, positions held by GS Group Inc. and its affiliates (including our Investment Adviser) for client and proprietary accounts may need to be aggregated with positions held by us. In this case, where BHCA regulations impose a cap on the amount of a position that may be held, GS Group Inc. may utilize available capacity to make investments for its proprietary accounts or for the accounts of other clients, which may require us to limit and/or liquidate certain investments.
These restrictions may materially adversely affect us by affecting our Investment Adviser’s ability to pursue certain strategies within our investment program or trade in certain securities. In addition, GS Group Inc. may cease in the future to qualify as an FHC, which may subject us to additional restrictions. Moreover, we can offer no assurance that the bank regulatory requirements applicable to GS Group Inc. and us, or the interpretation thereof, will not change, or that any such change will not have a material adverse effect on us.
GS Group Inc. may in the future, in its sole discretion and without notice to investors, engage in activities impacting us and/or our Investment Adviser in order to comply with the BHCA or other legal requirements applicable to, or reduce or eliminate the impact or applicability of any bank regulations or other restrictions on, GS Group Inc., us or other accounts managed by our Investment Adviser and its affiliates. GS Group Inc. may seek to accomplish this result by causing Goldman Sachs Asset Management to resign as our Investment Adviser, voting for changes to our Board of Directors, causing Goldman Sachs personnel to resign from our Board of Directors, reducing the amount of GS Group Inc.'s investment in us (if any), revoking our right to use the Goldman Sachs name or any combination of the foregoing, or by such other means as it determines in its sole discretion. Any replacement investment adviser appointed by us may be unaffiliated with Goldman Sachs.
CFTC rules may have a negative impact on us and our Investment Adviser.
The CFTC and the SEC have issued final rules establishing that most swap transactions are subject to CFTC regulation. Engaging in such swap or other commodity interest transactions such as futures contracts or options on futures contracts may cause us to fall within the definition of “commodity pool” under the Commodity Exchange Act, as amended, and related CFTC regulations. Our Investment Adviser has claimed relief from CFTC registration and regulation as a commodity pool operator pursuant to CFTC Rule 4.5 with respect to our operations, with the result that we will be limited in our ability to use futures contracts or options on futures contracts or engage in swap transactions. Specifically, CFTC Rule 4.5 imposes strict limitations on using such derivatives other than for hedging purposes, whereby the use of derivatives not used solely for hedging purposes is generally limited to situations where (i) the aggregate initial margin and premiums required to establish such positions does not exceed five percent of the liquidation value of our portfolio, after taking into account unrealized profits and unrealized losses on any such contracts it has entered into; or (ii) the aggregate net notional value of such derivatives does not exceed 100% of the liquidation value of our portfolio. Moreover, we anticipate entering into transactions involving such derivatives to a very limited extent solely for hedging purposes or otherwise within the limitations of CFTC Rule 4.5.
Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.
Rule 18f-4 under the Investment Company Act includes limitations on the ability of a BDC (or a registered investment company) to use derivatives and other transactions that create future payment or delivery obligations (including reverse repurchase agreements and similar financing transactions). Under the rule, BDCs that make significant use of derivatives are subject to a value-at-risk leverage limit, a derivatives risk management program, testing requirements, and requirements related to board reporting. These requirements apply unless the BDC qualifies as a “limited derivatives user,” as defined in Rule 18f-4. Under the rule, a BDC may enter into an unfunded commitment agreement that is not a derivatives transaction, such as an agreement to provide financing to a portfolio company, if the BDC has, among other things, a reasonable belief, at the time it enters into such an agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all of its unfunded commitment agreements, in each case as it becomes due.
Under Rule 18f-4, when we trade reverse repurchase agreements or similar financing transactions, including certain tender option bonds, we need to aggregate the amount of indebtedness associated with the reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness (e.g., bank borrowings, if applicable) when calculating our asset coverage ratio. We currently operate as a “limited derivatives user” and these requirements may limit our ability to use derivatives and/or enter into certain other financial contracts.
Certain investors are limited in their ability to make significant investments in us.
Private funds that are excluded from the definition of “investment company” either pursuant to Section 3(c)(1) or 3(c)(7) of the Investment Company Act and certain other unregistered investment companies are restricted from acquiring directly or through a controlled entity more than 3% of our total outstanding voting equity other than in accordance with the Investment Company Act (measured at the time of the acquisition, including through conversion of convertible securities). Investment companies registered under the Investment Company Act and BDCs are also subject to this restriction as well as other regulatory limitations that restrict the amount that they are able to invest in our securities. As a result, certain investors may be precluded from acquiring additional Units at a time that they might desire to do so.
Risks Relating to Competition
We depend upon management personnel of our Investment Adviser for our future success.
We do not have any employees. We depend on the experience, diligence, skill and network of business contacts of the Goldman Sachs Asset Management Private Credit Team, together with other investment professionals that our Investment Adviser currently retains or may subsequently retain, to identify, evaluate, negotiate, structure, close, monitor and manage our investments. Our future success will depend to a significant extent on the continued service and coordination of our Investment Adviser’s senior investment professionals. The departure of any of our Investment Adviser’s key personnel, including members of the Private Credit Investment Committee, or of a significant number of the investment professionals of our Investment Adviser, could have a material adverse effect on our business, financial condition or results of operations. In addition, we cannot assure investors that our Investment Adviser will remain our investment adviser or that we will continue to have access to our Investment Adviser or its investment professionals. See “-Risks Relating to Our Business and Structure-Our Investment Adviser can resign on 60 days’ notice. We may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.” We do not currently intend to provide key person life insurance for any of our key personnel.
We operate in a highly competitive market for investment opportunities.
A number of entities, including the Accounts and other entities, compete with us to make the types of investments that we make in middle-market companies. We compete with other BDCs, commercial and investment banks, commercial financing companies, CLOs, private funds, including hedge funds, and, to the extent they provide an alternative form of financing, private equity funds. Many of our competitors are more experienced, substantially larger and have considerably greater financial, technical and marketing resources than we do. Some competitors may have a lower cost of funds and/or access to funding sources that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Certain of our competitors are not subject to the regulatory restrictions that the Investment Company Act imposes on us as a BDC and that the Code imposes on us as a RIC. Additionally, an investment opportunity may be appropriate for one or more of us and other Accounts or any other entities managed by our Investment Adviser, and co-investment may not be possible. In such circumstances, the Investment Adviser will adhere to its investment allocation policy in order to determine the Accounts to which to allocate investment opportunities. Also, as a result of this competition, we may not be able to secure attractive investment opportunities from time to time.
We do not seek to compete primarily based on the interest rates we offer, and the Investment Adviser believes that some of our competitors may make loans with interest rates that are comparable to or lower than the rates we offer. Rather, we believe our competitive strengths include: (i) the positioning of Goldman Sachs Asset Management Private Credit within Goldman Sachs, given its associated relationship, sourcing and expertise advantages; (ii) Goldman Sachs Asset Management Private Credit’s experience and breadth as an investor; (iii) Goldman Sachs Asset Management Private Credit’s experienced team and history of investment performance; (iv) Goldman Sachs Asset Management Private Credit’s depth, breadth and duration of relationships with financial sponsors, companies, borrowers and other industry participants; and (v) the alignment of interest between the Company and the Goldman Sachs private credit platform through side-by-side investments alongside institutional and retail-focused private credit Accounts, which may include proprietary accounts of Goldman Sachs. For a further discussion of our competitive strengths, see “Item 1. Business-Competitive Advantages.”
We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. If we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss. As a result of operating in such a competitive environment, we may make investments that are on less favorable terms than what we may have originally anticipated, which may impact our return on these investments. We cannot assure Unitholders that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations.
Risks Relating to Our Operations
We may fail to limit participation in the Company by investors that are subject to the Employee Retirement Income Security Act of 1974 (“ERISA”).
We do not intend to permit Benefit Plan Investors to hold twenty-five percent (25%) (or such other percentage as may be specified in regulations promulgated by the United States Department of Labor) or more of the value of any class of our equity interests, unless a registration or public offering of Units would be sufficient to cause the Units to constitute a “publicly-offered security” for purposes of ERISA. Accordingly, we expect that our assets will not be treated as “plan assets” subject to Title I of ERISA or Section 4975 of the Code, as amended, though there is no assurance that this will be the case. Were our assets to be treated as “plan assets” (that is, if 25% or more of the value of any class of equity interests is held by Benefit Plan Investors and the Units do not constitute a “publicly-offered security” for purposes of ERISA), we could, among other things, be subject to certain restrictions on our ability to carry out our activities as described herein, including, without limitation, that we may be prohibited from trading with and through Goldman Sachs and its affiliates in respect of investments made for us and may be restricted from acquiring or disposing of our investments at optimal times or, in some cases, at all. Moreover, in such a case, we may require Benefit Plan Investors or other employee benefit plans not subject to Title I of ERISA or Section 4975 of the Code to reduce or terminate their interests in us in whole or in part notwithstanding that other investors may not be permitted to redeem or transfer their interests in us at such time.
We are dependent on information systems, and systems failures or cybersecurity incidents, as well as operating failures, could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations.
Our business is dependent on our Investment Adviser’s and third parties’ communications and information systems. Any failure or interruption of those systems, including as a result of the termination of the Investment Management Agreement or an agreement with any third-party service providers, could cause delays or other problems in our activities. Our financial, accounting, data processing, backup or other operating systems and facilities may fail to operate properly or become disabled or damaged as a result of a number of factors including events that are wholly or partially beyond our control and adversely affect our business. There could be:
•sudden electrical or telecommunications outages;
•natural disasters such as earthquakes, tornadoes and hurricanes;
•disease pandemics;
•events arising from local or larger scale political or social matters, including terrorist acts and acts of war;
•outages due to issues experienced by specific service providers; and/or
•cyber incidents.
In addition to our dependence on information systems, poor operating performance by our service providers could adversely impact us.
These events, in turn, could have a material adverse effect on our operating results and negatively affect the value of the Units and our ability to pay distributions to Unitholders.
Cybersecurity risks and cyber incidents may adversely affect our business or the business of our portfolio companies by causing a disruption to our operations or the operations of our portfolio companies, a compromise or corruption of our confidential information or the confidential information of our portfolio companies and/or damage to our business relationships or the business relationships of our portfolio companies, all of which could negatively impact the business, financial condition and operating results of us or our portfolio companies.
Cybersecurity risks and cyber incidents have been occurring globally at a more frequent and severe level, and will likely continue to increase in frequency and sophistication in the future. A cyber incident can be an intentional attack or an unintentional event and could involve gaining unauthorized access to our or our portfolio companies’ information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption, including through the introduction of computer viruses, malware or through “phishing” attempts or other forms of social engineering. Attacks can also involve ransomware, data exfiltration and publication or other forms of extortion. Cyber incidents originate from a wide variety of external sources, including cyber criminals, nation state hackers, hacktivists and other parties. The occurrence of a cyber incident against us, any of our portfolio companies, or against a third-party (including a service provider) that has access to our data or networks, a natural catastrophe, a disaster, an industrial accident, failure of our disaster recovery systems, consequential employee or service provider error, or outage or disruption of our or our third-party networks or software that we rely on, could have an adverse effect on our ability to communicate or conduct business, negatively impacting our operations and financial condition. This adverse effect can become particularly acute if those events affect our electronic data processing, transmission, storage, and retrieval systems, or impact the availability, integrity, or confidentiality of our data.
We and our portfolio companies depend heavily upon computer systems to perform necessary business functions. Despite the implementation of a variety of security measures, computer systems, networks, and data, like those of other companies, could be subject to cyber incidents and unauthorized access, use, alteration, or destruction, such as from physical and electronic break-ins or unauthorized
tampering. If one or more of these events occurs, it could potentially jeopardize the confidential, proprietary, personal and other information processed, stored in, and transmitted through our computer systems and networks, or otherwise cause interruptions or malfunctions in our operations, which could result in financial losses, litigation, regulatory penalties, client dissatisfaction or loss, reputational damage, and increased costs associated with mitigation of damages and remediation.
Third-party service providers with which we do business may also be sources of cybersecurity or other technological risk. We outsource certain functions and these relationships allow for the storage and processing of our information, as well as client, counterparty, employee, and borrower information. While we engage in actions to reduce our exposure resulting from outsourcing, ongoing threats may result in unauthorized access, loss, exposure, destruction, or other cybersecurity incidents that adversely affects the confidentiality, integrity, availability and security of our data, resulting in increased costs and other consequences as described above.
Moreover, the increased use of mobile and cloud technologies due to the proliferation of remote work could heighten these and other operational risks as certain aspects of the availability and security of such technologies may be complex and unpredictable. Reliance on mobile or cloud technology or any failure by mobile technology and cloud service providers to adequately safeguard or update their systems and prevent cyber incidents or other outages could disrupt our operations, the operations of a portfolio company or the operations of our or their service providers and result in misappropriation, corruption or loss of personal, confidential or proprietary information or the inability to conduct ordinary business operations. In addition, there is a risk that encryption and other protective measures may be circumvented, particularly to the extent that new computing technologies increase the speed and computing power available. Extended periods of remote working, whether by us, our portfolio companies, or our service providers, could strain technology resources, introduce operational risks and otherwise heighten the risks described above. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts.
Goldman Sachs and its third-party service providers have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of a risk of a cyber incident, do not guarantee that a cyber incident will not occur and/or that our business strategy, financial results, operations or confidential information will not be negatively impacted by such an incident.
In addition, cybersecurity has become a top priority for lawmakers and regulators around the world, and some jurisdictions have proposed or enacted laws requiring companies to notify regulators, individuals and the general investing public of data security breaches involving certain types of personal data, including the SEC, which, on July 26, 2023, adopted amendments requiring the public disclosure of certain cybersecurity breaches. On May 16, 2024, the SEC also adopted amendments to Regulation S-P, which, among other things, requires investment companies (including business development companies) to develop, implement and maintain written incident response plans and timely notify individuals about certain cybersecurity incidents. The amendments come into effect in December 2025. Compliance with such laws and regulations may result in cost increases due to system changes and the development of new administrative processes. If we or our Investment Adviser or certain of its affiliates, fail to comply with the relevant and increasing laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention or reputational damage.
Risks Relating to Our Business and Structure
Our Investment Adviser, its principals, investment professionals and employees and the members of its Private Credit Investment Committee may have certain conflicts of interest.
Our Investment Adviser, its principals, affiliates, investment professionals and employees, the members of its Private Credit Investment Committee and our officers and directors serve and may serve in the future as investment advisers, officers, directors, principals of, or in other capacities with respect to, public or private entities (including other BDCs and other investment funds) that operate in the same or a related line of business as us. Certain of these individuals could have obligations to investors in other Accounts, the fulfillment of which is not in our best interests or the best interests of Unitholders, and we expect that investment opportunities will satisfy the investment criteria for both us and such other Accounts. In addition, Goldman Sachs Asset Management and its affiliates also manage other accounts, and expect to manage other vehicles or accounts in the future, that have investment mandates that are similar, in whole or in part, to ours and, accordingly, may invest in asset classes similar to those targeted by us. As a result, the Investment Adviser and/or its affiliates may face conflicts in allocating investment opportunities between us and such other entities. The fact that our investment advisory fees may be lower than those of certain other funds advised by Goldman Sachs Asset Management could result in this conflict of interest affecting us adversely relative to such other funds.
Subject to applicable law, we may invest alongside Goldman Sachs and other Accounts.
As a result of the Relief, there could be significant overlap in our investment portfolio and the investment portfolios of other Accounts, including, in some cases, proprietary accounts of Goldman Sachs. In such circumstances, the Investment Adviser will adhere to its investment allocation policy in order to determine the Accounts to which to allocate investment opportunities. If we are unable to rely on the Relief for a particular opportunity, when our Investment Adviser identifies certain investments, it will be required to determine which Accounts should make the investment at the potential exclusion of other Accounts. Accordingly, it is possible that we may not be given the opportunity to participate in investments made by other Accounts. See “-Risks Relating to Legal and Regulatory Matters-Our ability to enter into transactions with our affiliates is restricted.”
Goldman Sachs’ financial and other interests may incentivize our Investment Adviser to favor other Accounts.
Our Investment Adviser receives performance-based compensation in respect of its investment management activities on our behalf, based on pre-incentive fee net investment income. As a result, our Investment Adviser may make investments for us that present a greater potential for return but also a greater risk of loss or that are more speculative than would be the case in the absence of performance-based compensation. In addition, the Investment Adviser may simultaneously manage other Accounts for which the Investment Adviser may be entitled to receive greater fees or other compensation (as a percentage of performance or otherwise) than it receives in respect of us. In addition, subject to applicable law, Goldman Sachs may invest in other Accounts, and such investments may constitute all or substantial percentages of such other Accounts’ outstanding equity interests. Therefore, the Investment Adviser may have an incentive to favor such other Accounts over us. To address these types of conflicts, the Investment Adviser has adopted policies and procedures under which investment opportunities will be allocated in a manner that it believes is consistent with its obligations as an investment adviser. However, the amount, timing, structuring or terms of an investment by us may differ from, and performance may be different from, the investments and performance of other Accounts.
Our financial condition and results of operations depend on our Investment Adviser’s ability to manage our future growth effectively.
Our ability to achieve our investment objective depends on our Investment Adviser’s ability to identify, invest in and monitor companies that meet our investment criteria.
Accomplishing this result on a cost-effective basis is largely a function of the structuring of our investment process and the ability of our Investment Adviser to provide competent, attentive and efficient services to us. Our executive officers and the members of the Private Credit Investment Committee have substantial responsibilities in connection with their roles at our Investment Adviser, with the Accounts, as well as responsibilities under the Investment Management Agreement. We may also be called upon to provide significant managerial assistance to certain of our portfolio companies. These demands on their time, which will increase as the number of investments grow, may distract them or slow the rate of investment. In order to grow, our Investment Adviser may need to hire, train, supervise, manage and retain new employees. However, we cannot assure Unitholders that they will be able to do so effectively. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
Our ability to grow depends on our access to adequate capital.
If we do not have adequate capital available for investment, our performance could be adversely affected. In addition, we elected to be treated as a RIC, and we expect to qualify annually for tax treatment as a RIC, commencing with our taxable year ended December 31, 2022. To maintain our qualification for tax treatment as a RIC, among other requirements, we are required to timely distribute to Unitholders at least 90% of our investment company taxable income (determined without regard to the dividends paid deduction), which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses, if any, for each taxable year. Consequently, such distributions will not be available to fund new investments. We expect to use debt financing to fund our growth, if any. Unfavorable economic or capital market conditions may increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. An inability to successfully access the capital markets could limit our ability to grow our business and fully execute our business strategy and could decrease our earnings, if any.
We borrow money, which may magnify the potential for gain or loss and may increase the risk of investing in us.
As part of our business strategy, we may borrow from and issue senior debt securities to banks, insurance companies and other lenders or investors. Holders of these senior securities or other credit facilities will have claims on our assets that are superior to the claims of Unitholders. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have if we did not employ leverage. Similarly, any decrease in our income would cause net income to decline more sharply than it would have had we not borrowed. Such a decline could negatively affect our ability to make distributions to Unitholders. In addition, we would have to service any additional debt that we incur, including interest expense on debt and dividends on Preferred Units that we may issue, as well as the fees and costs related to the entry into or amendments to debt facilities. These expenses (which may be higher than the expenses on our current borrowings due to the rising interest rate environment) would decrease net investment income, and our ability to pay such expenses will depend largely on our financial performance and will be subject to prevailing economic conditions and competitive pressures.
In addition to having claims on our assets that are superior to the claims of Unitholders, any obligations to the lenders may be secured by a first-priority security interest in our portfolio of investments and cash. In the case of a liquidation event, those lenders would receive proceeds to the extent of their security interest before any distributions are made to our Unitholders. Furthermore, our credit facility with Ally Bank (the “Credit Facility”) imposes, and any credit agreement or other debt financing agreement into which we may enter may impose, financial and operating covenants that restrict our investment activities (including restrictions on industry concentrations), remedies on default and similar matters. In connection with any future borrowings, our lenders may also require us to pledge assets. In addition, we may be unable to obtain our desired leverage, which would, in turn, affect an investor’s return on investment.
We currently do not intend to enter into any collateral and asset reuse arrangements, but may decide to enter into such an arrangement in the future.
The following table illustrates the effect of leverage on returns from an investment in our common stock assuming various annual returns on our portfolio, net of expenses. The calculations in the table below are hypothetical, and actual returns may be higher or lower than those appearing in the table below.
Assumed Return on Our Portfolio (Net of Expenses)
(10.00
)%
(5.00
)%
0.00
%
5.00
%
10.00
%
Corresponding Return to Unitholders (1)
(20.20
)%
(12.27
)%
(4.34
)%
3.59
%
11.51
%
(1)Based on (i) $637.73 million in total assets as of December 31, 2024, (ii) $220.10 million in outstanding indebtedness as of December 31, 2024, (iii) $402.23 million in net assets as of December 31, 2024, and (iv) annualized average interest rate on our indebtedness, as of December 31, 2024, excluding fees (such as fees on undrawn amounts and amortization of financing costs), of 7.94%.
Our Investment Adviser will be paid the Management Fee even if the value of an investment in the Company declines and our Investment Adviser’s Incentive Fee may create incentives for it to make certain kinds of investments.
The Management Fee is payable even in the event the value of a Unitholder’s investment declines.
The Investment Adviser receives substantial fees from us in return for its services, and these fees could influence the advice provided to us. The Management Fee is calculated as a percentage of the average of the Company’s net asset value at the end of the then-current calendar quarter and the prior calendar quarter. Accordingly, the Management Fee is payable regardless of whether the value of our net assets and/or an investment in the Company has decreased during the then-current quarter and creates an incentive for the Investment Adviser to incur leverage.
The Incentive Fee payable by us to our Investment Adviser also may create an incentive for our Investment Adviser to invest on our behalf in instruments that have a deferred interest feature. Under these investments, we accrue the interest over the life of the investment but do not receive the cash income from the investment until the end of the term. Our net investment income used to calculate the income portion of our Incentive Fee, however, includes accrued interest. Thus, a portion of this Incentive Fee is based on income that we have not yet received in cash. This risk could be increased because our Investment Adviser is not obligated to reimburse us for any Incentive Fees received even if we subsequently incur losses or never receive in cash the accrued income (including accrued income with respect to OID, PIK interest and zero coupon securities). Furthermore, in the event of an exchange listing, if any, the Investment Adviser will be able to earn a higher Incentive Fee.
The Incentive Fee is based on pre-incentive fee net investment income.
The Incentive Fee based on income will be determined and paid quarterly in arrears at the end of each calendar quarter by reference to our pre-incentive fee net investment income from the calendar quarter then ending. If market interest rates rise, we may be able to invest our funds in debt instruments that provide for a higher return, which would increase our pre-incentive fee net investment income and make it easier for the Investment Adviser to surpass the Hurdle Rate and receive an incentive fee on such net investment income. PIK interest and OID will also increase our pre-incentive fee net investment income and make it easier to surpass the Hurdle Rate. The pre-incentive fee net investment income is also included in the amount of our total assets (including assets purchased with borrowed amounts) used to calculate the base management fee.
Potential conflicts of interest with other businesses of Goldman Sachs could impact our investment returns.
There are significant potential conflicts of interest that could negatively impact our investment returns. A number of these potential conflicts of interest with affiliates of our Investment Adviser and GS Group Inc. are discussed in more detail elsewhere in this report.
GS Group Inc. is a publicly held FHC and a leading global financial institution that provides investment banking, securities and investment management services to a diversified client base, including companies and high-net-worth individuals, among others. As such, it acts as an investor, investment banker, research provider, investment manager, financier, adviser, market maker, trader, prime broker, derivatives dealer, lender, counterparty, agent and principal. In those and other capacities, Goldman Sachs and its affiliates advise clients in all markets and transactions and purchase, sell, hold and recommend a broad array of investments, including securities, derivatives, loans, commodities, currencies, credit default swaps, indices, baskets and other financial instruments and products for its own accounts or for the accounts of their customers, and have other direct and indirect interests, in the global fixed income, currency, commodity, equity, bank loans and other markets in which we invest or may invest. Such additional businesses and interests will likely give rise to potential conflicts of interest and may restrict the way we operate our business. For example, (1) we may not be able to conduct transactions relating to investments in portfolio companies because our Investment Adviser is not permitted to obtain or use material nonpublic information in effecting purchases and sales in public securities transactions for us, or (2) Goldman Sachs, the clients it advises, and its personnel may engage (or consider engaging) in commercial arrangements or transactions with us (subject to any limitations under the law), and/or may compete for commercial arrangements or transactions in the same types of companies, assets, securities or other assets or instruments as us. Transactions by, advice to and activities of such accounts (including potentially Goldman Sachs acting on a proprietary basis), may involve the same or related companies, securities or other assets or instruments as those in which we invest and may negatively affect us (including our ability to engage in a transaction or other activities) or the prices or terms at which our transactions or other activities may be effected. For example, Goldman Sachs may be engaged to provide advice to an account that is considering entering into a transaction with us, and Goldman Sachs may advise the account not to pursue the transaction with us, or otherwise in connection with a potential transaction provide advice to the account that would be adverse to us. See “-Our Investment Adviser, its principals, investment professionals and employees and the members of its Private Credit Investment Committee may have certain conflicts of interest” and “-Risks Relating to Legal and Regulatory Matters-Our ability to enter into transactions with our affiliates is restricted.”
In addition, subject to applicable law, GS & Co. may, to the extent permitted by applicable law, including the limitations set forth in Section 57(k) of the Investment Company Act, receive compensation from us or from the borrowers if we make any investments based on opportunities that such employees or personnel of GS & Co. have referred to us. Such compensation might incentivize GS & Co. or its employees or personnel to refer opportunities or to recommend investments that might otherwise be unsuitable for us. Further, any such compensation paid by us, or paid by the borrower (to which we would otherwise have been entitled) in connection with such investments, may negatively impact our returns.
Furthermore, Goldman Sachs is currently, and in the future expects to be, raising capital for new public and private investment vehicles that have, or when formed will have, the primary purpose of middle-market direct lending. These investment vehicles, as well as existing investment vehicles (including other Accounts), will compete with us for investments. Although our Investment Adviser and its affiliates will endeavor to allocate investment opportunities among its clients, including us, in a fair and equitable manner and consistent with applicable allocation procedures, it is expected that, in the future, we may not be given the opportunity to participate in investments made by other Accounts or that we may participate in such investments to a lesser extent due to participation by such other Accounts.
In addition, Goldman Sachs or another investment account or vehicle managed or controlled by Goldman Sachs or another client of the Investment Adviser may hold securities, loans or other instruments of a portfolio company in a different class or a different part of the capital structure than securities, loans or other instruments of such portfolio company held by us. As a result, Goldman Sachs or such other investment account or vehicle or such other client of the Investment Adviser may pursue or enforce rights or activities, or refrain from pursuing or enforcing rights or activities, on behalf of its own account, that could have an adverse effect on us. In addition, to the extent Goldman Sachs has invested in a portfolio company for its own account, Goldman Sachs may limit the transactions engaged in by us with respect to such portfolio company or issuer for reputational, legal, regulatory or other reasons.
Unitholders should note the matters discussed in “-Risks Relating to Legal and Regulatory Matters-Our ability to enter into transactions with our affiliates is restricted.”
Our Board of Directors may change our investment objective, operating policies and strategies without prior notice or Unitholder approval.
Our Board of Directors has the authority to modify or waive certain of our operating policies and strategies without prior notice (except as required by the Investment Company Act or other applicable laws) and without Unitholder approval, except as otherwise provided in the LLC Agreement. However, absent Unitholder approval, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of the Units. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions or make payments with respect to our indebtedness.
Our Investment Adviser can resign on 60 days’ notice. We may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
Our Investment Adviser has the right, under the Investment Management Agreement, to resign at any time upon 60 days’ written notice, regardless of whether we have found a replacement. If our Investment Adviser resigns, we may not be able to find a new external investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms within 60 days, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption, our financial condition, business and results of operations as well as our ability to pay distributions are likely to be adversely affected, and the value of our Units may decline.
Our Investment Adviser’s responsibilities and its liability to us are limited under the Investment Management Agreement, which may lead our Investment Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
Our Investment Adviser will not be liable for any error of judgment or mistake of law or for any loss we suffer in connection with the matters to which the Investment Management Agreement relates, except a loss resulting from actual fraud, willful misfeasance, bad faith or gross negligence on our Investment Adviser’s part in the performance of its duties, or from reckless disregard by our Investment Adviser of its obligations and duties under the Investment Management Agreement. Any person, even though also employed by our Investment Adviser, who may be or become an employee of and paid by us shall be deemed, when acting within the scope of his or her employment by us, to be acting in such employment solely for us and not as our Investment Adviser’s employee or agent. These protections may lead our Investment Adviser to act in a riskier manner when acting on our behalf than it would when acting for its own account. See “-Our Investment Adviser will be paid the Management Fee even if the value of an investment in the Company declines and our Investment Adviser’s Incentive Fee may create incentives for it to make certain kinds of investments.”
We may experience fluctuations in our quarterly results.
We could experience fluctuations in our quarterly operating results due to a number of factors, including interest rates payable on debt investments we make, default rates on such investments, the level of our expenses, variations in and the timing of the recognition of realized and unrealized gains or losses, the degree to which we encounter competition in certain markets and general economic conditions. As a result of these factors, results for any period should not be relied upon as being indicative of performance in future periods or the full fiscal year.
Beneficial owners of our equity securities may be subject to certain regulatory requirements based on their ownership percentages.
A beneficial owner, either directly or indirectly, of more than 25% of our voting securities is presumed to control us under the Investment Company Act. Control of us will also arise under the Investment Company Act if a person has the power to exercise a controlling influence over our management or policies, unless that power is solely the result of an official position with us. In the event an investor is or becomes a person that controls us, such investor and certain of its affiliated persons will be subject to, among other things, prohibitions or restrictions on engaging in certain transactions with us and certain of our affiliated persons. A beneficial owner of a large number of our equity securities may also become subject to public reporting obligations when we become a public reporting company under the Exchange Act.
Investors may fail to pay their undrawn Commitments.
The obligation of Unitholders to fund undrawn Commitments is without defense, counterclaim or offset of any kind. However, to the extent that a Unitholder fails to pay any amount of its Commitment when called or at all, there could be a material adverse effect on our business, financial condition and results of operations.
As a result, we may make fewer investments and be less diversified than if such Unitholder had paid its contribution. Additionally, we may be forced to obtain substitute sources of liquidity by selling investments (to the extent permitted by the LLC Agreement) to meet our funding obligations. Such forced sales of investment assets by us may be at disadvantageous prices. In addition, if we are not able to obtain substitute sources of liquidity, we may default on our funding obligations.
We are subject to risks related to corporate social responsibility.
Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities, which are increasingly considered to contribute to the long-term sustainability of a company’s performance. A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. In addition, investment in funds that specialize in companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures to their investment decisions.
Our brand and reputation may be negatively impacted if we fail to act responsibly (or are perceived to have failed to act responsibly) in a number of areas, such as considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the value of our brand and our relationships with investors, which could adversely affect our business and results of operations.
At the same time, there are various approaches to responsible investing activities and divergent views on the consideration of ESG topics. These differing views increase the risk that any action or lack thereof with respect to our Investment Adviser’s consideration of
responsible investing or ESG-related practices will be perceived negatively. “Anti-ESG” sentiment has gained momentum across the U.S., with several states having enacted or proposed “anti-ESG” policies, legislation or issued related legal opinions. If investors subject to such legislation view our responsible investing or ESG practices as being in contradiction of such “anti-ESG” policies, legislation or legal opinions, such investors may not invest in us. Further, asset managers have been subject to recent scrutiny related to ESG-focused industry working groups, initiatives and associations, including organizations advancing action to address climate change or climate-related risk. Such scrutiny could expose the Investment Adviser to the risk of antitrust investigations or challenges by federal authorities, result in reputational harm and discourage certain investors from investing in us. In addition, various constituencies have asserted that the U.S. Supreme Court’s decision striking down race-based affirmative action in higher education in June 2023 should be analogized to private employment matters and private contract matters.
Several new cases alleging discrimination based on similar arguments have been filed since that decision, with scrutiny of certain corporate diversity, equity and inclusion practices increasing. If the Investment Adviser does not successfully manage expectations across these varied interests, it could erode trust, impact our and their reputation, and constrain our investment and fundraising opportunities.
Additionally, new state-level, federal and international regulatory initiatives related to ESG could adversely affect our business. The SEC has proposed rules that, in addition to other matters, would establish a framework for reporting of climate-related risks. There is also a risk that a significant reorientation in the market following the implementation of these and further measures could be adverse to our portfolio companies if they are perceived to be less valuable as a consequence of, for example, their carbon footprint or “greenwashing” (i.e., the holding out of a product as having green or sustainable characteristics where this is not, in fact, the case). We are, and our portfolio companies may be, or could in the future become subject to the risk that similar measures might be introduced in other jurisdictions in the future. At this time, there is uncertainty regarding the scope of such proposals or when they would become effective (if at all). Compliance with any new laws or regulations increases our regulatory burden and could make compliance more difficult and expensive, affect the manner in which we or our portfolio companies conduct our businesses and adversely affect our profitability.
The effect of global climate change may impact the operations of our portfolio companies.
There may be evidence of global climate change. Climate change creates physical and financial risk we and our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect the financial condition of some of our portfolio companies through, for example, decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.
Risks Relating to Our Investments
Our investments are very risky and highly speculative.
We invest primarily through direct originations of secured debt, including first lien, unitranche and last-out portions of such loans; second-lien debt; unsecured debt, including mezzanine debt; and select equity investments. The securities in which we invest typically are not rated by any rating agency, and if they were rated, they would be below investment grade (rated lower than “Baa3” by Moody’s Investors Service, Inc. and lower than “BBB-” by Fitch Ratings or Standard & Poor’s Ratings Services). These securities, which may be referred to as “junk bonds,” “high yield bonds” or “leveraged loans,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.
In addition, we may also originate “covenant-lite” loans, which are loans with fewer financial maintenance covenants than other obligations, or no financial maintenance covenants. Such covenant-lite loans may not include terms that allow the lender to monitor the performance of the borrower or to declare a default if certain criteria are breached. These flexible covenants (or the absence of covenants) could permit borrowers to experience a significant downturn in their results of operations without triggering any default that would permit holders of their debt (such as us) to accelerate indebtedness or negotiate terms and pricing. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants. Therefore, our investments may result in an above-average amount of risk and volatility or loss of principal. We also may invest in other assets, including U.S. government securities and structured securities. These investments entail additional risks that could adversely affect our investment returns.
Secured Debt. When we make a secured debt investment, we generally take a security interest in the available assets of the portfolio company, including the equity interests of any subsidiaries, which we expect to help mitigate the risk that we will not be repaid. However, there is a risk that the collateral securing our debt investment may decrease in value over time, may be difficult to sell in a timely manner, may be difficult to appraise and may fluctuate in value based upon the success of the business and market conditions, including as a result of the inability of the portfolio company to raise additional capital. In some circumstances, our lien could be subordinated to claims of other creditors, such as trade creditors. In addition, deterioration in a portfolio company’s financial condition and prospects, including its inability to raise additional capital, may be accompanied by deterioration in the value of the collateral for the debt investment. Consequently, the fact that our debt is secured does not guarantee that we will receive principal and interest payments according to the debt investment’s terms, or at all, or that we will be able to collect on the loan, in full or at all, should we enforce our remedies.
Unsecured Debt, Including Mezzanine Debt. Our unsecured debt investments, including mezzanine debt investments, generally will be subordinated to senior debt in the event of an insolvency. This may result in an above average amount of risk and loss of principal.
Revolving Credit Facilities. From time to time, we may acquire or originate revolving credit facilities in connection with our investments in other assets, which may result in our holding unemployed funds, negatively impacting our returns.
Equity Investments. When we invest in secured debt or unsecured debt, including mezzanine debt, we may acquire equity securities from the company in which we make the investment. In addition, we may invest in the equity securities of portfolio companies independent of any debt investment. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we hold may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests, and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
Investing in middle-market companies involves a number of significant risks.
Investing in middle-market companies involves a number of significant risks, including:
•such companies may have limited financial resources and may be unable to meet their obligations under their debt securities that we hold, which may be accompanied by a deterioration in the value of any collateral and a reduction in the likelihood of us realizing any guarantees we may have obtained in connection with our investment;
•such companies typically have shorter operating histories, narrower product lines and smaller market shares than larger businesses, which tend to render them more vulnerable to competitors’ actions and market conditions, as well as general economic downturns;
•such companies are more likely to depend on the management talents and efforts of a small group of persons; therefore, the death, disability, resignation or termination of one or more of these persons could have a material adverse impact on our portfolio company and, in turn, on us;
•such companies generally have less predictable operating results, may from time to time be parties to litigation, may be engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence and may require substantial additional capital to support their operations, finance expansion or maintain their competitive positions;
•there is generally little public information about these companies, they and their financial information are not subject to the reporting requirements of the Exchange Act and other regulations that govern public companies and we may be unable to uncover all material information about these companies, which may prevent us from making a fully informed investment decision and cause us to lose money on our investments;
•our executive officers, directors and Investment Adviser may, in the ordinary course of business, be named as defendants in litigation arising from our investments in the portfolio companies; and
•such companies may have difficulty accessing the capital markets to meet future capital needs, which may limit their ability to grow or to repay their outstanding indebtedness, including any debt securities held by us, upon maturity.
We have exposure to credit risk and other risks related to credit investments.
Our investments are subject to liquidity, market value, credit, interest rate and certain other risks. In addition, we cannot assure you that the Investment Adviser will correctly evaluate the nature and magnitude of the various factors that could affect the value and return of our investments. These risks could be exacerbated to the extent that the portfolio is concentrated in one or more particular types of investments or industry sectors or regions.
Prices of our investments may be volatile and may fluctuate as a result of a variety of factors that are inherently difficult to predict, including changes in interest rates, prevailing credit spreads, general economic conditions, financial market conditions, domestic and international economic or political events, developments or trends in any particular industry, and the financial condition of the issuers or obligors of the investments. Investments that become non-performing, or defaulted loans or securities may become subject to a workout negotiation or restructuring. This may entail a substantial reduction in the interest rate, a substantial write-down of principal, and a substantial change in the terms, conditions and covenants of these investments. To the extent that defaulted investments are sold, it is unlikely that the sale proceeds will be equal to the amount of unpaid principal and interest thereon. In addition, we may incur additional expenses to the extent we are required to seek recovery upon a default or to participate in the restructuring of a non-performing or defaulted investment. We can offer no assurance as to the levels of defaults and/or recoveries that may be experienced on the investments.
Secured investments may also be subject to the risk that the security interests granted by the portfolio company obligors in the underlying collateral are not properly or fully perfected in favor of lenders (or their agents). Compounding these risks, the collateral securing the secured investments may be subject to casualty, impairment or devaluation risks.
Portfolio companies may also be permitted to issue additional indebtedness that would increase the overall leverage and fixed charges to which the portfolio companies are subject. Such additional indebtedness could have structural or contractual priority, either as to specific assets or generally, over the ranking of the investments held by us or could rank on a parity or seniority basis with respect to our investments. In the event of any default, restructuring or insolvency event of a portfolio company, we could be subordinated to, or be required to share on a ratable basis with, any recoveries in favor of the holders of such other or additional indebtedness. Our recoveries may be impaired as a result of the rights of holders of other indebtedness under any intercreditor agreement governing the relative rights of the indebtedness.
Our debt investments may also have no amortization and limited interim repayment requirements, which may increase the risk that a portfolio company will not be able to repay or refinance the debt investment when it comes due at its final stated maturity.
Changes in inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
Certain of our portfolio companies operate in industries that have been, or may be, impacted by changes in inflation rates. The U.S. inflation rate remains above historical levels over the past several decades. Inflationary pressures in the past few years increased the costs of labor, energy and raw materials and adversely affected consumer spending, economic growth and our portfolio companies’ operations. Certain of our portfolio companies may be in industries that have been, or may be, affected by inflation. If such portfolio companies are unable to pass any increases in their costs along to their customers, it could adversely affect their results and impact their ability to pay interest and principal on our loans. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in unrealized losses and therefore reduce our net assets resulting from operations.
The United States and other developed economies have experienced higher-than-normal inflation rates in the past few years, but it remains uncertain whether elevated inflation will continue or have a significant effect on the U.S. economy or other economies. Inflation may affect our investments adversely in a number of ways, including those noted above. During periods of rising inflation, interest and dividend rates of any instruments we or our portfolio companies may have issued could increase, which would tend to reduce returns to our investors. Inflationary expectations or periods of rising inflation could also be accompanied by the rising prices of commodities that are critical to the operation of portfolio companies as noted above. Portfolio companies may have fixed income streams and, therefore, be unable to pay their debts when they become due. The market value of such investments may decline in value in times of higher inflation rates. Some of our portfolio investments may have income linked to inflation through contractual rights or other means. However, as inflation may affect both income and expenses, any increase in income may not be sufficient to cover increases in expenses. Governmental efforts to curb inflation, such as increases to short-term interest rates by central banks, including the Federal Reserve, often have negative effects on the level of economic activity and may increase the risk that the economy enters a recession. In an attempt to stabilize inflation, certain countries have imposed wage and price controls at times. Past governmental efforts to curb inflation have also involved more drastic economic measures that have had a materially adverse effect on the level of economic activity in the countries where such measures were employed. We can offer no assurance that continued inflation in the United States and/or other economies will not become a serious problem in the future and have a material adverse impact on us.
We are exposed to risks associated with changes in interest rates.
Debt investments that we make may be based on floating rates, such as the Secured Overnight Financing Rate ("SOFR"), the Euro Interbank Offered Rate, the Federal Funds Rate or the Prime Rate. General interest rate fluctuations may have a substantial negative impact on our investments, the value of our securities and our rate of return on invested capital.
A reduction in the interest rates on new investments relative to interest rates on current investments could also have an adverse impact on our net interest income. However, an increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates, including subordinated loans, senior and junior secured and unsecured debt securities and loans and high yield bonds, and also could increase our interest expense, thereby decreasing our net income (as more fully described below). Also, an increase in interest
rates available to investors could make an investment in the Units less attractive if we are not able to increase our dividend rate, which could reduce the value of Units.
In addition, the Federal Reserve decreased the federal funds rate twice in 2024. The rate and timing of further rate decreases remain unknown. In addition, there can be no assurance that the Federal Reserve will not make additional upwards adjustments to the federal funds rate in the future to mitigate inflationary pressures. Uncertainty surrounding future Federal Reserve actions and changing interest rates may have unpredictable effects on markets, may result in heightened market volatility and may detract from our performance to the extent we are exposed to such changing interest rates and/or volatility. In periods of rising interest rates, to the extent we borrow money subject to a floating interest rate, our cost of funds would increase, which could reduce our net investment income. Similarly, rising interest rates could also reduce the yield on our investments if such increases on our borrowings exceed any rise in the rate that our investments yield (including any floating rate investments or investments subject to specified minimum interest rates (such as a SOFR floor)).
If general interest rates rise, there is a risk that the portfolio companies in which we hold floating rate securities or loans will be unable to pay escalating interest amounts, which could result in a default under their notes or loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. In addition, rising interest rates may increase pressure on us to provide fixed rate loans to our portfolio companies, which could adversely affect our net investment income, as increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments.
If general interest rates were to decline, borrowers may refinance their loans at lower interest rates, which could shorten the average life of the loans and reduce the associated returns on the investment, as well as require our Investment Adviser to incur management time and expense to re-deploy such proceeds, including on terms that may not be as favorable as our existing investments.
A change in the general level of interest rates can be expected to lead to a change in the interest rates we receive on many of our debt investments. Accordingly, a change in the interest rate could make it easier for us to meet or exceed the performance threshold in the Investment Management Agreement and may result in a substantial increase in the amount of Incentive Fees payable to our Investment Adviser with respect to the portion of the Incentive Fee based on income.
Many of our portfolio securities do not have a readily available market price and we value these securities at fair value as determined in good faith in accordance with the Investment Company Act, which valuation is inherently subjective and may not reflect what we may actually realize for the sale of the investment.
The majority of our investments are, and are expected to continue to be, in debt instruments that do not have readily ascertainable market prices. The fair value of assets that are not publicly traded or whose market prices are not readily available are determined in good faith under procedures adopted by the Investment Adviser, as the valuation designee (the "Valuation Designee"). As the Valuation Designee, the Investment Adviser is primarily responsible for the valuation of our assets, subject to the oversight of the Board, in accordance with Rule 2a-5 under the Investment Company Act. As the Valuation Designee, the Investment Adviser utilizes the services of independent third-party valuation firms (“Independent Valuation Advisors”) engaged by us in determining the fair value of a portion of the securities in our portfolio as of each quarter end. Investment professionals from our Investment Adviser also recommend portfolio company valuations using sources and/or proprietary models depending on the availability of information on our assets and the type of asset being valued, all in accordance with our valuation policy. The participation of our Investment Adviser in our valuation process could result in a conflict of interest, as the Management Fee is based in part on our net assets and also because our Investment Adviser is receiving a performance-based Incentive Fee.
In addition, the Investment Adviser may value an identical asset differently than Goldman Sachs, another division or unit within Goldman Sachs, or another Account values the asset, including because Goldman Sachs, or such other division, or unit, or Account has information or uses valuation techniques and models that it does not share with, or that are different from those of the Investment Adviser or from us. These valuation differences for the same asset can result in significant differences in the treatment of such asset by the Investment Adviser, Goldman Sachs, and other divisions or units of Goldman Sachs, and/or among Accounts (for example, with respect to an asset that is a loan, there can be differences when it is determined that such loan is deemed to be on nonaccrual status and/or in default). See “Risks Relating to our Business and Structure-Potential conflicts of interest with other businesses of Goldman Sachs could impact our investment returns.”
Because fair valuations, and particularly fair valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time and are often based to a large extent on estimates, comparisons and qualitative evaluations of private information, it may be more difficult for investors to value accurately our investments and could lead to undervaluation or overvaluation of the Units. In addition, the valuation of these types of securities may result in substantial write-downs and earnings volatility.
Rule 2a-5 under the Investment Company Act establishes a regulatory framework for determining fair value in good faith for purposes of the Investment Company Act and permits boards, subject to board oversight and certain other conditions, to designate certain parties to perform the fair value determinations. In accordance with this rule and as discussed above, our Board of Directors has designated our Investment Adviser as the Valuation Designee primarily responsible for the valuation of our assets, subject to the oversight of the Board of Directors, and we are in compliance with Rule 2a-5.
Our NAV as of a particular date may be materially greater than or less than the value that would be realized if our assets were to be liquidated as of such date. For example, if we were required to sell a certain asset or all or a substantial portion of our assets on a particular date, the actual price that we would realize upon the disposition of such asset or assets could be materially less than the value of such asset or assets as reflected in our NAV. Volatile market conditions could also cause reduced liquidity in the market for certain assets, which could result in liquidation values that are materially less than the values of such assets as reflected in our NAV.
The lack of liquidity in our investments may adversely affect our business.
Various restrictions render our investments relatively illiquid, which may adversely affect our business. As we generally make investments in private companies, substantially all of these investments are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. Our Investment Adviser is not permitted to obtain or use material non-public information in effecting purchases and sales in public securities transactions for us, which could create an additional limitation on the liquidity of our investments. The illiquidity of our investments may make it difficult for us to sell such investments if the need arises. Therefore, if we are required to or desire to liquidate all or a portion of our portfolio quickly, we could realize significantly less than the value at which we have recorded our investments, or could be unable to dispose of our investments in a timely manner or at such times as we deem advisable.
Our portfolio may be focused in a limited number of portfolio companies, which will subject us to a risk of significant loss if any of these companies default on their obligations under any of their debt instruments or if there is a downturn in a particular industry.
We are classified as a non-diversified investment company within the meaning of the Investment Company Act, which means that we are not limited by the Investment Company Act with respect to the proportion of our assets that we may invest in securities of a single issuer, excluding limitations on investments in certain other financial and investment companies. To the extent that we assume large positions in the securities of a small number of issuers or industries, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. In addition, the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly or if we need to write down the value of any one investment. Additionally, a downturn in any particular industry in which we are invested could significantly affect our aggregate returns. Further, any industry in which we are meaningfully concentrated at any given time could be subject to significant risks that could adversely impact our aggregate returns.
For example, as of December 31, 2024, Software represented 13.3% of our portfolio at fair value. Our investments in Software are subject to a variety of risks, including, but not limited to, intense competition, changing technology, shifting user needs, frequent introductions of new products and services, competitors in different industries and ranging from large established companies to emerging startups, decreasing average selling prices of products and services resulting from rapid technological changes, cybersecurity risks and cyber incidents and various legal and regulatory risks.
We may not be in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
We do not generally hold controlling equity positions in our portfolio companies. While we are obligated as a BDC to offer to make managerial assistance available to our portfolio companies, we can offer no assurance that management personnel of our portfolio companies will accept or rely on such assistance. To the extent that we do not hold a controlling equity interest in a portfolio company, we are subject to the risk that such portfolio company may make business decisions with which we disagree, and the stockholders and management of such portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company and may therefore suffer a decrease in the value of our investments.
In addition, we may not be in a position to control any portfolio company by investing in its debt securities. As a result, we are subject to the risk that a portfolio company in which we invest may make business decisions with which we disagree and the management of such company, as representatives of the holders of their common equity, may take risks or otherwise act in ways that do not serve our interests as debt investors.
We may be subject to risks associated with subordinated debt.
We may acquire and/or originate junior lien or subordinated debt investments. If a borrower defaults on a junior lien or subordinated loan or on debt senior in right of payment or as to the proceeds of collateral to our debt investment, or in the event of the bankruptcy of a borrower, the debt investment will be satisfied only after, in the case of junior lien debt, the proceeds of collateral are applied to repay senior lien debt or, in the case of subordinated debt, the senior debt is repaid in full. Under the terms of typical intercreditor or subordination agreements, senior creditors may be able to block the exercise of remedies or the acceleration of the subordinated debt or the exercise by holders of junior lien or subordinated debt of other rights they may have as creditors or in respect of collateral. Accordingly, we may not be able to take the steps necessary or sufficient to protect our investments in a timely manner or at all. In addition, junior lien or subordinated debt may not always be protected by financial covenants or limitations upon additional indebtedness, may have limited liquidity and may not be rated by a credit rating agency. If a borrower declares bankruptcy, we may not have full or any recourse to the assets of the borrower, or the assets of the borrower may not be sufficient to satisfy the loan. Further, the Investment Adviser’s ability to amend the terms of our loans, assign its loans, accept prepayments, exercise its remedies and control decisions made in bankruptcy proceedings may be limited by intercreditor arrangements. In addition, the risks associated with junior lien or subordinated debt include a greater possibility that adverse changes in the financial condition of the obligor or in general economic conditions (including a sustained period of rising interest rates or an economic downturn) may adversely affect the borrower’s ability to pay principal and interest on its debt. Many obligors on junior lien or subordinated loan securities are highly leveraged, and specific developments affecting such obligors, including reduced cash flow from operations or the inability to refinance debt at maturity, may also adversely affect such obligors’ ability to meet debt service obligations. The level of risk associated with investments in subordinated debt increases if such investments are debt of distressed or below investment grade issuers. Default rates for junior lien or subordinated debt securities have historically been higher than has been the case for investment grade securities.
We may be subject to risks associated with unsecured debt.
We may invest in unsecured indebtedness in portfolio companies where a significant portion of such companies’ senior or junior lien indebtedness may be secured. In such situations, our ability to influence such portfolio company’s affairs, especially during periods of financial distress or following an insolvency, is likely to be substantially less than that of senior or junior lien creditors.
We may be subject to risks arising from revolving credit facilities.
We acquire or originate revolving credit facilities from time to time in connection with our investments in other assets, including term loans. A revolving credit facility is a line of credit in which the borrower pays the lender a commitment fee during a commitment period and is then allowed to draw from the line of credit from time to time until the end of such commitment period. The borrower of a revolving credit facility is typically permitted to draw thereunder for any reason, including to fund its operational requirements, to make acquisitions or to reserve cash, so long as certain customary conditions are met. Outstanding drawdowns under such revolving credit facilities can therefore fluctuate on a day-to-day basis, which may generate operational and other costs for us. If the borrower of a revolving credit facility draws down on the facility, we would be obligated to fund the amounts due.
We can offer no assurance that a borrower of a revolving credit facility will fully draw down its available credit thereunder, and in many cases a borrower with sufficient liquidity may forego drawing down its available credit thereunder in favor of obtaining other liquidity sources. As a result, we are likely to hold unemployed funds, and investments in revolving credit facilities may therefore adversely affect our returns.
We may be subject to risks arising from assignments and participations.
We may acquire investments directly (by way of assignment) or indirectly (by way of participation). As described in more detail below, holders of participation interests are subject to additional risks not applicable to a holder of a direct interest in a debt obligation.
The purchaser of an assignment of a debt obligation typically succeeds to all the rights and obligations of the selling institution and becomes a party to the applicable documentation relating to the debt obligation. In contrast, participations acquired by us in a portion of a debt obligation held by a seller typically result in a contractual relationship only with such seller, not with the obligor. We would have the right to receive payments of principal, interest and any fees to which it is entitled under the participation only from the seller and only upon receipt by the seller of such payments from the obligor. In purchasing a participation, we generally will have neither the right to enforce compliance by the obligor with the terms of the documentation relating to the debt obligation nor any rights of set-off against the obligor, and we may not directly benefit from the collateral supporting the debt obligation in which it has purchased the participation. As a result, we will assume the credit risk of both the obligor and the seller, which will remain the legal owner of record of the applicable debt obligation. In the event of the insolvency of the seller, we may be treated as a general creditor of the seller in respect of the participation, may not benefit from any set-off exercised by the seller against the obligor and may be subject to any set-off exercised by the obligor against the seller. In addition, we may purchase a participation from a seller that does not itself retain any portion of the applicable debt obligation and, therefore, may have limited interest in monitoring the terms of the documentation relating to such debt obligation and the continuing creditworthiness of the borrower.
In addition, when we hold a participation in a debt obligation, we may not have the right to vote to waive enforcement of any default by an obligor. Sellers commonly reserve the right to administer the debt obligations sold by them as they see fit and to amend the documentation relating to such debt obligations in all respects. A seller may have interests different from ours, and the seller might not consider our interests when taking actions with respect to the debt obligation underlying the participation. In addition, some participation agreements that provide voting rights to the participant further provide that if the participant does not vote in favor of amendments, modifications or waivers to the documentation relating to the debt obligation, the seller may repurchase such participation at par. Assignments and participations are typically sold strictly without recourse to the seller thereof, and the seller will generally make no representations or warranties about the underlying debt obligation, the borrowers, the documentation relating to the debt obligations or any collateral securing the debt obligations.
We may have difficulty sourcing investment opportunities.
We cannot assure investors that we will be able to identify a sufficient number of suitable investment opportunities to allow us to deploy the capital available to us. Privately negotiated investments in loans and illiquid securities of private companies require substantial due diligence and structuring, and we cannot assure investors that we will achieve our anticipated investment pace. Our Investment Adviser will select our investments, and our stockholders will have no input with respect to such investment decisions. These factors increase the uncertainty, and thus the risk, of investing in our Units. To the extent we are unable to deploy all investments, our investment income and, in turn, our results of operations, will likely be materially adversely affected.
Our failure or inability to make follow-on investments in our portfolio companies could impair the value of our portfolio.
Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to:
•increase or maintain in whole or in part our equity ownership percentage or debt participation;
•exercise warrants, options or convertible securities that were acquired in the original or subsequent financing; or
•attempt to preserve or enhance the value of our investment.
We may elect not to, or be unable to, make follow-on investments or may lack sufficient funds to make those investments.
We will have the discretion to make any follow-on investments, subject to the availability of capital resources and applicable law. The failure to make, or inability to make, follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful operation. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, because we prefer other opportunities or because we are inhibited by compliance with BDC requirements, including the conditions of the Relief, compliance with covenants contained in the agreements governing our indebtedness or compliance with the requirements for maintenance of our qualification for tax treatment as a RIC.
Our portfolio companies may prepay loans, which may reduce stated yields in the future if the capital returned cannot be invested in transactions with equal or greater expected yields.
Certain of the loans we make are prepayable at any time, with some prepayable at no premium to par. We cannot predict when such loans may be prepaid. Whether a loan is prepaid will depend both on the continued positive performance of the portfolio company and the existence of favorable financing market conditions that permit such portfolio company to replace existing financing with less expensive capital. In periods of rising interest rates, the risk of prepayment of floating rate loans may increase if other financing sources are available. As market conditions change frequently, it is unknown when, and if, this may be possible for each portfolio company. In the case of some of these loans, having the loan prepaid early may reduce the achievable yield for us in the future below the current yield disclosed for our portfolio if the capital returned cannot be invested in transactions with equal or greater expected yields.
Investments in common and preferred equity securities, many of which are illiquid with no readily available market, involve a substantial degree of risk.
Although common stock has historically generated higher average total returns than fixed income securities over the long term, common stock also has experienced significantly more volatility in those returns. Our equity investments may fail to appreciate and may decline in value or become worthless, and our ability to recover our investment will depend on our portfolio company’s success. Investments in equity securities involve a number of significant risks, including:
•any equity investment we make in a portfolio company could be subject to further dilution as a result of the issuance of additional equity interests and to serious risks as a junior security that will be subordinate to all indebtedness (including trade creditors) or senior securities in the event that the issuer is unable to meet its obligations or becomes subject to a bankruptcy process;
•to the extent that the portfolio company requires additional capital and is unable to obtain it, we may not recover our investment; and
•in some cases, equity securities in which we invest will not pay current dividends, and our ability to realize a return on our investment, as well as to recover our investment, will be dependent on the success of the portfolio company.
Even if the portfolio company is successful, our ability to realize the value of our investment may depend on the occurrence of a liquidity event, such as a public offering or the sale of the portfolio company. It is likely to take a significant amount of time before a liquidity event occurs or we can otherwise sell our investment. In addition, the equity securities we receive or invest in may be subject to restrictions on resale during periods in which it could be advantageous to sell them.
There are special risks associated with investing in preferred securities, including:
•preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated period without any adverse consequences to the issuer. If we own a preferred security that is deferring its distributions, we may be required to report income for tax purposes before we receive such distributions;
•preferred securities are subordinated to debt in terms of priority to income and liquidation payments, and therefore will be subject to greater credit risk than debt;
•preferred securities may be substantially less liquid than many other securities, such as common stock or U.S. government securities; and
•generally, preferred security holders have no voting rights with respect to the issuing company, subject to limited exceptions.
Additionally, when we invest in debt securities, we may acquire warrants or other equity securities as well. Our goal is ultimately to dispose of such equity interests and realize gains upon our disposition of such interests. However, the equity interests we receive may not appreciate in value and, in fact, may decline in value. Accordingly, we may not be able to realize gains from our equity interests and any gains that we do realize on the disposition of any equity interests may not be sufficient to offset any other losses we experience.
We may invest, to the extent permitted by law, in the equity securities of investment funds that are operating pursuant to certain exceptions to the Investment Company Act. To the extent we so invest, we will bear our ratable share of any such company’s expenses, including management and performance fees. We will also remain obligated to pay the Management Fee and Incentive Fee to our Investment Adviser with respect to the assets invested in the securities and instruments of such companies. With respect to each of these investments, each Unitholder will bear its pro rata share of the Management Fee and Incentive Fee due to our Investment Adviser as well as indirectly bearing the management and performance fees and other expenses of any such investment funds or advisers.
By originating loans to companies that are experiencing significant financial or business difficulties, we may be exposed to distressed lending risks.
As part of our lending activities, we may originate loans to companies that are experiencing significant financial or business difficulties, including companies involved in bankruptcy or other reorganization and liquidation proceedings. Although the terms of such financing may result in significant financial returns to us, they involve a substantial degree of risk. The level of analytical sophistication, both financial and legal, necessary for successful financing to companies experiencing significant business and financial difficulties is unusually high. There is no assurance that we will correctly evaluate the value of the assets collateralizing our loans or the prospects for a successful reorganization or similar action. In any reorganization or liquidation proceeding relating to a company that we fund, we may lose all or part of the amounts advanced to the borrower or may be required to accept collateral with a value less than the amount of the loan advanced by us to the borrower.
We may be exposed to special risks associated with bankruptcy cases.
Many of the events within a bankruptcy case are adversarial and often beyond the control of the creditors. While creditors generally are afforded an opportunity to object to significant actions, we can offer no assurance that a bankruptcy court would not approve actions that may be contrary to our interests. Furthermore, there are instances where creditors can lose their ranking and priority if they are considered to have taken over management of a borrower.
The reorganization of a company can involve substantial legal, professional and administrative costs to a lender and the borrower; it is subject to unpredictable and lengthy delays; and during the process a company’s competitive position may erode, key management may depart and a company may not be able to invest its capital adequately. In some cases, the debtor company may not be able to reorganize and may be required to liquidate assets. The debt of companies in financial reorganization will, in most cases, not pay current interest, may not accrue interest during reorganization and may be adversely affected by an erosion of the issuer’s fundamental value.
In addition, lenders can be subject to lender liability claims for actions taken by them where they become too involved in the borrower’s business or exercise control over the borrower. For example, we could become subject to a lender’s liability claim if a borrower requests significant managerial assistance from us and we provide such assistance as contemplated by the Investment Company Act.
Declines in market prices and liquidity in the corporate debt markets can result in significant net unrealized depreciation of our portfolio, which in turn would affect our results of operations.
As a BDC, we are required to carry our investments at market value or, if no market value is ascertainable, at fair value as determined in good faith under procedures adopted by Goldman Sachs Asset Management, as Valuation Designee. We may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow (taking into consideration current market interest rates and credit spreads), the markets in which the portfolio company does business, a comparison of the portfolio company’s securities to similar publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we use the pricing indicated by the external event to corroborate our valuation.
While most of our investments are not publicly traded, applicable accounting standards require us to assume as part of our valuation process that our investments are sold in a principal market to market participants (even if we plan on holding an investment through its maturity). As a result, volatility in the capital markets can also adversely affect our investment valuations. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation. The effect of all of these factors on our portfolio can reduce our NAV by increasing net unrealized depreciation in our portfolio. Depending on market conditions, we could incur substantial realized losses and may suffer unrealized losses, which could have a material adverse impact on our business, financial condition and results of operations.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Our portfolio companies may be susceptible to economic downturns or recessions and may be unable to repay our loans during these periods. Therefore, during these periods our non-performing assets may increase and the value of our portfolio may decrease if we are required to write down the values of our investments. Adverse economic conditions may also decrease the value of collateral securing some of our loans and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, acceleration of the time when the loans are due and foreclosure on the portfolio company’s assets representing collateral for its obligations. This could trigger cross defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt that we hold and the value of any equity securities we own.
In addition, we may originate “covenant-lite” loans, which are loans with fewer financial maintenance covenants than other obligations, or no financial maintenance covenants. Such covenant-lite loans may not include terms that allow the lender to monitor the performance of the borrower or to declare a default if certain criteria are breached. These flexible covenants (or the absence of covenants) could permit borrowers to experience a significant downturn in their results of operations without triggering any default that would permit holders of their debt (such as us) to accelerate indebtedness or negotiate terms and pricing. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants. Therefore, our investments may result in an above-average amount of risk and volatility or loss of principal. We also may invest in other assets, including cash equivalents, U.S. government securities and other short-term investments, as described above. These investments entail additional risks that could adversely affect our investment returns. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company.
Our portfolio companies may have incurred or issued, or may in the future incur or issue, debt or equity securities that rank equally with, or senior to, our investments in such companies, which could have an adverse effect on us in any liquidation of the portfolio company.
Our portfolio companies may have, or may be permitted to incur, other debt, or issue other equity securities that rank equally with, or senior to, our investments. By their terms, such instruments may provide that the holders are entitled to receive payment of dividends, interest or principal on or before the dates on which we are entitled to receive payments in respect of our investments. These debt instruments would usually prohibit the portfolio companies from paying interest on or repaying our investments in the event and during the continuance of a default under such debt. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of securities ranking senior to our investment in that portfolio company typically are entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such holders, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of securities ranking equally with our investments, we would have to share on an equal basis any distributions with other security holders in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
Additionally, certain loans that we make to portfolio companies may be secured on a second priority basis by the same collateral securing senior secured debt, which will be secured on a first priority basis. The first priority liens on the collateral will secure the portfolio company’s obligations under any outstanding senior debt and may secure certain other future debt that may be permitted to be incurred by the portfolio company under the agreements governing the loans. The holders of obligations secured by the first priority liens on the collateral will generally control the liquidation of and be entitled to receive proceeds from any realization of the collateral to repay their obligations in full before us. In addition, the value of the collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. We can offer no assurance that the proceeds, if any, from the sale or sales of all of the collateral would be sufficient to satisfy the loan obligations secured by the second priority liens after payment in full of all obligations secured by the first priority liens. If such proceeds are not sufficient to repay amounts outstanding under the loan obligations secured by the second priority liens, then we, to the extent not repaid from the proceeds of the sale of the collateral, will only have an unsecured claim against the portfolio company’s remaining assets, if any.
The rights we may have with respect to the collateral securing any junior priority loans we make to our portfolio companies may also be limited pursuant to the terms of one or more intercreditor agreements that we enter into with the holders of senior debt. Under such an intercreditor agreement, at any time that senior obligations are outstanding, we may forfeit certain rights with respect to the collateral to the holders of the senior obligations. These rights may include the right to commence enforcement proceedings against the collateral, the right to control the conduct of such enforcement proceedings, the right to approve amendments to collateral documents, the right to release liens on the collateral and the right to waive past defaults under collateral documents. We may not have the ability to control or direct such actions, even if our rights as junior lenders are adversely affected. In addition, a bankruptcy court may choose not to enforce an intercreditor agreement or other arrangement with creditors. Similar risks to the foregoing may apply where we hold the last-out piece of a unitranche loan.
We may also make unsecured loans to portfolio companies, meaning that such loans will not benefit from any interest in collateral of such portfolio companies. Liens on such portfolio companies’ collateral, if any, will secure the portfolio company’s obligations under its outstanding secured debt and may secure certain future debt that is permitted to be incurred by the portfolio company under its secured loan agreements. The holders of obligations secured by such liens will generally control the liquidation of, and be entitled to receive proceeds from, any realization of such collateral to repay their obligations in full before us. In addition, the value of such collateral in the event of liquidation will depend on market and economic conditions, the availability of buyers and other factors. We can offer no assurance that the proceeds, if any, from sales of such collateral would be sufficient to satisfy our unsecured loan obligations after payment in full of all secured loan obligations. If such proceeds were not sufficient to repay the outstanding secured loan obligations, then the unsecured claims would rank equally with the unpaid portion of such secured creditors’ claims against the portfolio company’s remaining assets, if any.
Our portfolio companies may be highly leveraged.
Some of our portfolio companies may be highly leveraged, which may have adverse consequences to these portfolio companies and to us as an investor. These portfolio companies may be subject to restrictive financial and operating covenants and the leverage may impair these portfolio companies’ ability to finance their future operations and capital needs. As a result, these portfolio companies’ flexibility to respond to changing business and economic conditions and to take advantage of business opportunities may be limited. Further, a leveraged company’s income and net assets will tend to increase or decrease at a greater rate than if borrowed money were not used.
We will have broad discretion over the use of proceeds of the funds we raise from investors and will use proceeds in part to satisfy operating expenses.
We can offer no assurance that we will be able to locate a sufficient number of suitable investment opportunities to allow us to successfully deploy capital that we raise from investors in a timeframe that will permit investors to earn above-market returns. To the extent we are unable to invest substantially all of the capital we raise within our contemplated timeframe, our investment income, and in turn our results of operations, will likely be materially adversely affected.
We intend to use substantially all of the proceeds from the offering of Units, net of expenses, to make investments in accordance with our investment objectives and strategies. We anticipate that the remainder will be used for working capital and general corporate purposes, including the payment of operating expenses.
However, subject to the restrictions of applicable law and regulations, including the Investment Company Act, we have significant flexibility in applying the proceeds of the funds we raise from investors and may use the net proceeds in ways with which Unitholders may not agree, or for purposes other than those contemplated at the time of the capital raising. We may also pay operating expenses, and may pay other expenses such as due diligence expenses of potential new investments, from net proceeds. Our ability to achieve our investment objective may be limited to the extent that net proceeds of the funds we raise from investors, pending full investment by us in portfolio companies, are used to pay operating expenses.
We may form one or more CLOs, which may subject us to certain structured financing risks.
To the extent permissible under risk retention rules adopted pursuant to Section 941 of the Dodd-Frank Act and applicable provisions of the Investment Company Act, to finance investments, we may securitize certain of our investments, including through the formation of one or more CLOs, while retaining all or most of the exposure to the performance of these investments. This would involve contributing a pool of assets to a special purpose entity, and selling debt interests in such entity on a non-recourse or limited-recourse basis to purchasers. Any interest in any such CLO held by us may be considered a “non-qualifying asset” for purposes of Section 55 of the Investment Company Act.
If we create a CLO, we will depend on distributions from the CLO’s assets out of its earnings and cash flows to enable us to make distributions to Unitholders. The ability of a CLO to make distributions will be subject to various limitations, including the terms and covenants of the debt it issues. For example, tests (based on interest coverage or other financial ratios or other criteria) may restrict our ability, as holder of a CLO’s equity interests, to receive cash flow from these investments. There is no assurance any such performance tests will be satisfied. Also, a CLO may take actions that delay distributions in order to preserve ratings and to keep the cost of present and future financings lower or the CLO may be obligated to retain cash or other assets to satisfy over-collateralization requirements commonly provided for holders of the CLO’s debt. As a result, there may be a lag, which could be significant, between the repayment or other realization on a loan or other assets in, and the distribution of cash out of, a CLO, or cash flow may be completely restricted for the life of the CLO. If we do not receive cash flow from any such CLO that is necessary to satisfy the Annual Distribution Requirement for maintaining our qualification for tax treatment as a RIC, and we are unable to obtain cash from other sources necessary to satisfy this requirement, we could fail to maintain our qualification for tax treatment as a RIC, which would have a material adverse effect on our financial performance.
In addition, a decline in the credit quality of loans in a CLO due to poor operating results of the relevant borrower, declines in the value of loan collateral or increases in defaults, among other things, may force a CLO to sell certain assets at a loss, reducing their earnings and, in turn, cash potentially available for distribution to us for distribution to Unitholders.
To the extent that any losses are incurred by the CLO in respect of any collateral, such losses will be borne first by us as owner of equity interests. Finally, any equity interests that we retain in a CLO will not be secured by the assets of the CLO, and we will rank behind all creditors of the CLO.
We may invest a significant portion of our assets in high-quality short-term investments, which will generate lower rates of return than those expected from the interest generated on our intended investment program.
From time to time, a significant portion of our assets may be invested in a money market fund managed by an affiliate of GS Group Inc. This investment may earn yields substantially lower than the income that we expect to receive from investments made in accordance with our investment objective. As a result, we may not be able to achieve our investment objective and/or pay any dividends while a significant portion of our assets are invested in the money market fund or, if we are able to do so, such dividends may be substantially lower than the dividends that we expect to pay when our portfolio is fully invested in accordance with our investment objectives. If we do not realize yields in excess of our expenses, we may incur operating losses.
Risks Relating to the Units
The Units are limited in their transferability; we may repurchase or force a sale of a Unitholder’s Units.
Unitholders are not permitted to transfer their Units, including a transfer of solely an economic interest, without our prior written consent. While we expect not to unreasonably withhold our prior written consent to transfers by Unitholders, we expect to withhold our consent if any such transfer would (i) be prohibited by or trigger a prepayment under our debt or other credit facilities, (ii) result in a violation of applicable securities law, (iii) result in us no longer being eligible to be treated as a RIC, (iv) result in us being subject to additional regulatory or compliance requirements imposed by laws other than the Exchange Act or the Investment Company Act, or (v) result in our assets becoming “plan assets” of any ERISA Unitholder within the meaning of the Plan Assets Regulation (the regulation concerning the definition of “plan assets” under ERISA adopted by the United States Department of Labor and codified in 29 C.F.R. §2510.3-101, as modified by Section 3(42) of ERISA). Finally, Units may be transferred only in transactions that are exempt from registration under the Securities Act and the applicable securities laws of other jurisdictions, and therefore investors will be subject to restrictions on resale and transfer associated with securities sold pursuant to Regulation D, Regulation S and other exemptions from registration under the Securities Act.
Any transfer of Units in violation of these provisions will be void, and any intended recipient of the Units will acquire no rights in such Units and will not be treated as a Unitholder for any purpose. Prospective investors in us should not invest in us unless they are prepared to retain their Units until we liquidate.
Under the terms of the LLC Agreement, in the event any person is or becomes the owner of Units, and such ownership would result in a violation of any of the above provisions, we may, and each Unitholder has agreed and acknowledged that we have the power to, cause us to repurchase the Units of such person, or require such person to transfer their Units to another person; provided, any such repurchase will be conducted in accordance with the terms of the LLC Agreement and Section 23 of the Investment Company Act and applicable rules thereunder.
An investor may be subject to the short-swing profits rules under the Exchange Act as a result of its investment in the Units.
When the Units become registered under the Exchange Act, persons with the right to appoint a director or who beneficially own more than 10% of the Units may be subject to Section 16(b) of the Exchange Act, which recaptures for our benefit profits from the purchase and sale of registered Units within a six-month period.
Investing in the Units involves an above-average degree of risk.
The investments we make in accordance with our investment objective may result in a higher amount of risk than alternative investment options and volatility or loss of principal. The investments in portfolio companies may be highly speculative and aggressive. Therefore, an investment in the Units may not be suitable for an investor with lower risk tolerance.
A Unitholder’s interest in us will be diluted if we issue additional Units, which could reduce the overall value of an investment in us.
Unitholders do not have preemptive rights to any Units we issue in the future. We may decide in accordance with the process described below, to issue additional equity interests at or below the NAV per Unit. To the extent we issue additional equity interests, a Unitholder’s percentage ownership interest in us may be diluted. In addition, if such Units are issued below NAV, existing Unitholders may also experience dilution in the book value and fair value of their Units.
We are generally not able to issue and sell Units at a price per Unit below the then-current NAV per Unit. We may, however, sell Units, warrants, options or rights to acquire Units, at a price below the then-current NAV per Unit (i) with the consent of a majority in interest of our Unitholders (and a majority in interest of our Unitholders who are not affiliates of us) and (ii) if, among other things, a majority of our Independent Directors and a majority of our directors who have no financial interest in the transaction determine that such sale is in the best interests of us and our Unitholders.
We may in the future determine to issue Preferred Units, which could adversely affect the value of the Units.
The issuance of Preferred Units with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of Preferred Units could make an investment in the Units less attractive. In addition, the dividends on any Preferred Units we issue must be cumulative. Payment of dividends and repayment of the liquidation preference of Preferred Units must take preference over any distributions or other payments to Unitholders, and holders of Preferred Units are not subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference (other than convertible Preferred Units that converts into Units). In addition, under the Investment Company Act, Preferred Units would constitute a “senior security” for purposes of the 150% asset coverage test. See “-Risks Relating to Legal and Regulatory Matters-Regulations governing our operations as a BDC affect our ability to, and the way in which we, raise additional capital. These constraints may hinder our Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objective.”
We may not be able to pay investors distributions on Units, our distributions to investors may not grow over time and a portion of our distributions to investors may be a return of capital for U.S. federal income tax purposes.
Subject to the requirements of Section 852(a) of the Code and the terms of any indebtedness or Preferred Units, we intend to (i) distribute quarterly investment income (i.e. proceeds received in respect of interest payments, dividends or fees as opposed to proceeds received in connection with the disposition or repayment of an investment), and (ii) distribute substantially all of our investment company taxable income and net capital gain for each taxable year in order to maintain our qualification for treatment as a RIC, except that we may retain certain net capital gains for reinvestment and, carry forward taxable income for distribution in the following year and pay any applicable tax. All distributions will be paid at the discretion of the Board of Directors and will depend on such factors as the Board determines to be relevant from time to time, including our earnings, financial condition and compliance with any debt covenants we may be subject to. Accordingly, we may not pay distributions to Unitholders.
The distributions we pay to Unitholders in a year may exceed our net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes that would reduce a holder’s adjusted tax basis in its Units and correspondingly increase such holder’s gain, or reduce such holder’s loss, on disposition of such Units. Distributions in excess of a holder’s adjusted tax basis in its Units will constitute capital gains to such holder. Unitholders who periodically receive the payment of a distribution from a RIC consisting of a return of capital for U.S. federal income tax purposes may be under the impression that they are receiving a distribution of the RIC’s net ordinary income or capital gains when they are not. Accordingly, Unitholders should read carefully any written disclosure accompanying a distribution from us and the information about the specific tax characteristics of our distributions provided to Unitholders after the end of each calendar year, and should not assume that the source of any distribution is our net ordinary income or capital gains.
If we do not distribute a certain percentage of our income annually, we will suffer adverse tax consequences, including possible loss of the tax benefits available to us as a RIC. In addition, in accordance with U.S. generally accepted accounting principles (“GAAP”) and tax rules, we include in income certain amounts that we have not yet received in cash, such as contractual PIK interest, which represents contractual interest added to the loan balance that becomes due at the end of the loan term, or the accrual of original issue or market discount. Since we may recognize income before or without receiving cash representing such income, we may have difficulty meeting the requirement to distribute at least 90% of our investment company taxable income to obtain tax benefits as a RIC. We will be subject to a 4% nondeductible federal excise tax on certain undistributed income for a calendar year unless we distribute in a timely manner an amount at least equal to the sum of (1) 98% of our ordinary income (taking into account certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income for the one-year period ending October 31 in that calendar year and (3) any income recognized, but not distributed, in preceding years. We will not be subject to excise taxes on amounts on which we are required to pay corporate income taxes (such as retained net capital gains).
Unitholders may be subject to filing requirements under the Exchange Act as a result of their investment in the Units.
Ownership information for any person or group that beneficially owns more than 5% of the Units will have to be disclosed in a Schedule 13D or Schedule 13G, as required by Regulation 13D-G under the Exchange Act, or other filings with the SEC. Beneficial ownership for these purposes is determined in accordance with the rules of the SEC, and includes having or sharing voting or investment power over the securities. Although we will provide in our quarterly statements the number of outstanding Units, the responsibility for determining the filing obligation and preparing the filing remains with the investor. In addition, beneficial owners of more than 10% of the Units will be subject to Section 16 of the Exchange Act, including the reporting obligations of Section 16(a).
The tax treatment of a non-U.S. Unitholder in its jurisdiction of tax residence will depend entirely on the laws of such jurisdiction, and may vary considerably from jurisdiction to jurisdiction.
Depending on (i) the laws of such non-U.S. Unitholder’s jurisdiction of tax residence, (ii) how we, our investments and/or any other investment vehicles through which we directly or indirectly invest are treated in such jurisdiction, and (iii) the activities of any such entities, an investment in us could result in such non-U.S. Unitholder recognizing adverse tax consequences in its jurisdiction of tax residence, including (a) with respect to any generally required or additional tax filings and/or additional disclosure required in such filings in relation to the treatment for tax purposes in the relevant jurisdiction of an interest in us, the investments and/or any other investment vehicles through which we directly or indirectly invest and/or of distributions from such entities and any uncertainties arising
in that respect (such entities not being established under the laws of the relevant jurisdiction); (b) the possibility of taxable income significantly in excess of cash distributed to a non-U.S. Unitholder, and possibly in excess of our actual economic income; (c) the possibilities of losing deductions or the ability to utilize tax basis and of sums invested being returned in the form of taxable income or gains; and (d) the possibility of being subject to tax at unfavorable tax rates. A non-U.S. Unitholder may also be subject to restrictions on the use of its share of our deductions and losses in its jurisdiction of tax residence. Each prospective investor is urged to consult its own tax advisors with respect to the tax and tax filing consequences, if any, in its jurisdiction of tax residence of an investment in us, as well as any other jurisdiction in which such prospective investor is subject to taxation.
We may have difficulty paying our required distributions if we recognize taxable income before or without receiving cash representing such income.
For U.S. federal income tax purposes, we will include in our taxable income certain amounts that we have not yet received in cash, such as OID, which may occur if we receive warrants in connection with the origination of a loan or possibly in other circumstances or contracted PIK interest, which generally represents contractual interest added to the loan balance and due at the end of the loan term. Such OID, which could be significant relative to our overall investment assets, and increases in loan balances as a result of PIK interest will be included in our taxable income before we receive any corresponding cash payments. We also may be required to include in our taxable income certain other amounts that we have not yet received or will not receive in cash, such as accruals on a contingent payment debt instrument, accruals of interest income and/or OID on defaulted debt, or deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. Moreover, we generally will be required to take certain amounts into income no later than the time such amounts are reflected on our financial statements. The credit risk associated with the collectability of deferred payments may be increased as and when a portfolio company increases the amount of interest on which it is deferring cash payment through deferred interest features. Our investments with a deferred interest feature may represent a higher credit risk than loans for which interest must be paid in full in cash on a regular basis. For example, even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is scheduled to occur upon maturity of the obligation.
Because in certain cases we may recognize taxable income before or without receiving cash representing such income, we may have difficulty making distributions to Unitholders that will be sufficient to enable us to meet the Annual Distribution Requirement necessary for us to maintain our qualification for tax treatment as a RIC. Accordingly, we may need to sell some of our assets at times and/or at prices that we would not consider advantageous, we may need to raise additional equity or debt capital, or we may need to forego new investment opportunities or otherwise take actions that are disadvantageous to our business (or be unable to take actions that are advantageous to our business) to enable us to make distributions to Unitholders that will be sufficient to enable us to meet the Annual Distribution Requirement. If we are unable to obtain cash in the amount required for us to make, or if we are restricted from making, sufficient distributions to Unitholders to meet the Annual Distribution Requirement, we may fail to qualify for the U.S. federal income tax benefits allowable to RICs and, thus, become subject to a corporate-level U.S. federal income tax (and any applicable U.S. state and local taxes).
Unitholders may receive Units as distributions, which could result in adverse tax consequences to them.
In order to satisfy the Annual Distribution Requirement applicable to RICs, we have the ability to declare a large portion of a distribution in Units instead of in cash. We are not subject to restrictions on the circumstances in which we may declare a portion of a distribution in Units but would generally anticipate doing so only in unusual situations, such as, for example, if we do not have sufficient cash to meet our RIC distribution requirements under the Code. Generally, were we to declare such a distribution, we would allow Unitholders to elect payment in cash and/or Units of equivalent value, with a percentage limitation on the portion of the total distribution available to be received in cash. If too many Unitholders elect to receive cash, the cash available for distribution would be allocated among the Unitholders electing to receive cash (with the balance of the distribution paid in Units).
The number of Units declared would thus depend on the applicable percentage limitation on cash available for distribution, the Unitholders’ individual elections to receive cash or Units, and the value of the Units. Each Unitholder generally would be treated as having received a taxable distribution (including for purposes of the withholding tax rules applicable to a Non-U.S. Unitholder) on the date the distribution is received in an amount equal to the cash that such Unitholder would have received if the entire distribution had been paid in cash, even if the Unitholder received all or most of the distribution in Units. We currently do not intend to pay distributions in Units, but we can offer no assurance that we will not do so in the future.
Non-U.S. Unitholders may be subject to withholding of U.S. federal income tax on dividends we pay.
Distributions of our “investment company taxable income” to a non-U.S. Unitholder that are not effectively connected with the non-U.S. Unitholder’s conduct of a trade or business within the United States will generally be subject to withholding of U.S. federal income tax at a 30% rate (or lower rate provided by an applicable income tax treaty) to the extent paid out of our current or accumulated earnings and profits.
Certain properly reported distributions are generally exempt from withholding of U.S. federal income tax where they are paid in respect of our (i) “qualified net interest income” (generally, our U.S.-source interest income, other than certain contingent interest and interest from obligations of a corporation or partnership in which we or the non-U.S. Unitholder are at least a 10% equity-holder, reduced by
expenses that are allocable to such income) or (ii) “qualified short-term capital gains” (generally, the excess of our net short-term capital gain over our net long-term capital loss for such taxable year), and certain other requirements are satisfied.
NO ASSURANCE CAN BE GIVEN AS TO WHETHER ANY OF OUR DISTRIBUTIONS WILL BE ELIGIBLE FOR THIS EXEMPTION FROM WITHHOLDING OF U.S. FEDERAL INCOME TAX. IN PARTICULAR, THIS EXEMPTION WILL NOT APPLY TO OUR DISTRIBUTIONS PAID IN RESPECT OF OUR NON-U.S. SOURCE INTEREST INCOME OR OUR DIVIDEND INCOME (OR ANY OTHER TYPE OF INCOME OTHER THAN GENERALLY OUR NON-CONTINGENT U.S.-SOURCE INTEREST INCOME RECEIVED FROM UNRELATED OBLIGORS AND OUR QUALIFIED SHORT-TERM CAPITAL GAINS). IN THE CASE OF UNITS HELD THROUGH AN INTERMEDIARY, THE INTERMEDIARY MAY WITHHOLD U.S. FEDERAL INCOME TAX EVEN IF WE REPORT THE PAYMENT AS QUALIFIED NET INTEREST INCOME OR QUALIFIED SHORT-TERM CAPITAL GAIN. BECAUSE THE UNITS WILL BE SUBJECT TO SIGNIFICANT TRANSFER RESTRICTIONS, AND AN INVESTMENT IN UNITS WILL GENERALLY BE ILLIQUID, NON-U.S. UNITHOLDERS WHOSE DISTRIBUTIONS ON UNITS ARE SUBJECT TO WITHHOLDING OF U.S. FEDERAL INCOME TAX MAY NOT BE ABLE TO TRANSFER THEIR UNITS EASILY OR QUICKLY OR AT ALL.
To the extent OID and PIK interest constitute a portion of our income, we will be exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash representing such income.
Our investments may include OID instruments and PIK interest arrangements, which represents contractual interest added to a loan balance and due at the end of such loan’s term. To the extent OID or PIK interest constitute a portion of our income, we are exposed to typical risks associated with such income being required to be included in taxable and accounting income prior to receipt of cash, including the following:
•The higher interest rates of OID and PIK instruments reflect the payment deferral and increased credit risk associated with these instruments, and OID and PIK instruments generally represent a significantly higher credit risk than coupon loans.
•Even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is supposed to occur at the maturity of the obligation.
•OID and PIK instruments may have unreliable valuations because their continuing accruals require continuing judgments about the collectability of the deferred payments and the value of any associated collateral. OID and PIK income may also create uncertainty about the source of our cash distributions.
•For accounting purposes, any cash distributions to Unitholders representing OID and PIK income are not treated as coming from paid-in capital, even if the cash to pay them comes from offering proceeds. As a result, despite the fact that a distribution representing OID and PIK income could be paid out of amounts invested by our Unitholders, the Investment Company Act does not require that Unitholders be given notice of this fact by reporting it as a return of capital.
In addition, investments in PIK and OID instruments may provide certain benefits to the Investment Adviser, including increasing management fees and incentive fees prior to the receipt of cash with respect to accrued interest payments.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES.
We maintain our principal executive office at 200 West Street, New York, New York 10282. We do not own any real estate.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings, including proceedings relating to the enforcement of our rights under loans to or other contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II.

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED UNITHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information
There is currently no public market for the Units, and we do not expect one to develop in the future.
Unitholders
On October 6, 2022, the Initial Member, an affiliate of our Investment Adviser, made an initial capital contribution to us of $10,000, and was the sole owner of our membership interests until the Initial Drawdown Date. We did not raise additional capital prior to the Initial Drawdown Date, at which point we raised capital from the issuance and sale of privately offered Units. On the Initial Drawdown Date, we called investor capital, and, upon receipt of investor funds, we issued 1.5 million Units.
As of March 4, 2025, there were approximately two holders of record of our Units.
Sales of Unregistered Securities
The following table summarizes the total Units issued and proceeds received related to capital drawdowns:
Unit Issue Date
Units Issued
Proceeds Received
($ in millions)
For the Year Ended December 31, 2024
May 24, 2024
1,134,153
$
22.50
June 17, 2024
1,878,400
37.50
July 5, 2024
1,863,521
37.50
August 15, 2024
3,756,273
75.00
November 15, 2024
1,875,000
37.50
Total capital drawdowns
10,507,347
$
210.00
For the Year Ended December 31, 2023
September 18, 2023
1,906,612
$
37.50
October 31, 2023
1,887,267
37.50
Total capital drawdowns
3,793,879
$
75.00
Each of the above issuances and sales of the Units was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2) of the Securities Act and Regulation D or Regulation S under the Securities Act. Each purchaser of Units was required to represent that it is (i) either an “accredited investor” as defined in Rule 501 of Regulation D under the Securities Act or, in the case of Units sold outside the United States, not a “U.S. person” in accordance with Regulation S of the Securities Act and (ii) was acquiring the Units for investment and not with a view to resell or distribute. We do not engage in general solicitation or advertising and do not offer securities to the public, in connection with such issuances and sales.
Because the Units were acquired by investors in one or more transactions “not involving a public offering,” they are “restricted securities” and may be required to be held indefinitely. Our Units may not be sold, transferred, assigned, pledged or otherwise disposed of unless (i) our consent is granted, and (ii) the sale, transfer, assignment, pledge or other disposal of Units is registered under applicable securities laws or specifically exempted from registration (in which case the Unitholder may, at our option, be required to provide us with a legal opinion, in form and substance satisfactory to us, that registration is not required). Accordingly, an investor must be willing to bear the economic risk of investment in the Units until we are liquidated. No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of Units may be made except by registration of the transfer on our books. Each transferee will be required to execute the LLC Agreement of the Company pursuant to which they will agree to be bound by these restrictions and the other restrictions imposed on the Units.
Distributions
Subject to the requirements of Section 852(a) of the Code and the terms of any indebtedness or Preferred Units, we intend to (i) distribute quarterly investment income (i.e., proceeds received in respect of interest payments, dividends or fees as opposed to proceeds received in connection with the disposition or repayment of an investment), and (ii) distribute substantially all of our investment company taxable income and net capital gain for each taxable year in order to maintain our qualification for tax treatment as a RIC.
Depending on the level of taxable income and net capital gain earned in a year, we may retain certain net capital gain for reinvestment and carry forward taxable income for distribution in the following year and pay any applicable tax. Distributions will generally be made among Unitholders pro rata on a per Unit basis (subject to adjustments for withholding tax). However, no distribution shall be made to a Unitholder to the extent not permitted under applicable law.
Upon our liquidation, after payment or provision for payment of our debts and other liabilities and subject to the prior rights of any outstanding Preferred Units, our remaining net assets will be distributed among Unitholders equally on a per Unit basis (subject to the payment of the Incentive Fee and our other expenses).
The following table summarizes the distributions declared on our Units and Units distributed pursuant to the DRIP (as defined below) to Unitholders who had not opted out of the DRIP:
Date Declared
Record Date
Payment Date
Amount Per Unit
Units
For the Year Ended December 31, 2024
February 27, 2024
April 2, 2024
April 29, 2024
$
0.43
(1)
190,814
May 1, 2024
July 2, 2024
July 30, 2024
$
0.35
211,833
August 7, 2024
October 2, 2024
November 1, 2024
$
0.39
351,530
November 7, 2024
December 31, 2024
January 29, 2025
$
0.45
456,719
For the Year Ended December 31, 2023
November 1, 2023
December 29, 2023
January 29, 2024
$
0.59
261,789
(1)$0.05 is considered a capital gain distribution.
Distribution Reinvestment Plan
We have adopted an “opt out” distribution reinvestment plan (the "DRIP"). As a result, if we declare a distribution in accordance with “-Distributions” above, the Unitholders will have their distributions automatically reinvested by the plan administrator, as agent for the Unitholders in administering the DRIP, in additional Units of the same class of Units to which the distribution relates unless a Unitholder specifically “opts out” of the DRIP and elects to receive distributions in cash.
Participation in the DRIP is completely voluntary. A Unitholder may “opt out” of the DRIP and elect to receive distributions in cash at any time by notifying the plan administrator in writing so that such notice is received by the plan administrator no later than ten (10) calendar days prior to the record date for the distribution, otherwise the election will be effective only with respect to any subsequent distribution. The plan administrator will set up an account for each Unitholder who does not “opt out” of the DRIP in order to acquire Units in non-certificated form through the plan. Unitholders who hold Units through a broker or other financial intermediary may opt out of the DRIP by notifying their broker or other financial intermediary of their election.
We will use newly issued Units to implement the DRIP. The number of Units to be issued to a Unitholder is determined by dividing the total dollar amount of the distribution payable to such Unitholder, net of any applicable withholding tax, by the then-current NAV per Unit. For purposes of this calculation, the NAV per Unit may be based on the NAV per Unit calculated at the end of the most recent calendar month prior to the date of the applicable distribution, subject to adjustments for material changes and to the limitations of the Investment Company Act (which generally prohibit us from issuing Units at a price below the then-current NAV of the Units as determined within 48 hours, excluding Sundays and holidays, of such issuance, subject to certain exceptions). The number of Units to be outstanding after giving effect to payment of a distribution cannot be established until the value per Unit at which additional Units will be issued has been determined and the elections of the Unitholders have been tabulated.
There will be no brokerage or other charges to Unitholders who participate in the plan. The DRIP administrator’s fees under the plan will be paid by us.
Unitholders who elect to have their distributions reinvested in additional Units are generally subject to the same U.S. federal, state and local tax consequences as if they have received the distributions in cash. However, since a participating Unitholder’s cash distributions would be reinvested in Units, such Unitholder will not receive cash with which to pay applicable taxes on reinvested distributions. A Unitholder’s basis for U.S. federal income tax purposes in the Units received from us pursuant to the DRIP will generally be equal to the amount of cash that would have been received if the Unitholder had received the distribution in cash. Any Units received in a distribution will have a new holding period for tax purposes commencing on the day following the day on which such Units are credited to the Unitholder’s account. Further, in the event that following the Commitment Period, a majority-in-interest of the Unitholders indicates their desire to elect to cause us to suspend the reinvestment of proceeds in new investments (other than Additional Investments), the DRIP shall be terminated automatically on the 60th day following receipt of such notice.
We may terminate the DRIP upon notice in writing mailed to each participant at least 60 days prior to any record date for the payment of any distribution by us.
Recycling
Subject to the requirements of Section 852(a) of the Code and the terms of any indebtedness or Preferred Units, proceeds realized by us from the sale or repayment of any investment (as opposed to investment income) may be retained and reinvested by us at any time during our life; provided that, following the Commitment Period, upon sixty at least (60) days’ written notice from a majority-in-interest of Unitholders indicating their desire to elect to cause us to suspend such reinvestment of proceeds in new investments (other than Additional Investments), we shall suspend such reinvestment of proceeds until such date as a majority-in-interest of Unitholders provides written notice electing to begin reinvesting again. Any amounts so reinvested will not reduce a Unitholder’s Undrawn Commitment.
To the extent that we retain net capital gains for reinvestment or carry forward taxable income for distribution in the following year, there may be certain tax consequences to us and our Unitholders.

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. [RESERVED]

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and other parts of this report contain forward-looking information that involves risks and uncertainties. References to “we,” “us,” “our,” and the “Company,” mean Phillip Street Middle Market Lending Fund LLC or Phillip Street Middle Market Lending Fund LLC, together with its consolidated subsidiaries, as the context may require. The terms “GSAM,” “Goldman Sachs Asset Management,” our “Adviser” or our “Investment Adviser” refer to Goldman Sachs Asset Management, L.P., a Delaware limited partnership. The term “GS Group Inc.” refers to The Goldman Sachs Group, Inc. “GS & Co.” refers to Goldman Sachs & Co. LLC and its predecessors. The term “Goldman Sachs” refers to GS Group Inc., together with GS & Co., GSAM and its other subsidiaries and affiliates. The discussion and analysis contained in this section refer to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. Please see “Cautionary Statement Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with this discussion and analysis. Our actual results could differ materially from those anticipated by such forward-looking information due to factors discussed under “Cautionary Statement Regarding Forward-Looking Statements” appearing elsewhere in this report.
OVERVIEW
We are a specialty finance company focused on lending to middle-market companies. We are a closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the "Investment Company Act"). In addition, we have elected to be treated as a regulated investment company ("RIC"), and we expect to qualify annually for tax treatment, as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2022. From our formation in 2022 through December 31, 2024, we originated approximately $860.7 million in aggregate principal amount of debt investments prior to any subsequent exits and repayments. We seek to generate current income and, to a lesser extent, capital appreciation primarily through direct originations of secured debt, including first lien, unitranche debt, including last-out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments.
“Unitranche” loans are first lien loans that extend deeper in a borrower’s capital structure than traditional first lien debt and may provide for a waterfall of cash flow priority between different lenders in such loan. In a number of instances, we may find another lender to provide the “first-out” portion of a unitranche loan while we retain the “last-out” portion of such loan, in which case, the “first-out” portion of the loan would generally receive priority with respect to the payment of principal, interest and any other amounts due thereunder as compared to the “last-out” portion that we would continue to hold. In exchange for taking greater risk of loss, the “last-out” portion generally earns a higher interest rate than the “first-out” portion of the loan. We use the term “mezzanine” to refer to debt that ranks senior in right of payment only to a borrower’s equity securities and ranks junior in right of payment to all of such borrower’s other indebtedness. We may make multiple investments in the same portfolio company.
We may also originate or invest in “covenant-lite” loans, which are loans with fewer financial maintenance covenants than other obligations, or no financial maintenance covenants. Such covenant-lite loans may not include terms that allow the lender to monitor the performance of the borrower or to declare a default if certain criteria are breached. These flexible covenants (or the absence of covenants) could permit borrowers to experience a significant downturn in their results of operations without triggering any default that would permit holders of their debt (such as us) to accelerate indebtedness or negotiate terms and pricing. Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with financial maintenance covenants. Therefore, our investments may result in an above-average amount of risk and volatility or loss of principal. We also may invest in other assets, including cash equivalents, U.S. government securities and other short-term investments, as described above. These investments entail additional risks that could adversely affect our investment returns.
We expect to invest, under normal circumstances, at least 90% of our net assets (plus any borrowings for investment purposes) in private middle-market credit obligations and related instruments. We define “credit obligations and related instruments” for this purpose as any fixed-income instrument, including loans to, and bonds, preferred stock of and other instruments, portfolio companies that provide exposure to fixed-income instruments. These other instruments may not by definition be fixed-income instruments, but structurally have the underlying investment risk and return profile and income-payment profile of fixed-income instruments. “Middle market” is used to refer to companies with between $5 million and $200 million of annual EBITDA, adjusted for certain one-time and non-recurring expenses that are outside the ordinary operations of these companies, along with companies that we determine, based on other metrics, including recurring revenue or tower cash flow, are middle market companies. Following such time that the aggregate amount of capital contributions to us made by Unitholders equals or exceeds $450 million, but subject to market conditions and the availability of suitable investment opportunities, we generally expect to target allocations among private middle-market credit obligations and related instruments in the following ratios: (i) 45% to companies with between $5 million and $25 million of EBITDA, and (ii) 55% to companies with between $25 million and $75 million of EBITDA, in each case adjusted for certain one-time and non-recurring expenses that are outside the ordinary operations of these companies. Notwithstanding the foregoing, we may invest on an opportunistic basis in credit obligations of private middle-market companies with EBITDA outside of the foregoing ranges, including credit obligations of companies that we believe are middle market companies based on metrics such as recurring revenue and tower cash flow, as opposed to EBITDA. In addition, as a result of fluctuations in the asset value of one asset relative to another asset, private middle-market credit obligations and related instruments may not reflect the foregoing targets or may represent less than 90% of our net assets (plus any borrowings for investment purposes) at any time. However, we may not invest, under normal circumstances, more than 20% of our net assets (plus any borrowings for investment purposes) in securities and other instruments that are not private middle-market credit obligations. In addition, we are subject to the investment guidelines, which are further described in “Item 1. Business-Investment Criteria.”
We expect to invest in middle-market companies domiciled in the United States. We may from time to time invest opportunistically in large U.S. companies, stressed or distressed debt, structured products, private equity or other opportunities, subject to the investment guidelines and the limits imposed by the Investment Company Act.
While we expect our investment program to focus primarily on debt investments, our investments may include equity or equity features, such as a direct investment in the equity or convertible securities of a portfolio company or warrants or options to buy a minority interest in a portfolio company. Any warrants we may receive with debt securities will generally require only a nominal cost to exercise, so as a portfolio company appreciates in value, we may achieve additional investment return from these equity investments. We may structure the warrants to provide provisions protecting our rights as a minority-interest holder, as well as puts, or rights to sell such securities back to the portfolio company, upon the occurrence of specified events. In many cases, we may also obtain registration rights in connection with these equity investments, which may include demand and “piggyback” registration rights (which would allow us to have equity securities from an investment in a portfolio company registered for public offering in connection with a planned registration of such equity securities by the portfolio company).
For a discussion of the competitive landscape we face, please see “Item 1A. Risk Factors-Risks Relating to Competition-We operate in a highly competitive market for investment opportunities” and “Item 1. Business-Competitive Advantages.”
KEY COMPONENTS OF OPERATIONS
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make.
As a BDC, we generally will be prohibited from acquiring assets other than qualifying assets unless, after giving effect to any acquisition, at least 70% of our total assets are qualifying assets. Qualifying assets generally include securities of eligible portfolio companies, cash, cash equivalents, U.S. government securities and high-quality debt instruments maturing in one year or less from the time of investment. Under the Investment Company Act and the rules thereunder, “eligible portfolio companies” include (i) private U.S. operating companies, (ii) public U.S. operating companies whose securities are not listed on a national securities exchange (e.g., the New York Stock Exchange) or registered under the Exchange Act, and (iii) public U.S. operating companies having a market capitalization of less than $250 million. Public U.S. operating companies whose securities are quoted on the over-the-counter bulletin board and through OTC Markets are not listed on a national securities exchange and therefore are eligible portfolio companies.
Revenues
We generate revenues in the form of interest income on debt investments and, to a lesser extent, capital gains and distributions, if any, on equity securities that we may acquire in portfolio companies. Some of our investments may provide for deferred interest payments or payment-in-kind (“PIK”) income. The principal amount of the debt investments and any accrued but unpaid interest generally becomes due at the maturity date.
We generate revenues primarily through receipt of interest income from the investments we hold. In addition, we may generate revenue in the form of commitment, origination, structuring, syndication, exit fees or diligence fees, fees for providing managerial assistance and consulting fees. Portfolio company fees (directors’ fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) will be paid to us, unless, to the extent required by applicable law or exemptive relief, if any, therefrom, we receive our allocable portion of such fees when invested in the same portfolio company as other client accounts managed by our Investment Adviser (collectively with the Company, the “Accounts”), which other Accounts could receive their allocable portion of such fee. We do not expect to receive material fee income as it is not our principal investment strategy. We record contractual prepayment premiums on loans and debt securities as interest income.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Interest and dividend income are presented net of withholding tax, if any.
Expenses
Our primary operating expenses include the payment of the management fee (the “Management Fee”) and the incentive fee (the “Incentive Fee”) to our Investment Adviser, legal and professional fees, interest and other debt expenses and other operating and overhead related expenses. The Management Fee and Incentive Fee compensate our Investment Adviser for its work in identifying, evaluating, negotiating, closing and monitoring our investments. We bear all other expenses of our operations and transactions in accordance with the investment management and advisory agreement (the “Investment Management Agreement”) and administration agreement (the “Administration Agreement”), including:
•our operational, offering and organizational expenses;
•fees and expenses, including travel expenses, incurred by our Investment Adviser or payable to third parties related to our investments, including, among others, professional fees (including the fees and expenses of consultants and experts) and fees and expenses from evaluating, monitoring, researching and performing due diligence on investments and prospective investments;
•interest, fees and other expenses payable on indebtedness for borrowed money (including through the issuance of notes and other evidence of indebtedness), other indebtedness, financings or extensions of credit, if any, incurred by us;
•fees and expenses incurred by us in connection with membership in investment company organizations;
•brokers’ commissions;
•fees and expenses associated with calculating our NAV (including expenses of any independent valuation firm);
•legal, auditing or accounting expenses;
•taxes or governmental fees;
•the fees and expenses of our administrator, transfer agent or sub-transfer agent;
•the cost of preparing unit certificates or any other expenses, including clerical expenses of issue or repurchase of our common units of our limited liability company interests (the "Units");
•the expenses of and fees for registering or qualifying our Units for sale and of maintaining our registration or qualifying and registering us as a broker or a dealer;
•the fees and expenses of our directors who are not affiliated with our Investment Adviser;
•the cost of preparing and distributing reports, proxy statements and notices to our Unitholders, the SEC and other regulatory authorities;
•costs of holding Unitholder meetings;
•the fees or disbursements of custodians of our assets, including expenses incurred in the performance of any obligations enumerated by limited liability company agreement or other organizational documents insofar as they govern agreements with any such custodian;
•insurance premiums; and
•costs incurred in connection with any claim, litigation, arbitration, mediation, government investigation or dispute in connection with our business and the amount of any judgment or settlement paid in connection therewith, or the enforcement of our rights against any person and indemnification or contribution expenses payable by us to any person and other extraordinary expenses not incurred in the ordinary course of our business.
Our Investment Adviser will not be required to pay expenses of activities which are primarily intended to result in sales of Units.
We expect our general and administrative expenses to be relatively stable or decline as a percentage of total assets during periods of asset growth and to increase during periods of asset declines.
Leverage
We expect from time to time to borrow funds for a variety of purposes, subject to the limitations of the Investment Company Act, including to bridge fundings for investments in advance of drawdowns, as part of our investment strategy and to meet other short-term liquidity needs, including to pay the Management Fee. Sources of leverage include the issuance of senior securities (including preferred stock) and other credit facilities (secured by investments and/or pledges of undrawn commitments). Our secured credit facility (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”) with Ally Bank, as administrative agent, allows us to borrow money and lever our investment portfolio, subject to the limitations of the Investment Company Act, with the objective of increasing our yield. This is known as “leverage” and could increase or decrease returns to our Unitholders. The use of leverage involves significant risks. We are permitted to borrow amounts such that our asset coverage ratio, as defined in the Investment Company Act, is at least 150% after such borrowing (if certain requirements are met).
Certain trading practices and investments, such as reverse repurchase agreements, may be considered borrowings or involve leverage and thus may be subject to Investment Company Act restrictions. Short-term credits necessary for the settlement of securities transactions and arrangements with respect to securities lending will not be considered borrowings for these purposes. Practices and investments that may involve leverage but are not considered borrowings are not subject to the Investment Company Act’s asset coverage requirement. The amount of leverage that we employ will depend on the assessment by our Investment Adviser and our board of directors (the “Board of Directors” or the “Board”) of market conditions and other factors at the time of any proposed borrowing.
PORTFOLIO AND INVESTMENT ACTIVITY
Our portfolio (excluding investments in money market funds, if any) consisted of the following:
As of
December 31, 2024
December 31, 2023
Amortized Cost
Fair Value
Amortized Cost
Fair Value
($ in millions)
($ in millions)
First Lien/Senior Secured Debt
$
562.62
$
562.47
$
149.45
$
149.83
First Lien/Last-Out Unitranche
39.67
39.64
27.54
27.59
Common Stock
2.25
2.31
-
-
Total investments
$
604.54
$
604.42
$
176.99
$
177.42
The weighted average yield by asset type of our portfolio (excluding investments in money market funds, if any), at amortized cost and fair value, was as follows:
As of
December 31, 2024
December 31, 2023
Amortized Cost
Fair Value
Amortized Cost
Fair Value
Weighted Average Yield(1)
First Lien/Senior Secured Debt(2)
10.2
%
10.2
%
12.7
%
12.7
%
First Lien/Last-Out Unitranche(2)(3)
11.1
%
11.1
%
12.1
%
12.1
%
Common Stock(4)
-
-
-
-
Total Portfolio
10.2
%
10.2
%
12.6
%
12.6
%
(1)The weighted average yield of our portfolio does not represent the total return to our Unitholders.
(2)Computed based on (a) the annual actual interest rate or yield earned plus amortization of fees and discounts on the performing debt and other income producing investments as of the reporting date, divided by (b) the total investments (including investments on non-accrual status and non-income producing investments) at amortized cost or fair value.
(3)The calculation includes incremental yield earned on the "last-out" portion of the unitranche loan investments.
(4)Computed based on (a) the stated coupon rate, if any, for each income-producing investment, divided by (b) the total investments (including investments on non-accrual status and non-income producing investments) at amortized cost or fair value.
As of December 31, 2024, the total portfolio weighted average yield measured at amortized cost and fair value was 10.2% and 10.2%, as compared to 12.6% and 12.6%, as of December 31, 2023. The decrease in total portfolio weighted average yield at amortized cost and fair value, and within First Lien/Senior Secured Debt and First Lien/Last-Out Unitranche weighted average yield at cost and fair value, was due to a decline in interest rates.
The following table presents certain selected information regarding our investment portfolio (excluding investments in money market funds, if any):
As of
December 31, 2024
December 31, 2023
Number of portfolio companies
Percentage of performing debt bearing a floating rate(1)
100.0
%
100.0
%
Percentage of performing debt bearing a fixed rate(1)(2)
-
%
-
%
Weighted average leverage (net debt/EBITDA)(3)
5.4
x
4.9
x
Weighted average interest coverage(3)
2.1
x
1.7
x
Median EBITDA(3)
$
76.31 million
$
56.78 million
(1)
Measured on a fair value basis. Excludes investments, if any, placed on non-accrual status.
(2)
Includes income producing preferred stock investments, if applicable.
(3)
For a particular portfolio company, we calculate the level of contractual indebtedness net of cash (“net debt”) owed by the portfolio company and compare that amount to measures of cash flow available to service the net debt. To calculate net debt, we include debt that is both senior and pari passu to the tranche of debt owned by us but exclude debt that is legally and contractually subordinated in ranking to the debt owned by us. We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual rights of repayment of the tranche of debt owned by us relative to other senior and junior creditors of a portfolio company. We typically calculate cash flow available for debt service at a portfolio company by taking EBITDA for the trailing twelve-month period. Weighted average net debt to EBITDA is weighted based on the fair value of our debt investments, excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
For a particular portfolio company, we also calculate the level of contractual interest expense owed by the portfolio company and compare that amount to EBITDA (“interest coverage ratio”). We believe this calculation method assists in describing the risk of our portfolio investments, as it takes into consideration contractual interest obligations of the portfolio company. Weighted average interest coverage is weighted based on the fair value of our performing debt investments, excluding investments where interest coverage may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
Median EBITDA is based on our debt investments, excluding investments where net debt to EBITDA may not be the appropriate measure of credit risk, such as cash collateralized loans and investments that are underwritten and covenanted based on recurring revenue.
Portfolio company statistics are derived from the most recently available financial statements of each portfolio company as of the reported end date. Statistics of the portfolio companies have not been independently verified by us and may reflect a normalized or adjusted amount.
As of December 31, 2024 and December 31, 2023, investments where net debt to EBITDA may not be the appropriate measure of credit risk represented 11.8% and 35.7% of total debt investments at fair value.
Our Investment Adviser monitors, on an ongoing basis, the financial trends of each portfolio company to determine if it is meeting its respective business plan and to assess the appropriate course of action for each portfolio company. Our Investment Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following: (i) assessment of success in adhering to the portfolio company’s business plan and compliance with covenants; (ii) periodic or regular contact with portfolio company management and, if appropriate, the financial or strategic sponsor to discuss financial position, requirements and accomplishments; (iii) comparisons to our other portfolio companies in the industry, if any; (iv) attendance at and participation in Board meetings or presentations by portfolio companies; and (v) review of monthly and quarterly financial statements and financial projections of portfolio companies.
As part of the monitoring process, our Investment Adviser also employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our Investment Adviser grades the credit risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account in certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. The grading system for our investments is as follows:
•	Grade 1 investments involve the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit;
•	Grade 2 investments involve a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 2;
•	Grade 3 investments indicate that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 120 days past due; and
•	Grade 4 investments indicate that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 4, in most cases, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 4, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit.
Our Investment Adviser grades the investments in our portfolio at least each quarter and it is possible that the grade of a portfolio investment may be reduced or increased over time. For investments graded 3 or 4, our Investment Adviser enhances its level of scrutiny over the monitoring of such portfolio company. The following table shows the composition of our portfolio (excluding investments in money market funds, if any) on the 1 to 4 grading scale:
As of
December 31, 2024
December 31, 2023
Investment Performance Rating
Fair Value
Percentage of
Total
Fair Value
Percentage of
Total
(in millions)
(in millions)
Grade 1
$
-
-
%
$
-
-
%
Grade 2
604.42
100.0
177.42
100.0
Grade 3
-
-
-
-
Grade 4
-
-
-
-
Total Investments
$
604.42
100.0
%
$
177.42
100.0
%
The following table shows the amortized cost of our performing and non-accrual investments (excluding investments in money market funds, if any):
As of
December 31, 2024
December 31, 2023
Amortized Cost
Percentage of
Total
Amortized Cost
Percentage of
Total
(in millions)
(in millions)
Performing
$
604.54
100.0
%
$
176.99
100.0
%
Non-accrual
-
-
-
-
Total Investments
$
604.54
100.0
%
$
176.99
100.0
%
Investments are placed on non-accrual status when it is probable that principal, interest or dividends will not be collected according to the contractual terms. Accrued interest or dividends generally are reversed when an investment is placed on non-accrual status. Interest or dividend payments received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual investments are restored to accrual status when past due principal and interest or dividends are paid and, in management’s judgment, principal and interest or dividend payments are likely to remain current. We may make exceptions to this treatment if the loan has sufficient collateral value and is in the process of collection.
The following table shows our investment activity by investment type(1):
For the Year Ended December 31,
For the Year Ended December 31,
($ in millions)
Amount of investments committed at cost:
First Lien/Senior Secured Debt
$
612.02
$
178.84
First Lien/Last-Out Unitranche
4.95
43.16
Common Stock
2.25
-
Total
$
619.22
$
222.00
Proceeds from investments sold or repaid:
First Lien/Senior Secured Debt
$
54.11
$
15.36
Total
$
54.11
$
15.36
Net increase in portfolio
$
565.11
$
206.64
Number of new portfolio companies with new investment commitments
Total new investment commitment amount in new portfolio companies
$
533.71
$
210.62
Average new investment commitment amount in new portfolio companies
14.4
8.1
Number of existing portfolio companies with new investment commitments
Total new investment commitment amount in existing portfolio companies
$
85.51
$
11.38
Weighted average remaining term for new investment commitments (in years)(2)
5.9
5.1
Percentage of new debt investment commitments at floating interest rates
96.0
%
100.0
%
Percentage of new debt investment commitments at fixed interest rates(3)
-
%
-
%
Weighted average yield on new debt and income producing investment commitments(4)
10.4
%
12.5
%
Weighted average yield on new investment commitments(5)
10.3
%
12.5
%
Weighted average yield on debt and income producing investments sold or repaid(6)
10.6
%
12.7
%
Weighted average yield on investments sold or repaid(7)
10.6
%
12.7
%
(1)New investment commitments are shown net of capitalized fees, expenses and original issue discount (“OID”) that occurred at the initial close. Figures for new investment commitments may also include positions originated during the period but not held at the reporting date. Figures for investments sold or repaid, excludes unfunded commitments that may have expired or otherwise been terminated without receipt of cash proceeds or other consideration.
(2)Calculated as of the end of the relevant period and the maturity date of the individual investments.
(3)May include preferred stock investments.
(4)Computed based on (a) the annual actual interest rate on new debt and income producing investment commitments, divided by (b) the total new debt and income producing investment commitments. The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes investments that are on non-accrual status. The annual actual interest rate used is as of the respective quarter end date when the investment activity occurred.
(5)Computed based on (a) the annual actual interest rate on new investment commitments, divided by (b) the total new investment commitments (including investments on non-accrual status and non-income producing investments). The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments. The annual actual interest rate used is as of the respective quarter end date when the investment activity occurred.
(6)Computed based on (a) the annual actual interest rate on debt and income producing investments sold or paid down, divided by (b) the total debt and income producing investments sold or paid down. The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes prepayment premiums earned on exited investments and investments that are on non-accrual status.
(7)Computed based on (a) the annual actual interest rate on investments sold or paid down, divided by (b) the total investments sold or paid down (including investments on non-accrual status and non-income producing investments). The calculation includes incremental yield earned on the “last-out” portion of the unitranche loan investments and excludes prepayment premiums earned on exited investments.
RESULTS OF OPERATIONS
The comparison for the years ended December 31, 2023 and for the period from October 6, 2022 (commencement of operations) to December 31, 2022 can be found in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Form 10-K for the fiscal year ended December 31, 2023.
Our operating results were as follows:
For the Year Ended December 31,
For the Year Ended December 31,
($ in millions)
Total investment income
$
42.41
$
11.63
Net expenses
(17.70
)
(7.01
)
Net investment income (loss)
24.71
4.62
Net realized gain (loss) on investments
-
(1)
0.02
Net unrealized appreciation (depreciation) on investments
(0.55
)
0.43
Net realized and unrealized gain (losses) on translations and transactions
0.51
-
Net realized and unrealized gains (losses)
(0.04
)
0.45
Net increase (decrease) in net assets from operations
$
24.67
$
5.07
(1) Amount rounds to less than 0.1.
Net increase in members’ capital from operations can vary from period to period as a result of various factors, including acquisitions, the level of new investment commitments, the recognition of realized gains and losses and changes in unrealized appreciation and depreciation in the investment portfolio.
Investment Income
Our investment income was as follows:
For the Year Ended December 31,
For the Year Ended December 31,
($ in millions)
Interest
$
40.67
$
9.46
Dividend income
0.88
2.04
Other income
0.86
0.13
Total investment income
$
42.41
$
11.63
Investment income for the year ended December 31, 2024 and for the year ended December 31, 2023 was driven by our deployment of capital into income producing investments.
Expenses
Our expenses were as follows:
For the Year Ended December 31,
For the Year Ended December 31,
($ in millions)
Interest and other debt expenses
$
10.75
$
2.94
Incentive fees
1.73
0.21
Management fees
3.49
1.44
Directors’ fees
0.12
0.14
Professional fees
0.70
0.88
Offering costs
-
1.00
Other general and administrative expenses
0.91
0.69
Total expenses
$
17.70
7.30
Management fee waiver
-
(0.29
)
Net Expenses
$
17.70
$
7.01
In the table above:
•Interest and other debt expenses increased from $2.94 million for the year ended December 31, 2023 to $10.75 million for the year ended December 31, 2024. The increase was primarily driven by an increase in our aggregate borrowings outstanding during the year.
•Incentive Fees increased from $0.21 million for the year ended December 31, 2023 to $1.73 million for the year ended December 31, 2024. The increase was primarily driven by the performance of the investment portfolio. For additional information, see Note 3 “Significant Agreements and Related Party Transactions” in our consolidated financial statements included in this report.
•Management Fees increased from $1.44 million for year ended December 31, 2023 to $3.49 million for the year ended December 31, 2024. The increase was primarily driven by an increase in members' capital. For the year ended December 31, 2024, the Investment Adviser voluntarily waived $0 of its Management Fees. For the year ended December 31, 2023, the Investment Adviser voluntarily waived $0.29 million of its Management Fees.
•Offering costs decreased from $1.00 million for the year ended December 31, 2023 to $0 million for the year ended December 31, 2024. The decrease was primarily due to Offering costs being amortized on a straight-line basis over 12 months beginning on the date of commencement of operations.
Net Change in Unrealized Appreciation (Depreciation) on Investments
Any changes in fair value are recorded as a change in unrealized appreciation (depreciation) on investments. For further details on the valuation process, refer to Note 2 “Significant Accounting Policies-Investments” in our consolidated financial statements. Net change in unrealized appreciation (depreciation) on investments were as follows:
For the Year Ended December 31,
($ in millions)
Unrealized appreciation
$
1.94
$
0.59
Unrealized depreciation
(2.49
)
$
(0.16
)
Net change in unrealized appreciation (depreciation) on investments
$
(0.55
)
$
0.43
The net change in unrealized appreciation (depreciation) on investments consisted of the following:
For the Year Ended December 31,
($ in millions)
Portfolio company:
NCWS Intermediate, Inc. (dba National Carwash Solutions)
$
(0.71
)
Hamilton Thorne, Inc.
(0.50
)
Sonar Acquisitionco, Inc. (dba SimPRO)
(0.25
)
TM Restaurant Group LLC
(0.18
)
Artifact Bidco, Inc. (dba Avetta)
(0.08
)
Other, net (1)
0.02
Onyx CenterSource, Inc.
0.12
Singlewire Software, LLC
0.13
ASM Buyer, Inc.
0.22
Spotless Brands, LLC
0.22
VASA Fitness Buyer, Inc.
0.22
Fullsteam Operations LLC
0.24
Total
$
(0.55
)
(1) For the year ended December 31, 2024, Other, net includes gross unrealized appreciation of $0.78 million and gross unrealized depreciation of $(0.76) million.
For the Year Ended December 31,
($ in millions)
Portfolio Company:
Other, net (1)
$
0.18
DFS Holding Company, Inc.
0.06
Fullsteam Operations LLC
0.05
GPS Phoenix Buyer, Inc. (dba Guidepoint)
(0.01
)
Harrington Industrial Plastics, LLC
(0.01
)
Rubrik, Inc.
(0.01
)
Singlewire Software, LLC
0.08
Spotless Brands, LLC
0.11
TM Restaurant Group LLC
(0.13
)
UP Acquisition Corp. (dba Unified Power)
-
VASA Fitness Buyer, Inc.
0.11
Total
$
0.43
(1) For the year ended December 31, 2023, Other, net includes gross unrealized appreciation of $0.19 million and gross unrealized depreciation of $(0.01) million.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The primary use of existing funds and any funds raised in the future is expected to be for our investments in portfolio companies, cash distributions to our Unitholders or for other general corporate purposes, including paying for operating expenses or debt service to the extent we borrow or issue senior securities.
We expect to generate cash primarily from the net proceeds of any future offerings of our Units, drawdowns of capital commitments, future borrowings and cash flows from operations. Subject to the terms of our Amended and Restated Limited Liability Company Agreement (as it may be amended or amended and restated from time to time, the “LLC Agreement”), to the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our Board of Directors otherwise determines that leveraging our portfolio would be in our best interest and the best interests of our Unitholders, we may enter into credit facilities in addition to our Credit Facility, or issue other senior securities. Subject to the terms of the LLC Agreement, we would expect any such credit facilities may be secured by certain of our assets and may contain advance rates based upon pledged collateral. The pricing and other terms of any such facilities would depend upon market conditions when we enter into any such facilities as well as the performance of our business, among other factors. As a BDC, with certain limited exceptions, we are only permitted to borrow amounts such that our asset coverage ratio, as defined in the Investment Company Act, is at least 150% after such borrowing (if certain requirements are met). We may also refinance or repay any of our indebtedness at any time based on our financial condition and market conditions. As of December 31, 2024 and December 31, 2023, our asset coverage ratio based on the aggregate amount outstanding of our senior securities was 283% and 1,053%. We may also refinance or repay any of our indebtedness at any time based on our financial condition and market conditions.
We may enter into investment commitments through signed commitment letters, that may ultimately become investment transactions in the future. We regularly evaluate and carefully consider our unfunded commitments using GSAM’s proprietary risk management framework for the purpose of planning our capital resources and ongoing liquidity, including our financial leverage.
An affiliate of the Investment Adviser made a capital commitment to us of $10,000 on October 6, 2022 (commencement of operations) and served as our initial member (the “Initial Member”). We began accepting subscription agreements (the “Subscription Agreements”) from investors acquiring Units in our private offering. Under the terms of the Subscription Agreements, investors are required to make capital contributions up to the amount of their undrawn capital commitment to purchase Units each time we deliver a drawdown notice.
As of the dates indicated, we had aggregate capital commitments and undrawn capital commitments from investors as follows:
December 31, 2024
December 31, 2023
Capital
Commitments
($ in millions)
Unfunded
Capital
Commitments
($ in millions)
% of Capital
Commitments
Funded
Capital
Commitments
($ in millions)
Unfunded
Capital
Commitments
($ in millions)
% of Capital
Commitments
Funded
Common Units
$
750.01
$
367.50
%
$
750.01
$
577.50
%
The following table summarizes the total Units issued and proceeds related to capital drawdowns:
Unit Issue Date
Units Issued
Proceeds Received
($ in millions)
For the Year Ended December 31, 2024
May 24, 2024
1,134,153
$
22.50
June 17, 2024
1,878,400
37.50
July 5, 2024
1,863,521
37.50
August 15, 2024
3,756,273
75.00
November 15, 2024
1,875,000
37.50
Total capital drawdowns
10,507,347
$
210.00
For the Year Ended December 31, 2023
September 18, 2023
1,906,612
$
37.50
October 31, 2023
1,887,267
37.50
Total capital drawdowns
3,793,879
$
75.00
Contractual Obligations
We have entered into certain contracts under which we have future commitments. Payments under the Investment Management Agreement, pursuant to which GSAM has agreed to serve as our Investment Adviser, are equal to (1) Management Fee equal to a percentage of value of our average NAV at the end of the then-current calendar quarter and the prior calendar quarter and (2) an Incentive Fee based on pre-incentive fee net investment income. Under the Administration Agreement, pursuant to which the Administrator will be responsible for providing us with various accounting and administrative services necessary to conduct our day-to-day operations, we pay our Administrator such fees as may be agreed between us and our Administrator that we determine are commercially reasonable in our sole discretion. Either party or the Unitholders, by a vote of a majority of our outstanding voting securities, may terminate the Investment Management Agreement without penalty on at least 60 days’ written notice to the other party. Either party may terminate the Administration Agreement without penalty upon at least 30 days’ written notice to the other party. The following table shows our contractual obligations as of December 31, 2024:
Payments Due by Period ($ in millions)
Total
Less Than
1 Year
1 - 3
Years
3 - 5
Years
More Than
5 Years
Credit Facility(1)
$
220.10
$
-
$
-
$
220.10
$
-
(1)Provides, under certain circumstances, a total borrowing capacity of $1 billion.
Credit Facility
Phillip Street Middle Market Lending Investments LLC (“SPV”), an indirectly wholly-owned subsidiary of the Company, entered into the Credit Facility on February 10, 2023 with Ally Bank (“Ally”) as administrative agent and collateral agent. State Street Bank and Trust Company serves as collateral custodian and securities intermediary. We serve as collateral manager under the Credit Facility.
The Credit Facility is drawable in U.S. Dollars. As of December 31, 2024, the total commitments under the Credit Facility were $500 million. The Credit Facility also has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Credit Facility to $1 billion. Proceeds from borrowings under the Credit Facility may be used to acquire portfolio loans, fund unfunded commitments with respect to loans, make distributions or pay related expenses. All amounts outstanding under the Credit Facility must be repaid by December 20, 2029.
Advances under the Credit Facility bear interest (at our election) at a per annum rate equal to either (x) Daily Simple SOFR (as defined in the Credit Facility) or (y) Term SOFR (as defined in the Credit Facility) with an Available Tenor (as defined in the Credit Facility) of either one month or three months. The applicable spread is 2.25% per annum. We paid a non-usage fee of 0.50% per annum for the first three months on the average daily unused amount of the financing commitments. Thereafter, we pay between 0.50% and 1.00% per annum, depending on the unused amount of the financing commitments, on the average daily unused amount of the financing commitments. On September 26, 2024, SPV entered into a second amendment to the Credit Facility (the "Second Amendment"). The Second Amendment, among other things, amended certain components of the Borrowing Base (as defined in the Credit Facility), resulting in an increase in the Borrowing Base. On December 20, 2024, SPV entered into a third amendment to the Credit Facility (the "Third Amendment"). The Third Amendment, among other things, extended the maturity date, decreased the applicable spread, increased the total commitments under the Credit Facility, and increased the accordion feature and amended certain components of the Borrowing Base (as defined in the Credit Facility), resulting in an increase in the Borrowing Base.
For further details, see Note 6 “Debt-Credit Facility” to our consolidated financial statements included in this report.
Off-Balance Sheet Arrangements
We may become a party to investment commitments and to financial instruments with off-balance sheet risk in the normal course of our business to fund investments and to meet the financial needs of our portfolio companies. These instruments may include commitments to extend credit and involve, to varying degrees, elements of liquidity and credit risk in excess of the amount recognized in the balance sheet. As of December 31, 2024, we believed that we had adequate financial resources to satisfy our unfunded commitments. Our unfunded commitments to provide funds to portfolio companies were as follows:
As of
December 31, 2024
December 31, 2023
($ in millions)
Unfunded Commitments
First Lien/Senior Secured Debt
$
158.55
$
37.26
First Lien/Last-Out Unitranche
8.53
15.62
Total
$
167.08
$
52.88
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Changes in the economic environment, financial markets and any other parameters used in determining such estimates could cause actual results to differ materially.
For a description of our critical accounting policies, see Note 2 “Significant Accounting Policies” to our consolidated financial statements included in this report. We consider the most significant accounting policies to be those related to our Valuation of Portfolio Investments, Revenue Recognition, Non-Accrual Investments, Distribution Policy and Income Taxes. We consider the most significant critical estimate to be the fair value measurement of investments. The critical accounting policies and estimate should be read in connection with our risk factors listed under “Risk Factors” in this report.
Fair Value Measurement of Investments
Consistent with GAAP and the Investment Company Act, we conduct a valuation of our investments, pursuant to which our NAV is determined. Our investments are valued on a quarterly basis, or more frequently if required under the Investment Company Act. The determination of fair value involves subjective judgments and estimates. The majority of investments are not quoted or traded in an active market and as such their fair values are determined using valuation techniques, primarily discounted cash flows, market multiples, and recent comparable transactions. The most significant inputs in applying the discounted cash flow approach and the market multiples approach are the selected discount rates and multiples, respectively. The selection of these inputs is based on a combination of factors that are specific to the underlying portfolio companies such as financial performance and certain factors that are observable in the market such as current interest rates and comparable public company trading multiples. Accordingly, the notes to our consolidated financial statements express the uncertainty with respect to the possible effect of these valuations and any change in these valuations on the
consolidated financial statements. For further details of our investments and fair value measurement accounting policy, see Note 2 “Significant Accounting Policies-Investments” and Note 5 “Fair Value Measurement.”
RECENT DEVELOPMENTS
We will pay a distribution equal to an amount up to our taxable earnings per Unit, including net investment income (if positive) for the period January 1, 2025 through March 31, 2025, payable on or about April 28, 2025 to Unitholders of record as of March 31, 2025.

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are subject to financial market risks, most significantly changes in interest rates. Interest rate sensitivity refers to the change in our earnings that may result from changes in the level of interest rates. Because we expect to fund a portion of our investments with borrowings, our net investment income is expected to be affected by the difference between the rate at which we invest and the rate at which we borrow. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.
As of December 31, 2024 and December 31, 2023, on a fair value basis, 100.0% of our performing debt investments bore interest at a floating rate. Our borrowings under the Credit Facility bear interest at a floating rate.
We regularly measure our exposure to interest rate risk. We assess interest rate risk and manage our interest rate exposure on an ongoing basis by comparing our interest rate sensitive assets to our interest rate sensitive liabilities.
Based on our December 31, 2024 Consolidated Statement of Financial Condition, the following table shows the annual impact on net income of base rate changes in interest rates (considering interest rate floors for variable rate instruments) assuming no changes in our investment and borrowing structure:
As of December 31, 2024
Basis Point Change
Interest
Income
Interest
Expense
Net
Income
($ in millions)
Up 300 basis points
$
14.46
$
(6.13
)
$
8.33
Up 200 basis points
9.64
(4.08
)
5.56
Up 100 basis points
4.82
(2.04
)
2.78
Up 75 basis points
3.61
(1.53
)
2.08
Up 50 basis points
2.41
(1.02
)
1.39
Up 25 basis points
1.20
(0.51
)
0.69
Down 25 basis points
(1.20
)
0.51
(0.69
)
Down 50 basis points
(2.41
)
1.02
(1.39
)
Down 75 basis points
(3.61
)
1.53
(2.08
)
Down 100 basis points
(4.82
)
2.04
(2.78
)
Down 200 basis points
(9.64
)
4.08
(5.56
)
Down 300 basis points
(14.33
)
6.13
(8.20
)

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHILLIP STREET MIDDLE MARKET LENDING FUND LLC
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID 238)
Consolidated Statements of Financial Condition
Consolidated Statements of Operations
Consolidated Statements of Changes in Members' Capital
Consolidated Statements of Cash Flows
Consolidated Schedules of Investments
Notes to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Unitholders of Phillip Street Middle Market Lending Fund LLC
Opinion on the Financial Statements
We have audited the accompanying 2024 and 2023 consolidated financial statements of Phillip Street Middle Market Lending Fund LLC and its subsidiaries and the 2022 financial statements of Phillip Street Middle Market Lending Fund LLC (collectively referred to as the “Company”), which comprise the statement of assets and liabilities as of December 31, 2024 and 2023, including the schedule of investments, and the related statements of operations, changes in net assets and cash flows for each of the two years in the period ended December 31, 2024 and for the period from October 6, 2022 (commencement of operations) to December 31, 2022, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations, changes in its net assets and its cash flows for each of the two years in the period ended December 31, 2024 and for the period from October 6, 2022 (commencement of operations) to December 31, 2022 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of December 31, 2024 and 2023 by correspondence with the agent banks, portfolio company investees, and transfer agent. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 4, 2025
We have served as the auditor of one or more investment companies in the Goldman Sachs Business Development Companies group since 2012.
Phillip Street Middle Market Lending Fund LLC
Consolidated Statements of Financial Condition
(in thousands, except unit and per unit amounts)
December 31,
December 31,
Assets
Investments, at fair value
Non-controlled/non-affiliated investments (cost of $593,640 and $176,996)
$
593,545
$
177,418
Non-controlled affiliated investments (cost of $10,902 and $0)
10,874
-
Total investments, at fair value (cost of $604,542 and $176,995)
$
604,419
$
177,418
Investments in affiliated money market fund (cost of $9,229 and $9,542)
9,229
9,542
Cash
11,353
5,789
Interest and dividends receivable
4,261
1,092
Deferred financing costs
5,816
2,963
Other assets
2,648
Total assets
$
637,726
$
196,827
Liabilities
Debt
$
220,100
$
18,000
Interest and other debt expenses payable
3,737
Management fees payable
1,245
Professional fees payable
Incentive fees payable
Distribution payable
9,123
5,162
Accrued deferred offering costs
-
Accrued expenses and other liabilities
Total liabilities
$
235,492
$
25,257
Commitments and contingencies (Note 7)
Members' capital
Preferred units (no units issued and outstanding)
$
-
$
-
Common units (20,272,339 and 8,749,026 units issued and outstanding as of December 31, 2024 and December 31, 2023)
401,831
171,117
Distributable earnings (loss)
Total members' capital
$
402,234
$
171,570
Total liabilities and members' capital
$
637,726
$
196,827
Net asset value per unit
$
19.84
$
19.61
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Statements of Operations
(in thousands, except unit and per unit amounts)
For the Year Ended December 31,
For the Year Ended December 31,
For the period from October 6, 2022 (commencement of operations) to December 31,
Investment income:
From non-controlled/non-affiliated investments:
Interest income
$
40,023
$
9,461
$
Other income
From non-controlled affiliated investments:
Interest income
-
-
Dividend income
2,044
Other income
-
-
Total investment income
$
42,405
$
11,629
$
Expenses:
Interest and other debt expenses
$
10,751
$
2,943
$
-
Incentive fees
1,725
-
Management fees
3,490
1,441
Directors’ fees
Professional fees
Offering costs
-
Organization costs
-
-
Other general and administrative expenses
Total expenses
$
17,696
$
7,292
$
1,183
Management fee waiver
-
(286
)
-
Net expenses
$
17,696
$
7,006
$
1,183
Net investment income (loss)
$
24,709
$
4,623
$
(842
)
Net realized and unrealized gains (losses):
Net realized gain (loss) from:
Non-controlled/non-affiliated investments
$
(1
)
$
$
-
Foreign currency transactions
-
-
Net change in unrealized appreciation (depreciation) from:
Non-controlled/non-affiliated investments
(517
)
(8
)
Non-controlled affiliated investments
(29
)
-
-
Foreign currency translations
(7
)
-
-
Net realized and unrealized gains (losses)
$
(33
)
$
$
(8
)
Net increase (decrease) in members' capital from operations
$
24,676
$
5,072
$
(850
)
Weighted average units outstanding
13,555,799
5,824,201
1,511,486
Basic and diluted net investment income (loss) per unit
$
1.82
$
0.79
$
(0.56
)
Basic and diluted earnings (loss) per unit
$
1.82
$
0.87
$
(0.56
)
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Statements of Changes in Members' Capital
(in thousands, except per unit amounts)
For the Year Ended December 31,
For the Year Ended December 31,
For the period from October 6, 2022 (commencement of operations) to December 31,
Members' capital at beginning of period
$
171,570
$
96,660
$
-
Net increase (decrease) in members' capital from operations:
Net investment income (loss)
$
24,709
$
4,623
$
(842
)
Net realized gain (loss)
-
Net change in unrealized appreciation (depreciation)
(553
)
(8
)
Net increase (decrease) in members' capital from operations
$
24,676
$
5,072
$
(850
)
Distributions to members from:
Distributable earnings
$
(24,278
)
$
(5,162
)
$
-
Total distributions to members
$
(24,278
)
$
(5,162
)
$
-
Capital transactions:
Issuance of common units
$
210,000
$
75,000
$
97,510
Reinvestment of common unit distributions
20,266
-
-
Net increase in members' capital from capital transactions
$
230,266
$
75,000
$
97,510
Total increase (decrease) in members' capital
$
230,664
$
74,910
$
96,660
Members' capital at end of period
$
402,234
$
171,570
$
96,660
Distributions recorded per unit
$
1.62
$
0.59
$
-
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Statements of Cash Flows
(in thousands, except unit and per unit amounts)
For the Year Ended December 31,
For the Year Ended December 31,
For the period from October 6, 2022 (commencement of operations) to December 31,
Cash flows from operating activities:
Net increase (decrease) in members' capital from operations:
$
24,676
$
5,072
$
(850
)
Adjustments to reconcile net increase (decrease) in members’ capital from operations to net cash provided by (used for) operating activities:
Purchases of investments
(484,885
)
(175,031
)
(17,354
)
Payment-in-kind interest capitalized
(573
)
(11
)
-
Investments in affiliated money market fund, net
70,183
(79,725
)
Proceeds from sales of investments and principal repayments
59,670
16,120
-
Net realized (gain) loss on investments
(18
)
-
Net change in unrealized (appreciation) depreciation on investments
(431
)
Net change in unrealized (appreciation) depreciation on foreign currency translation
-
-
Amortization of premium and accretion of discount, net
(1,760
)
(695
)
(6
)
Amortization of deferred financing costs
Amortization of deferred offering costs
-
-
Change in operating assets and liabilities:
(Increase) decrease in interest and dividends receivable
(3,169
)
(948
)
(144
)
(Increase) decrease in other assets
(2,625
)
(23
)
-
Increase (decrease) in interest and other debt expenses payable
2,826
-
Increase (decrease) in professional fees payable
(41
)
Increase (decrease) in management fees payable
Increase (decrease) in accrued organization costs
-
(217
)
Increase (decrease) in incentive fees payable
-
Increase (decrease) in accrued deferred offering costs
(58
)
-
-
Increase (decrease) in accrued expenses and other liabilities
Net cash provided by (used for) operating activities
$
(402,674
)
$
(82,805
)
$
(97,115
)
Cash flows from financing activities:
Proceeds from issuance of common units
$
210,000
$
75,000
$
97,510
Offering costs paid
-
(905
)
$
(291
)
Distributions paid
(51
)
-
-
Financing costs paid
(3,804
)
(3,605
)
-
Borrowings on debt
296,050
48,000
-
Repayments of debt
(93,950
)
(30,000
)
-
Net cash provided by (used for) financing activities
$
408,245
$
88,490
$
97,219
Net increase (decrease) in cash
$
5,571
5,685
$
Effect of foreign exchange rate changes on cash and cash equivalents
(7
)
-
-
Cash, beginning of period
5,789
-
Cash, end of period
$
11,353
$
5,789
$
Supplemental and non-cash activities
Interest expense paid
$
5,125
$
-
$
-
Accrued but unpaid distributions
$
9,123
$
5,162
$
-
Reinvestment of common unit distributions
$
20,266
$
-
$
-
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Schedule of Investments as of December 31, 2024
(in thousands, except unit and per unit amounts)
Investment (1)
Industry (2)
Interest
Rate (3)
Reference Rate and
Spread (3)
Maturity
Par/Shares(4)
Cost
Fair
Value
Footnotes
Debt Investments - 149.7%
United States - 149.7%
1st Lien/Senior Secured Debt - 139.8%
VisionSafe Holdings, Inc.
Aerospace & Defense
10.52%
S + 6.00%
04/19/30
$
3,391
$
3,329
$
3,324
(5) (6) (7)
VisionSafe Holdings, Inc.
Aerospace & Defense
S + 6.00%
04/19/30
(9
)
(10
)
(5) (7) (8)
Formulations Parent Corporation (dba Chase Corp)
Chemicals
10.27%
S + 5.75%
11/15/30
4,975
4,887
4,875
(5) (7)
Formulations Parent Corporation (dba Chase Corp)
Chemicals
S + 5.75%
11/15/29
(14
)
(17
)
(5) (7) (8)
ASM Buyer, Inc.
Commercial Services & Supplies
10.02%
S + 5.50% (Incl 2.75% PIK)
08/22/31
12,840
12,503
12,711
(5) (6) (7)
ASM Buyer, Inc.
Commercial Services & Supplies
9.41%
S + 5.00%
08/22/30
1,500
(5) (7) (8)
ASM Buyer, Inc.
Commercial Services & Supplies
S + 5.50% (Incl 2.75% PIK)
08/22/31
(7
)
(7
)
(5) (7) (8)
Rock Star Mergersub LLC (dba Triumvirate Environmental)
Commercial Services & Supplies
9.15%
S + 4.75%
12/15/31
8,132
8,051
8,051
(5) (6)
Rock Star Mergersub LLC (dba Triumvirate Environmental)
Commercial Services & Supplies
S + 4.75%
12/15/31
2,602
(13
)
(13
)
(5) (8)
Rock Star Mergersub LLC (dba Triumvirate Environmental)
Commercial Services & Supplies
9.15%
S + 4.75%
12/15/31
1,106
(5) (8)
Superior Environmental Solutions
Commercial Services & Supplies
10.96%
S + 6.50%
08/01/29
5,462
5,350
5,435
(5) (6) (7)
Superior Environmental Solutions
Commercial Services & Supplies
10.25%
S + 5.75%
08/01/29
3,027
2,982
2,913
(5) (6) (7)
Superior Environmental Solutions
Commercial Services & Supplies
S + 5.75%
08/01/29
2,562
(19
)
(96
)
(5) (7) (8)
Superior Environmental Solutions
Commercial Services & Supplies
11.00%
S + 6.50%
08/01/29
1,659
1,612
1,651
(5) (7)
Superior Environmental Solutions
Commercial Services & Supplies
10.96%
S + 6.50%
08/01/29
1,470
(5) (7) (8)
Superior Environmental Solutions
Commercial Services & Supplies
10.96%
S + 6.50%
08/01/29
(5) (7)
Superior Environmental Solutions
Commercial Services & Supplies
10.96%
S + 6.50%
08/01/29
(5) (6) (7)
USA DeBusk, LLC
Commercial Services & Supplies
9.61%
S + 5.25%
04/30/31
2,965
2,924
2,950
(5) (6) (7)
USA DeBusk, LLC
Commercial Services & Supplies
9.89%
S + 5.25%
04/30/31
1,093
(5) (7) (8)
USA DeBusk, LLC
Commercial Services & Supplies
9.59%
S + 5.25%
04/30/30
(5) (7) (8)
Valet Waste Holdings, Inc. (dba Valet Living)
Commercial Services & Supplies
10.11%
S + 5.75%
05/01/29
12,516
12,439
12,422
(5) (6) (7)
Valet Waste Holdings, Inc. (dba Valet Living)
Commercial Services & Supplies
10.11%
S + 5.75%
05/01/29
1,321
(5) (7) (8)
Valet Waste Holdings, Inc. (dba Valet Living)
Commercial Services & Supplies
S + 5.75%
05/01/29
1,100
(7
)
(8
)
(5) (7) (8)
Geotechnical Merger Sub, Inc.
Construction & Engineering
9.41%
S + 4.75%
10/15/31
14,908
14,762
14,759
(5) (6)
Geotechnical Merger Sub, Inc.
Construction & Engineering
S + 4.75%
10/15/31
5,521
(27
)
(28
)
(5) (8)
Geotechnical Merger Sub, Inc.
Construction & Engineering
9.27%
S + 4.75%
10/15/31
2,071
(5) (8)
Sonar Acquisitionco, Inc. (dba SimPRO)
Construction & Engineering
9.10%
S + 4.75%
10/24/30
5,660
1,287
1,292
(5) (8) (9)
Sonar Acquisitionco, Inc. (dba SimPRO)
Construction & Engineering
9.12%
B + 4.75%
10/24/30
AUD
5,600
3,682
3,431
(5) (6) (9)
Sonar Acquisitionco, Inc. (dba SimPRO)
Construction & Engineering
B + 4.75%
10/24/30
(5
)
(6
)
(5) (8) (9)
Superman Holdings, LLC (dba Foundation Software)
Construction & Engineering
8.86%
S + 4.50%
08/29/31
15,141
15,068
15,066
(5) (6) (7)
Superman Holdings, LLC (dba Foundation Software)
Construction & Engineering
S + 4.50%
08/29/31
4,929
(12
)
(25
)
(5) (7) (8)
Superman Holdings, LLC (dba Foundation Software)
Construction & Engineering
S + 4.50%
08/29/31
2,183
(10
)
(11
)
(5) (7) (8)
Blast Bidco Inc. (dba Bazooka Candy Brands)
Consumer Staples Distribution & Retail
10.33%
S + 6.00%
10/04/30
4,444
4,347
4,400
(5) (6) (7)
Blast Bidco Inc. (dba Bazooka Candy Brands)
Consumer Staples Distribution & Retail
S + 6.00%
10/05/29
(10
)
(5
)
(5) (7) (8)
Buffalo Merger Sub, LLC (dba Oliver Packaging)
Containers & Packaging
9.82%
S + 5.25%
11/01/30
19,977
19,681
19,677
(5) (6)
Buffalo Merger Sub, LLC (dba Oliver Packaging)
Containers & Packaging
S + 5.25%
11/01/30
2,323
(34
)
(35
)
(5) (8)
DFS Holding Company, Inc.
Distributors
10.50%
S + 6.25%
01/31/29
4,703
4,597
4,645
(5) (6) (7)
DFS Holding Company, Inc.
Distributors
10.50%
S + 6.25%
01/31/29
(5) (7) (8)
ABC Investment Holdco Inc. (dba ABC Plumbing)
Diversified Consumer Services
10.33%
S + 6.00%
04/26/29
7,758
7,620
7,603
(5) (6) (7) (10)
ABC Investment Holdco Inc. (dba ABC Plumbing)
Diversified Consumer Services
10.54%
S + 6.00%
04/26/29
3,610
(5) (7) (8) (10)
ABC Investment Holdco Inc. (dba ABC Plumbing)
Diversified Consumer Services
10.48%
S + 6.00%
04/26/29
(5) (7) (8) (10)
CI (Quercus) Intermediate Holdings, LLC (dba SavATree)
Diversified Consumer Services
9.33%
S + 5.00%
06/06/31
6,842
6,808
6,808
(5) (6) (7)
CI (Quercus) Intermediate Holdings, LLC (dba SavATree)
Diversified Consumer Services
9.33%
S + 5.00%
06/06/31
2,259
(5) (7) (8)
CI (Quercus) Intermediate Holdings, LLC (dba SavATree)
Diversified Consumer Services
9.36%
S + 5.00%
06/06/31
(5) (7) (8)
Spotless Brands, LLC
Diversified Consumer Services
10.06%
S + 5.50%
07/25/28
12,463
6,723
6,719
(5) (7) (8)
Spotless Brands, LLC
Diversified Consumer Services
10.09%
S + 5.75%
07/25/28
8,472
8,275
8,472
(5) (6) (7)
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Schedule of Investments as of December 31, 2024 (continued)
(in thousands, except unit and per unit amounts)
Investment (1)
Industry (2)
Interest
Rate (3)
Reference Rate and
Spread (3)
Maturity
Par/Shares(4)
Cost
Fair
Value
Footnotes
Spotless Brands, LLC
Diversified Consumer Services
10.03%
S + 5.75%
07/25/28
$
1,313
$
1,282
$
1,313
(5) (7)
Sunshine Cadence HoldCo, LLC (dba Cadence Education)
Diversified Consumer Services
9.61%
S + 5.00%
05/01/31
10,589
10,490
10,483
(5) (6) (7)
Sunshine Cadence HoldCo, LLC (dba Cadence Education)
Diversified Consumer Services
9.46%
S + 5.00%
05/01/31
2,767
(5) (7) (8)
Sunshine Cadence HoldCo, LLC (dba Cadence Education)
Diversified Consumer Services
S + 5.00%
05/01/30
1,615
(14
)
(16
)
(5) (7) (8)
VASA Fitness Buyer, Inc.
Diversified Consumer Services
11.96%
S + 7.50%
08/14/28
8,330
8,102
8,288
(5) (6) (7)
VASA Fitness Buyer, Inc.
Diversified Consumer Services
11.92%
S + 7.50%
08/14/28
1,445
(5) (7) (8)
VASA Fitness Buyer, Inc.
Diversified Consumer Services
S + 7.50%
08/14/28
(6
)
(1
)
(5) (7) (8)
Trystar, LLC
Electrical Equipment
9.03%
S + 4.50%
08/06/31
6,512
6,449
6,447
(5) (6) (7)
Trystar, LLC
Electrical Equipment
S + 4.50%
08/06/31
2,326
(11
)
(23
)
(5) (7) (8)
Trystar, LLC
Electrical Equipment
S + 4.50%
08/06/31
1,163
(11
)
(12
)
(5) (7) (8)
Admiral Buyer, Inc. (dba Fidelity Payment Services)
Financial Services
9.83%
S + 5.50%
05/08/28
8,884
8,827
8,840
(5) (6) (7)
Admiral Buyer, Inc. (dba Fidelity Payment Services)
Financial Services
9.85%
S + 5.50%
05/08/28
1,723
(5) (7) (8)
Admiral Buyer, Inc. (dba Fidelity Payment Services)
Financial Services
S + 5.50%
05/08/28
1,171
(7
)
(6
)
(5) (7) (8)
Admiral Buyer, Inc. (dba Fidelity Payment Services)
Financial Services
9.89%
S + 5.50%
05/08/28
(5) (7)
Fullsteam Operations LLC
Financial Services
12.91%
S + 8.25%
11/27/29
9,202
8,924
9,202
(5) (6) (7)
Fullsteam Operations LLC
Financial Services
11.65%
S + 7.00%
11/27/29
6,720
(5) (7) (8)
Fullsteam Operations LLC
Financial Services
12.91%
S + 8.25%
11/27/29
2,896
2,819
2,896
(5) (7)
Fullsteam Operations LLC
Financial Services
S + 8.25%
11/27/29
2,553
(19
)
(38
)
(5) (7) (8)
Fullsteam Operations LLC
Financial Services
11.66%
S + 7.00%
11/27/29
1,680
(5) (7) (8)
Fullsteam Operations LLC
Financial Services
12.91%
S + 8.25%
11/27/29
1,287
1,253
1,287
(5) (7)
Fullsteam Operations LLC
Financial Services
S + 8.25%
11/27/29
(15
)
-
(5) (7) (8)
Fullsteam Operations LLC
Financial Services
S + 8.25%
11/27/29
(2
)
(4
)
(5) (7) (8)
Priority Technology Holdings, Inc. (dba Priority Payment)
Financial Services
9.11%
S + 4.75%
05/16/31
18,215
18,145
18,220
(5) (6) (9)
Project Accelerate Parent, LLC (dba ABC Fitness)
Financial Services
9.61%
S + 5.25%
02/24/31
4,353
4,313
4,310
(5) (6) (7)
Project Accelerate Parent, LLC (dba ABC Fitness)
Financial Services
S + 5.25%
02/24/31
(5
)
(6
)
(5) (7) (8)
Eagle Family Foods Group Holdings, LLC
Food Products
9.59%
S + 5.00%
08/12/30
19,494
19,308
19,299
(5) (6) (7)
Eagle Family Foods Group Holdings, LLC
Food Products
S + 5.00%
08/12/30
2,255
(21
)
(23
)
(5) (7) (8)
Tropical Bidco, LLC (dba Tropical Cheese)
Food Products
9.08%
S + 4.75%
12/11/30
6,113
6,022
6,022
(5) (6)
Tropical Bidco, LLC (dba Tropical Cheese)
Food Products
9.08%
S + 4.75%
12/11/30
(5) (8)
Hamilton Thorne, Inc.
Health Care Equipment & Supplies
8.28%
E + 5.50%
11/28/31
EUR
11,492
12,293
11,666
(5) (6)
Hamilton Thorne, Inc.
Health Care Equipment & Supplies
S + 5.50%
11/28/31
5,768
(57
)
(58
)
(5) (8)
Hamilton Thorne, Inc.
Health Care Equipment & Supplies
9.93%
S + 5.50%
11/28/31
4,230
4,146
4,146
(5) (6)
Coding Solutions Acquisition, Inc. (dba CorroHealth)
Health Care Providers & Services
9.25%
S + 5.00%
08/07/31
3,507
3,472
3,454
(5) (6) (7)
Coding Solutions Acquisition, Inc. (dba CorroHealth)
Health Care Providers & Services
S + 5.00%
08/07/31
(8
)
(8
)
(5) (7) (8)
Coding Solutions Acquisition, Inc. (dba CorroHealth)
Health Care Providers & Services
9.33%
S + 5.00%
08/07/31
(5) (7) (8)
Highfive Dental Holdco, LLC
Health Care Providers & Services
11.21%
S + 6.75%
06/13/28
4,717
4,611
4,646
(5) (6) (7)
Highfive Dental Holdco, LLC
Health Care Providers & Services
S + 6.75%
06/13/28
(11
)
(8
)
(5) (7) (8)
HealthEdge Software, Inc.
Health Care Technology
9.13%
S + 4.75%
07/16/31
10,239
10,141
10,136
(5) (6) (7)
HealthEdge Software, Inc.
Health Care Technology
9.15%
S + 4.75%
07/16/31
4,517
4,473
4,472
(5) (7)
HealthEdge Software, Inc.
Health Care Technology
S + 4.75%
07/16/31
1,358
(13
)
(14
)
(5) (7) (8)
Easy Mile Fitness, LLC
Hotels, Restaurants & Leisure
11.09%
S + 6.50%
09/12/29
9,295
9,213
9,202
(5) (6) (7)
Easy Mile Fitness, LLC
Hotels, Restaurants & Leisure
11.07%
S + 6.50%
09/12/29
1,705
(5) (7) (8)
Easy Mile Fitness, LLC
Hotels, Restaurants & Leisure
S + 6.50%
09/12/29
(3
)
(3
)
(5) (7) (8)
TM Restaurant Group LLC
Hotels, Restaurants & Leisure
11.72%
S + 7.25%
07/26/28
10,580
10,366
10,263
(5) (6) (7)
TM Restaurant Group LLC
Hotels, Restaurants & Leisure
S + 7.25%
07/26/28
3,000
(32
)
(90
)
(5) (7) (8)
TM Restaurant Group LLC
Hotels, Restaurants & Leisure
S + 7.25%
07/26/28
1,286
(17
)
(39
)
(5) (7) (8)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
10.39%
S + 5.25%
07/24/31
15,145
15,000
14,993
(5) (6) (7)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
9.58%
S + 5.25%
07/24/31
6,370
1,265
1,235
(5) (7) (8)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
9.58%
S + 5.25%
07/24/30
1,180
(5) (7) (8)
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Schedule of Investments as of December 31, 2024 (continued)
(in thousands, except unit and per unit amounts)
Investment (1)
Industry (2)
Interest
Rate (3)
Reference Rate and
Spread (3)
Maturity
Par/Shares(4)
Cost
Fair
Value
Footnotes
Ark Data Centers, LLC
IT Services
9.08%
S + 4.75%
11/27/30
$
12,750
$
12,498
$
12,495
(5) (6)
Ark Data Centers, LLC
IT Services
S + 4.75%
11/27/30
7,500
(74
)
(75
)
(5) (8)
Ark Data Centers, LLC
IT Services
S + 4.75%
11/27/30
2,250
(44
)
(45
)
(5) (8)
GPS Phoenix Buyer, Inc. (dba Guidepoint)
IT Services
10.36%
S + 6.00%
10/02/29
6,242
6,137
6,180
(5) (6) (7)
GPS Phoenix Buyer, Inc. (dba Guidepoint)
IT Services
10.36%
S + 6.00%
10/02/29
2,205
2,172
2,183
(5) (6) (7)
GPS Phoenix Buyer, Inc. (dba Guidepoint)
IT Services
S + 6.00%
10/02/29
1,631
(13
)
(16
)
(5) (7) (8)
GPS Phoenix Buyer, Inc. (dba Guidepoint)
IT Services
S + 6.00%
10/02/29
1,305
(21
)
(13
)
(5) (7) (8)
QBS Parent, Inc. (dba Quorum Software)
IT Services
9.27%
S + 4.75%
11/07/31
9,045
9,000
9,011
(5) (6)
QBS Parent, Inc. (dba Quorum Software)
IT Services
S + 4.75%
11/07/31
(5
)
(4
)
(5) (8)
US Signal Company, LLC
IT Services
10.07%
S + 5.50%
09/04/29
15,258
15,113
15,105
(5) (6) (7)
US Signal Company, LLC
IT Services
S + 5.50%
09/04/29
4,695
(44
)
(47
)
(5) (7) (8)
US Signal Company, LLC
IT Services
S + 5.50%
09/04/29
2,347
(22
)
(23
)
(5) (7) (8)
Circustrix Holdings, LLC (dba SkyZone)
Leisure Products
10.86%
S + 6.50%
07/18/28
6,449
6,311
6,384
(5) (6) (7)
Circustrix Holdings, LLC (dba SkyZone)
Leisure Products
10.88%
S + 6.50%
07/18/28
(5) (7) (8)
Circustrix Holdings, LLC (dba SkyZone)
Leisure Products
10.86%
S + 6.50%
07/18/28
(5) (7)
Mandrake Bidco, Inc. (dba Miratech)
Machinery
9.34%
S + 4.75%
08/20/31
19,224
19,039
19,032
(5) (6) (7)
Mandrake Bidco, Inc. (dba Miratech)
Machinery
S + 4.75%
08/20/30
3,076
(29
)
(31
)
(5) (7) (8)
Rotation Buyer, LLC (dba Rotating Machinery Services)
Machinery
9.08%
S + 4.75%
12/26/31
8,938
8,848
8,848
(5) (6)
Rotation Buyer, LLC (dba Rotating Machinery Services)
Machinery
S + 4.75%
12/26/31
2,292
(11
)
(11
)
(5) (8)
Rotation Buyer, LLC (dba Rotating Machinery Services)
Machinery
9.08%
S + 4.75%
12/26/31
1,146
(5) (8)
Recorded Books Inc. (dba RBMedia)
Media
10.26%
S + 5.75%
09/03/30
5,757
5,607
5,699
(5) (6) (7)
Recorded Books Inc. (dba RBMedia)
Media
10.32%
S + 5.75%
09/03/30
(5) (6) (7)
Recorded Books Inc. (dba RBMedia)
Media
S + 5.75%
08/31/28
(11
)
(5
)
(5) (7) (8)
Engage2Excel, Inc.
Professional Services
10.75%
S + 6.50%
07/01/29
6,710
6,617
6,609
(5) (6) (7)
Engage2Excel, Inc.
Professional Services
10.75%
S + 6.50%
07/01/29
(5) (7) (8)
Westwood Professional Services Inc.
Professional Services
9.08%
S + 4.75%
09/19/31
4,106
4,066
4,064
(5) (6) (7)
Westwood Professional Services Inc.
Professional Services
9.26%
S + 4.75%
09/19/31
1,234
(5) (7) (8)
Westwood Professional Services Inc.
Professional Services
S + 4.75%
09/19/31
(6
)
(6
)
(5) (7) (8)
AI Titan Parent, Inc. (dba Prometheus)
Software
9.11%
S + 4.75%
08/29/31
5,872
5,816
5,813
(5) (6) (7)
AI Titan Parent, Inc. (dba Prometheus)
Software
S + 4.75%
08/29/31
1,174
(6
)
(12
)
(5) (7) (8)
AI Titan Parent, Inc. (dba Prometheus)
Software
S + 4.75%
08/29/31
(7
)
(7
)
(5) (7) (8)
Arrow Buyer, Inc. (dba Archer Technologies)
Software
10.08%
S + 5.75%
07/01/30
2,912
2,851
2,898
(5) (6) (7)
Arrow Buyer, Inc. (dba Archer Technologies)
Software
S + 5.75%
07/01/30
(7
)
(2
)
(5) (7) (8)
Arrow Buyer, Inc. (dba Archer Technologies)
Software
10.08%
S + 5.75%
07/01/30
(5) (7)
Artifact Bidco, Inc. (dba Avetta)
Software
8.83%
S + 4.50%
07/28/31
10,567
10,466
10,461
(5) (6) (7)
Artifact Bidco, Inc. (dba Avetta)
Software
S + 4.50%
07/28/31
2,586
(12
)
(26
)
(5) (7) (8)
Artifact Bidco, Inc. (dba Avetta)
Software
S + 4.50%
07/26/30
1,256
(12
)
(13
)
(5) (7) (8)
Artifact Bidco, Inc. (dba Avetta)
Software
S + 4.50%
07/26/30
(5
)
(6
)
(5) (7) (8)
Crewline Buyer, Inc. (dba New Relic)
Software
11.11%
S + 6.75%
11/08/30
7,262
7,100
7,080
(5) (6) (7)
Crewline Buyer, Inc. (dba New Relic)
Software
S + 6.75%
11/08/30
(15
)
(18
)
(5) (7) (8)
Onyx CenterSource, Inc.
Software
11.24%
S + 6.50%
12/15/28
6,148
6,032
6,148
(5) (6) (7)
Onyx CenterSource, Inc.
Software
11.24%
S + 6.50%
12/15/28
(5) (7) (8)
Rocky Debt Merger Sub, LLC (dba NContracts)
Software
9.61%
S + 5.25% (Incl. 2.75% PIK)
09/01/31
16,036
15,883
15,876
(5) (6) (7)
Rocky Debt Merger Sub, LLC (dba NContracts)
Software
S + 5.25% (Incl. 2.75% PIK)
09/01/31
4,582
(22
)
(46
)
(5) (7) (8)
Rocky Debt Merger Sub, LLC (dba NContracts)
Software
S + 5.25% (Incl. 2.75% PIK)
09/01/31
1,833
(17
)
(18
)
(5) (7) (8)
Rubrik, Inc.
Software
11.67%
S + 7.00%
08/17/28
8,774
8,705
8,774
(5) (6) (7)
Rubrik, Inc.
Software
11.67%
S + 7.00%
08/17/28
1,226
1,153
1,162
(5) (7) (8)
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Schedule of Investments as of December 31, 2024 (continued)
(in thousands, except unit and per unit amounts)
Investment (1)
Industry (2)
Interest
Rate (3)
Reference Rate and
Spread (3)
Maturity
Par/Shares(4)
Cost
Fair
Value
Footnotes
Runway Bidco, LLC (dba Redwood Software)
Software
9.33%
S + 5.00%
12/17/31
$
13,721
$
13,584
$
13,584
(5) (6)
Runway Bidco, LLC (dba Redwood Software)
Software
S + 5.00%
12/17/31
3,409
(17
)
(17
)
(5) (8)
Runway Bidco, LLC (dba Redwood Software)
Software
S + 5.00%
12/17/31
1,705
(17
)
(17
)
(5) (8)
Singlewire Software, LLC
Software
9.58%
S + 5.25%
05/10/29
7,766
7,576
7,688
(5) (6) (7)
Singlewire Software, LLC
Software
S + 5.25%
05/10/29
1,438
(33
)
(14
)
(5) (7) (8)
Charger Debt Merger Sub, LLC (dba Classic Collision)
Specialty Retail
9.08%
S + 4.75%
06/02/31
8,537
8,457
8,452
(5) (6) (7)
Charger Debt Merger Sub, LLC (dba Classic Collision)
Specialty Retail
9.16%
S + 4.75%
06/02/31
4,664
1,790
1,774
(5) (7) (8)
Charger Debt Merger Sub, LLC (dba Classic Collision)
Specialty Retail
S + 4.75%
05/31/30
1,089
(10
)
(11
)
(5) (7) (8)
Ortholite, LLC
Textiles, Apparel & Luxury Goods
10.58%
S + 6.25%
09/29/27
2,846
2,799
2,818
(5) (6) (7)
Harrington Industrial Plastics, LLC
Trading Companies & Distributors
10.11%
S + 5.75%
10/07/30
3,257
3,186
3,224
(5) (6) (7)
Harrington Industrial Plastics, LLC
Trading Companies & Distributors
10.11%
S + 5.75%
10/07/30
2,574
1,776
1,800
(5) (7) (8)
NCWS Intermediate, Inc. (dba National Carwash Solutions)
Trading Companies & Distributors
9.83%
S + 5.50% (Incl. 2.25% PIK)
12/31/29
12,757
12,584
11,991
(5) (6) (7)
NCWS Intermediate, Inc. (dba National Carwash Solutions)
Trading Companies & Distributors
9.59%
S + 5.50%
12/31/29
1,494
(5) (7) (8)
NCWS Intermediate, Inc. (dba National Carwash Solutions)
Trading Companies & Distributors
9.83%
S + 5.50%
12/31/29
(5) (7) (8)
PT Intermediate Holdings III, LLC (dba Parts Town)
Trading Companies & Distributors
9.33%
S + 5.00% (Incl. 1.75% PIK)
04/09/30
13,864
13,842
13,795
(5) (6)
PT Intermediate Holdings III, LLC (dba Parts Town)
Trading Companies & Distributors
S + 5.00% (Incl. 1.75% PIK)
04/09/30
(1
)
(5
)
(5) (8)
United Flow Technologies Intermediate Holdco II, LLC
Trading Companies & Distributors
9.58%
S + 5.25%
06/23/31
13,347
13,157
13,213
(5) (6) (7)
United Flow Technologies Intermediate Holdco II, LLC
Trading Companies & Distributors
9.89%
S + 5.25%
06/23/31
7,433
(5) (7) (8)
United Flow Technologies Intermediate Holdco II, LLC
Trading Companies & Distributors
S + 5.25%
06/21/30
1,487
(20
)
(15
)
(5) (7) (8)
Total 1st Lien/Senior Secured Debt
562,624
562,474
1st Lien/Last-Out Unitranche (11) - 9.9%
EIP Consolidated, LLC (dba Everest Infrastructure)
Wireless Telecommunication Services
10.61%
S + 6.25%
12/07/28
$
6,255
$
6,204
$
6,193
(5) (6) (7)
EIP Consolidated, LLC (dba Everest Infrastructure)
Wireless Telecommunication Services
10.61%
S + 6.25%
12/07/28
3,745
2,715
2,707
(5) (7) (8)
K2 Towers III, LLC
Wireless Telecommunication Services
10.89%
S + 6.55%
12/06/28
10,000
9,203
9,186
(5) (7) (8)
Skyway Towers Intermediate LLC
Wireless Telecommunication Services
10.96%
S + 6.61%
12/22/28
3,682
3,649
3,645
(5) (6) (7)
Skyway Towers Intermediate LLC
Wireless Telecommunication Services
10.96%
S + 6.61%
12/22/28
2,305
(5) (7) (8)
Tarpon Towers II LLC
Wireless Telecommunication Services
11.18%
S + 6.83%
02/01/29
3,143
3,115
3,111
(5) (6) (7)
Tarpon Towers II LLC
Wireless Telecommunication Services
11.19%
S + 6.83%
02/01/29
1,858
(5) (7) (8)
Thor FinanceCo LLC (dba Harmoni Towers)
Wireless Telecommunication Services
12.19%
S + 7.00%
08/24/28
6,222
6,155
6,160
(5) (6) (7)
Thor FinanceCo LLC (dba Harmoni Towers)
Wireless Telecommunication Services
11.70%
S + 7.00%
08/24/28
3,778
1,451
1,451
(5) (7) (8)
Towerco IV Holdings, LLC
Wireless Telecommunication Services
8.21%
S + 3.75%
08/31/28
7,666
6,375
6,386
(5) (6) (7) (8)
Total 1st Lien/Last-Out Unitranche
39,671
39,636
Total United States
$
602,295
$
602,110
Total Debt Investments
$
602,295
$
602,110
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Schedule of Investments as of December 31, 2024 (continued)
(in thousands, except unit and per unit amounts)
Investment (1)
Industry (2)
Initial
Acquisition
Date(13)
Shares(4)
Cost
Fair
Value
Footnotes
Equity Securities - 0.6%
United States - 0.6%
Common Stock - 0.6%
VisionSafe Parent, LLC
Aerospace & Defense
04/19/24
$
$
(5) (7) (12)
RPC ABC Investment Holdings LLC (dba ABC Plumbing)
Diversified Consumer Services
04/26/24
1,992,620
1,993
1,993
(5) (7) (10) (12)
Total Common Stock
2,247
2,309
Total United States
$
2,247
$
2,309
Total Equity Securities
2,247
2,309
Total Investments - 150.3%
$
604,542
$
604,419
Investments in Affiliated Money Market Fund - 2.3%
United States - 2.3%
Goldman Sachs Financial Square Government Fund - Institutional Shares
9,228,570
$
9,229
$
9,229
(14) (15)
Total Investments in Affiliated Money Market Fund
$
9,229
$
9,229
Total United States
$
9,229
$
9,229
Total Investments and Investments in Affiliated Money Market Fund - 152.6%
$
613,771
$
613,648
(1)
Percentages are based on members' capital.
(2)
For Industry subtotal and percentage, see Note 4 "Investments."
(3)
Represents the actual interest rate for partially or fully funded debt in effect as of the reporting date. Certain investments are subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by the larger of the floor or the reference to either Euribor ("E"), SOFR including SOFR adjustment, if any, ("S") at the borrower's option, which reset periodically based on the terms of the credit agreement. S loans are typically indexed to 12 month, 6 month, 3 month or 1 month S rates. As of December 31, 2024, the rate for the 1 month S was 4.33%, 3 month S was 4.31%, 6 month S was 4.25% and 1 month B was 4.32%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2024.
(4)
Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Par amount is denominated in U.S. Dollars ("$" or "USD") unless otherwise noted, Australian Dollars ("AUD"), or Euros ("EUR").
(5)
Represents co-investments made with the Company's affiliates in accordance with the terms of the exemptive relief received from the U.S. Securities and Exchange Commission. See Note 3 “Significant Agreements and Related Party Transactions”.
(6)
All, or a portion of, the assets are pledged as collateral for the revolving credit facility with Ally Bank (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”). See Note 6 “Debt”.
(7)
The fair value of the investment was determined using significant unobservable inputs. See Note 5 “Fair Value Measurement".
(8)
Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. The negative cost, if applicable, is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value, if applicable, is the result of the capitalized discount on the loan. See Note 7 "Commitments and Contingencies".
(9)
The investment is not a qualifying asset under Section 55(a) of the Investment Company Act. The Company may not acquire any non-qualifying asset unless, at the time of acquisition, qualifying assets represent at least 70% of the Company’s total assets. As of December 31, 2024, the aggregate fair value of these securities is $22,937 or 3.6% of the Company’s total assets.
(10)
As defined in the Investment Company Act of 1940, as amended (the “Investment Company Act”), the investment is deemed to be an “affiliated person” of the Company because the Company owns, either directly or indirectly, 5% or more of the portfolio company’s outstanding voting securities. See Note 3 “Significant Agreements and Related Party Transactions”.
(11)
In exchange for the greater risk of loss, the “last-out” portion of the Company's unitranche loan investment generally earns a higher interest rate than the “first-out” portions. The “first-out” portion would generally receive priority with respect to payment of principal, interest and any other amounts due thereunder over the “last-out” portion.
(12)
Non-income producing security.
(13)
Securities exempt from registration under the Securities Act of 1933 and may be deemed to be “restricted securities”. As of December 31, 2024, the aggregate fair value of these securities is $2,309 or 0.6% of the Company's net assets. The initial acquisition dates have been included for such securities.
(14)
The investment is otherwise deemed to be an “affiliated person” of the Company. See Note 3 “Significant Agreements and Related Party Transactions”.
(15)
The annualized seven-day yield as of December 31, 2024 is 4.42%.
PIK - Payment-In-Kind
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Schedule of Investments as of December 31, 2023
(in thousands, except unit and per unit amounts)
Investment (1)
Industry (2)
Interest
Rate (3)
Reference Rate and
Spread (3)
Maturity
Par/Shares(4)
Cost
Fair
Value
Footnotes
Debt Investments - 103.4%
United States - 103.4%
1st Lien/Senior Secured Debt - 87.3%
Formulations Parent Corporation (dba Chase Corp)
Chemicals
11.12%
S + 5.75%
11/15/30
$
5,013
$
4,914
$
4,912
(6)
Formulations Parent Corporation (dba Chase Corp)
Chemicals
S + 5.75%
11/15/29
(16
)
(17
)
(5) (6)
ASM Buyer, Inc.
Commercial Services & Supplies
S + 6.00%
01/29/28
-
-
(5) (6)
ASM Buyer, Inc.
Commercial Services & Supplies
S + 6.00%
01/29/28
4,189
-
-
(5) (6) (7)
ASM Buyer, Inc.
Commercial Services & Supplies
S + 6.00%
01/29/27
-
-
(5) (6)
Superior Environmental Solutions
Commercial Services & Supplies
11.96%
S + 6.50%
08/01/29
5,517
5,386
5,407
(6) (7) (8)
Superior Environmental Solutions
Commercial Services & Supplies
11.96%
S + 6.50%
08/01/29
(5) (6) (8)
Superior Environmental Solutions
Commercial Services & Supplies
S + 6.50%
08/01/29
(10
)
(17
)
(5) (6) (8)
UP Acquisition Corp. (dba Unified Power)
Commercial Services & Supplies
11.38%
S + 6.00%
10/31/29
5,081
4,969
4,966
(6) (7)
UP Acquisition Corp. (dba Unified Power)
Commercial Services & Supplies
S + 6.00%
10/31/29
(17
)
(18
)
(5) (6)
Blast Bidco Inc. (dba Bazooka Candy Brands)
Consumer Staples Distribution & Retail
11.35%
S + 6.00%
10/04/30
4,478
4,369
4,366
(6) (7)
Blast Bidco Inc. (dba Bazooka Candy Brands)
Consumer Staples Distribution & Retail
S + 6.00%
10/05/29
(13
)
(13
)
(5) (6)
DFS Holding Company, Inc.
Distributors
12.46%
S + 7.00%
01/31/29
4,751
4,625
4,680
(6) (7) (8)
DFS Holding Company, Inc.
Distributors
12.46%
S + 7.00%
01/31/29
(5) (6) (8)
Groundworks, LLC
Diversified Consumer Services
11.90%
S + 6.50%
03/14/30
2,416
2,353
2,367
(6) (7) (8)
Groundworks, LLC
Diversified Consumer Services
S + 6.50%
03/14/30
(6
)
(2
)
(5) (6) (8)
Groundworks, LLC
Diversified Consumer Services
S + 6.50%
03/14/29
(3
)
(3
)
(5) (6) (8)
Spotless Brands, LLC
Diversified Consumer Services
12.27%
S + 6.75%
07/25/28
8,580
8,362
8,451
(6) (7) (8)
Spotless Brands, LLC
Diversified Consumer Services
12.25%
S + 6.75%
07/25/28
1,330
1,295
1,310
(6) (8)
VASA Fitness Buyer, Inc.
Diversified Consumer Services
13.33%
S + 7.88% (Incl. 0.38% PIK)
08/14/28
8,417
8,139
8,249
(6) (7) (8)
VASA Fitness Buyer, Inc.
Diversified Consumer Services
S + 7.88% (Incl. 0.38% PIK)
08/14/28
(8
)
(5
)
(5) (6) (8)
VASA Fitness Buyer, Inc.
Diversified Consumer Services
S + 7.88% (Incl. 0.38% PIK)
08/14/28
1,445
(23
)
(29
)
(5) (6) (8)
Fullsteam Operations LLC
Financial Services
13.78%
S + 8.25%
11/27/29
9,202
8,886
8,926
(6) (7)
Fullsteam Operations LLC
Financial Services
13.78%
S + 8.25%
11/27/29
2,896
(5) (6)
Fullsteam Operations LLC
Financial Services
S + 8.25%
11/27/29
(17
)
(15
)
(5) (6)
Fullsteam Operations LLC
Financial Services
S + 8.25%
11/27/29
1,287
(19
)
(19
)
(5) (6)
Highfive Dental Holdco, LLC
Health Care Providers & Services
12.45%
S + 6.75%
06/13/28
4,765
4,634
4,646
(6) (7) (8)
Highfive Dental Holdco, LLC
Health Care Providers & Services
S + 6.75%
06/13/28
(14
)
(13
)
(5) (6) (8)
Highfive Dental Holdco, LLC
Health Care Providers & Services
S + 6.75%
06/13/28
3,192
(86
)
(80
)
(5) (6) (8)
TM Restaurant Group LLC
Hotels, Restaurants & Leisure
12.72%
S + 7.25%
07/26/28
10,688
10,425
10,367
(6) (7) (8)
TM Restaurant Group LLC
Hotels, Restaurants & Leisure
S + 7.25%
07/26/28
1,286
(21
)
(39
)
(5) (6) (8)
TM Restaurant Group LLC
Hotels, Restaurants & Leisure
S + 7.25%
07/26/28
3,000
(41
)
(90
)
(5) (6) (8)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
11.79%
S + 6.25%
04/15/27
5,430
5,376
5,376
(6) (7)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
11.75%
S + 6.25%
04/15/27
2,956
2,927
2,927
(6) (7)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
11.79%
S + 6.25%
04/15/27
2,121
2,100
2,100
(6) (7)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
11.64%
S + 6.25%
04/15/27
(6) (7)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
11.79%
S + 6.25%
04/15/27
(6) (7)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
S + 6.25%
04/15/27
(6
)
(6
)
(5) (6)
AQ Sunshine, Inc. (dba Relation Insurance)
Insurance
S + 6.25%
04/15/27
2,956
(29
)
(30
)
(5) (6)
GPS Phoenix Buyer, Inc. (dba Guidepoint)
IT Services
11.38%
S + 6.00%
10/02/29
6,305
6,183
6,179
(6) (7)
GPS Phoenix Buyer, Inc. (dba Guidepoint)
IT Services
S + 6.00%
10/02/29
1,631
(16
)
(16
)
(5) (6)
GPS Phoenix Buyer, Inc. (dba Guidepoint)
IT Services
S + 6.00%
10/02/29
1,305
(25
)
(26
)
(5) (6)
Circustrix Holdings, LLC (dba SkyZone)
Leisure Products
12.11%
S + 6.75%
07/18/28
6,514
6,358
6,384
(6) (7) (8)
Circustrix Holdings, LLC (dba SkyZone)
Leisure Products
S + 6.75%
07/18/28
(9
)
(8
)
(5) (6) (8)
Circustrix Holdings, LLC (dba SkyZone)
Leisure Products
S + 6.75%
07/18/28
(10
)
(17
)
(5) (6) (8)
Recorded Books Inc. (dba RBMedia)
Media
11.64%
S + 6.25%
09/03/30
5,815
5,660
5,699
(6) (7) (8)
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Consolidated Schedule of Investments as of December 31, 2023 (continued)
(in thousands, except unit and per unit amounts)
Investment (1)
Industry (2)
Interest
Rate (3)
Reference Rate and
Spread (3)
Maturity
Par/Shares(4)
Cost
Fair
Value
Footnotes
Recorded Books Inc. (dba RBMedia)
Media
S + 6.25%
08/31/28
$
$
(12
)
$
(9
)
(5) (6) (8)
Arrow Buyer, Inc. (dba Archer Technologies)
Software
11.85%
S + 6.50%
07/01/30
2,942
2,872
2,898
(6) (7) (8)
Arrow Buyer, Inc. (dba Archer Technologies)
Software
S + 6.50%
07/01/30
(8
)
(10
)
(5) (6) (8)
Crewline Buyer, Inc. (dba New Relic)
Software
12.10%
S + 6.75%
11/08/30
6,963
6,792
6,789
(6) (7)
Crewline Buyer, Inc. (dba New Relic)
Software
S + 6.75%
11/08/30
(18
)
(18
)
(5) (6)
Ncontracts, LLC
Software
11.80%
S + 6.50%
12/11/29
10,689
10,423
10,422
(6) (7)
Ncontracts, LLC
Software
S + 6.50%
12/11/29
(12
)
(12
)
(5) (6)
Ncontracts, LLC
Software
S + 6.50%
12/11/29
(24
)
(25
)
(5) (6)
Onyx CenterSource, Inc.
Software
12.25%
S + 6.75%
12/15/28
6,210
6,071
6,070
(6) (7)
Onyx CenterSource, Inc.
Software
12.25%
S + 6.75%
12/15/28
(5) (6)
Rubrik, Inc.
Software
12.52%
S + 7.00%
08/17/28
8,774
8,691
8,686
(6) (7) (8)
Rubrik, Inc.
Software
12.52%
S + 7.00%
08/17/28
1,226
(5) (6) (8)
Singlewire Software, LLC
Software
11.35%
S + 6.00%
05/10/29
8,942
8,695
8,763
(6) (7) (8)
Singlewire Software, LLC
Software
S + 6.00%
05/10/29
1,438
(39
)
(29
)
(5) (6) (8)
Ortholite, LLC
Textiles, Apparel & Luxury Goods
11.61%
S + 6.25%
09/29/27
2,876
2,848
2,847
(6) (7) (8)
Harrington Industrial Plastics, LLC
Trading Companies & Distributors
11.11%
S + 5.75%
10/07/30
3,281
3,201
3,199
(6) (7)
Harrington Industrial Plastics, LLC
Trading Companies & Distributors
11.11%
S + 5.75%
10/07/30
1,119
(5) (6)
Total 1st Lien/Senior Secured Debt
149,451
149,830
1st Lien/Last-Out Unitranche (9) - 16.1%
EIP Consolidated, LLC (dba Everest Infrastructure)
Wireless Telecommunication Services
11.61%
S + 6.25%
12/07/28
$
6,255
$
6,193
$
6,193
(6) (7)
EIP Consolidated, LLC (dba Everest Infrastructure)
Wireless Telecommunication Services
S + 6.25%
12/07/28
3,745
(37
)
(38
)
(5) (6)
K2 Towers III, LLC
Wireless Telecommunication Services
11.91%
S + 6.55%
12/06/28
10,000
7,294
7,293
(5) (6)
Skyway Towers Intermediate LLC
Wireless Telecommunication Services
11.73%
S + 6.37%
12/22/28
3,682
3,645
3,645
(6) (7)
Skyway Towers Intermediate LLC
Wireless Telecommunication Services
S + 6.37%
12/22/28
2,305
(23
)
(23
)
(5) (6)
Thor FinanceCo LLC (dba Harmoni Towers)
Wireless Telecommunication Services
12.46%
S + 7.00%
08/24/28
6,222
6,147
6,160
(6) (7) (8)
Thor FinanceCo LLC (dba Harmoni Towers)
Wireless Telecommunication Services
S + 7.00%
08/24/28
3,778
(45
)
(38
)
(5) (6) (8)
Towerco IV Holdings, LLC
Wireless Telecommunication Services
9.71%
S + 4.25%
08/31/28
7,666
4,370
4,396
(5) (6) (7) (8)
Total 1st Lien/Last-Out Unitranche
27,544
27,588
Total United States
$
176,995
$
177,418
Total Debt Investments
176,995
177,418
Total Investments - 103.4%
$
176,995
$
177,418
Investments in Affiliated Money Market Fund - 5.6%
Goldman Sachs Financial Square Government Fund - Institutional Shares
9,542,172
$
9,542
$
9,542
(7) (10) (11)
Total Investments in Affiliated Money Market Fund
9,542
9,542
Total Investments and Investments in Affiliated Money Market Fund - 109.0%
$
186,537
$
186,960
(1)
Percentages are based on members' capital.
(2)
For Industry subtotal and percentage, see Note 4 "Investments."
(3)
Represents the actual interest rate for partially or fully funded debt in effect as of the reporting date. Certain investments are subject to an interest rate floor. Variable rate loans bear interest at a rate that may be determined by the larger of the floor or the reference to either L, S, SN, or alternate base rate (commonly based on the P, unless otherwise noted) at the borrower's option, which reset periodically based on the terms of the credit agreement. L and S loans are typically indexed to 12 month, 6 month, 3 month or 1 month L or S rates. As of December 31, 2023, the rate for the 1 month S was 5.35% and 3 month S was 5.33%. For investments with multiple reference rates or alternate base rates, the interest rate shown is the weighted average interest rate in effect at December 31, 2023.
(4)
Par amount is presented for debt investments, while the number of shares or units owned is presented for equity investments. Par amount is denominated in USD.
(5)
Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion. The unfunded loan commitment may be subject to a commitment termination date that may expire prior to the maturity date stated. The negative cost, if applicable, is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value, if applicable, is the result of the capitalized discount on the loan. See Note 7 "Commitments and Contingencies".
(6)
Represents co-investments made with the Company's affiliates in accordance with the terms of the exemptive relief received from the U.S. Securities and Exchange Commission. See Note 3 “Significant Agreements and Related Party Transactions”.
(7)
All, or a portion of, the assets are pledged as collateral for the revolving credit facility with Ally Bank (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”). See Note 6 “Debt”.
(8)
The fair value of the investment was determined using significant unobservable inputs. See Note 5 “Fair Value Measurement”.
(9)
In exchange for the greater risk of loss, the “last-out” portion of the Company's unitranche loan investment generally earns a higher interest rate than the “first-out” portions. The “first-out” portion would generally receive priority with respect to payment of principal, interest and any other amounts due thereunder over the “last-out” portion.
(10)
The investment is otherwise deemed to be an “affiliated person” of the Company. See Note 3 “Significant Agreements and Related Party Transactions”.
(11)
The annualized seven-day yield as of December 31, 2023 is 5.25%.
PIK - Payment-In-Kind
The accompanying notes are an integral part of these consolidated financial statements.
Phillip Street Middle Market Lending Fund LLC
Notes to the Consolidated Financial Statements
(in thousands, except unit and per unit amounts)
1.	ORGANIZATION
Phillip Street Middle Market Lending Fund LLC (the “Company”) is a Delaware limited liability company formed on July 13, 2022. The Company has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “Investment Company Act”). In addition, the Company has elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2022. The Company commenced operations on October 6, 2022. On November 2, 2022, the Company's initial investors (other than the Initial Member (as defined below)) funded the initial portion of their capital commitment to purchase units of the Company’s limited liability interest (“Units”).
The Company’s investment objective is to generate current income and, to a lesser extent, capital appreciation primarily through direct originations of secured debt, including first lien, unitranche debt, including last out portions of such loans, and second lien debt, and unsecured debt, including mezzanine debt, as well as through select equity investments.
Goldman Sachs Asset Management, L.P. (“GSAM”), a Delaware limited partnership and an affiliate of Goldman Sachs & Co. LLC (including its predecessors, “GS & Co.”), is the investment adviser (the “Investment Adviser”) of the Company. The term “Goldman Sachs” refers to The Goldman Sachs Group, Inc. (“GS Group Inc.”), together with GS & Co., GSAM and its other subsidiaries.
The Company is conducting an offering pursuant to which investors will make a capital commitment (a “Commitment”) to purchase Units pursuant to a subscription agreement entered into with the Company pursuant to which the investor will agree to purchase Units for an aggregate purchase price equal to its Commitment. Each investor will be required to purchase the Company’s Units each time the Company delivers a drawdown notice at least 10 business days prior to the required funding date (the “Drawdown Date”). The offering and sale of Units will be exempt from registration pursuant to Regulation D and Regulation S promulgated under the U.S. Securities Act of 1933, as amended, for offers and sales of securities that do not involve a public offering and for offers and sale of securities outside of the United States.
On October 6, 2022, the Company received a capital commitment of $10 from an affiliate of the Investment Adviser (the “Initial Member”). The Initial Member was the sole owner of the Company’s interests until the period beginning on the first date on which investors in the Company are required to make the initial capital contribution to purchase Units, and Units are issued in respect thereof (the “Initial Drawdown Date”).
On October 19, 2022, the Company began accepting subscription agreements ("Subscription Agreements") from investors acquiring Units of the Company in the Company's private offering. Under the terms of the Subscription Agreements, investors are required to make capital contributions up to the undrawn amount of their capital commitment to purchase Units each time the Company delivers a drawdown notice. On March 1, 2023, the Company’s board of directors (the “Board of Directors” or the “Board”) approved an amended and restated limited liability company agreement.
The Company has formed wholly-owned subsidiaries, which are structured as Delaware limited liability companies, to hold certain equity or equity-like investments in portfolio companies and corporate debt of portfolio companies.
2.	SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s functional currency is U.S. dollars (“USD”) and these consolidated financial statements have been prepared in that currency. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to Regulation S-X. This requires the Company to make certain estimates and assumptions that may affect the amounts reported in the consolidated financial statements and accompanying notes. These consolidated financial statements reflect normal and recurring adjustments that in the opinion of the Company are necessary for the fair statement of the results for the periods presented. Actual results may differ from the estimates and assumptions included in the consolidated financial statements.
Certain prior period information has been conformed to the current period presentation and has no effect on the Company’s consolidated financial position or consolidated results of operations as previously reported.
As an investment company, the Company applies the accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”).
Basis of Consolidation
As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidated the financial position and results of operations of its wholly-owned subsidiaries, Phillip Street Middle Market Lending Investments LLC ("SPV"), Phillip Street Middle Market Lending Investments Holdings LLC, and PSLF Blocker I, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Revenue Recognition
The Company records its investment transactions on a trade date basis, which is the date when the Company assumes the risks for gains and losses related to that instrument. Realized gains and losses are based on the specific identification method.
Interest income, adjusted for amortization of premium and accretion of discount, is recorded on an accrual basis. Discounts and premiums to par value on investments purchased are accreted and amortized, respectively, into interest income over the life of the respective investment using the effective interest method. Loan origination fees, original issue discount ("OID") and market discounts or premiums are capitalized and amortized into interest income using the effective interest method or straight-line method, as applicable. Exit fees that are receivable upon repayment of a loan or debt security are amortized into interest income over the life of the respective investment. Upon prepayment of a loan or debt security, any prepayment premiums, unamortized upfront loan origination fees and unamortized discounts are recorded as interest income, for which the Company has earned the following:
For the Year Ended December 31,
For the Year Ended December 31,
For the period from October 6, 2022 (commencement of operations) to December 31,
Prepayment premiums
$
$
$
-
Accelerated amortization of upfront loan origination fees and unamortized discounts
$
$
$
-
Fees received from portfolio companies (directors’ fees, consulting fees, administrative fees, tax advisory fees and other similar compensation) are paid to the Company, unless, to the extent required by applicable law or exemptive relief, if any, therefrom, the Company only receives its allocable portion of such fees when invested in the same portfolio company as another Account (as defined below) managed by the Investment Adviser.
Dividend income on preferred equity investments is recorded on an accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity investments is recorded on the record date for private portfolio companies and on the ex-dividend date for publicly traded portfolio companies. Interest and dividend income are presented net of withholding tax, if any.
Certain investments may have contractual payment in kind ("PIK") interest or dividends. PIK represents accrued interest or accumulated dividends that are added to the principal amount or shares (if equity) of the investment on the respective interest or dividend payment dates rather than being paid in cash and generally becomes due at maturity or upon the investment being called by the issuer. PIK is recorded as interest or dividend income, as applicable. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized interest or dividends are generally reversed through interest or dividend income, respectively.
Certain structuring fees, amendment fees, syndication fees and commitment fees are recorded as other income when earned. Administrative agent fees received by the Company are recorded as other income when the services are rendered over time.
Non-Accrual Investments
Investments are placed on non-accrual status when it is probable that principal, interest or dividends will not be collected according to the contractual terms. Accrued interest or dividends generally are reversed when an investment is placed on non-accrual status. Interest or dividend payments received on non-accrual investments may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual investments are restored to accrual status when past due principal and interest or dividends are paid and, in management’s judgment, principal and interest or dividend payments are likely to remain current. The Company may make exceptions to this treatment if an investment has sufficient collateral value and is in the process of collection. As of December 31, 2024 and December 31, 2023, the Company did not have any investments on non-accrual status.
Investments
The Company carries its investments in accordance with ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), issued by the FASB, which defines fair value, establishes a framework for measuring fair value and requires disclosures about fair value measurements. Fair value is generally based on quoted market prices provided by independent price sources. In the absence of quoted market prices, investments are measured at fair value as determined by the Investment Adviser, as the valuation designee (the "Valuation Designee") designated by the Board of Directors, pursuant to Rule 2a-5 under the Investment Company Act.
Due to the inherent uncertainties of valuation, certain estimated fair values may differ significantly from the values that would have been realized had a ready market for these investments existed, and these differences could be material. See Note 5 “Fair Value Measurement”.
The Company generally invests in illiquid securities, including debt and equity investments, of middle-market companies. The Board of Directors has designated to the Investment Adviser day-to-day responsibilities for implementing and maintaining internal controls and procedures related to the valuation of the Company’s portfolio investments. Under valuation procedures approved by the Board of Directors and adopted by the Valuation Designee, market quotations are generally used to assess the value of the investments for which market quotations are readily available (as defined in Rule 2a-5). The Investment Adviser obtains these market quotations from independent pricing sources. If market quotations are not readily available, the Investment Adviser prices securities at the bid prices obtained from at least two brokers or dealers, if available; otherwise, the Investment Adviser obtains prices from a principal market maker or a primary market dealer. To assess the continuing appropriateness of pricing sources and methodologies, the Investment Adviser regularly performs price verification procedures and issues challenges as necessary to independent pricing sources or brokers, and any differences are reviewed in accordance with the valuation procedures. If the Valuation Designee believes any such market quotation does not reflect the fair value of an investment, it may independently value such investment in accordance with valuation procedures for investments for which market quotations are not readily available.
With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, the valuation procedures approved by the Board of Directors and adopted by the Valuation Designee, contemplate a multi-step valuation process conducted by the Investment Adviser each quarter and more frequently as needed. As the Valuation Designee, the Investment Adviser is primarily responsible for the valuation of the Company’s assets, subject to the oversight of the Board of Directors, as described below:
(1)The quarterly valuation process begins with each portfolio company or investment being initially valued by the investment professionals of the Investment Adviser responsible for the valuation of the portfolio investment;
(2)The Valuation Designee also engages independent valuation firms (the “Independent Valuation Advisors”) to provide independent valuations of the investments for which market quotations are not readily available or are readily available but deemed not reflective of the fair value of an investment. The Independent Valuation Advisors independently value such investments using quantitative and qualitative information. The Independent Valuation Advisors also provide analyses to support their valuation methodology and calculations. The Independent Valuation Advisors provide an opinion on a final range of values on such investments to the Valuation Designee. The Independent Valuation Advisors define fair value in accordance with ASC 820 and utilize valuation approaches including the market approach, the income approach or both. A portion of the portfolio is reviewed on a quarterly basis, and all investments in the portfolio for which market quotations are not readily available, or are readily available, but deemed not reflective of the fair value of an investment, are reviewed at least annually by an Independent Valuation Advisor;
(3)The Independent Valuation Advisors’ preliminary valuations are reviewed by the Investment Adviser and the Valuation Oversight Group (“VOG”), a team that is part of the controllers group of Goldman Sachs. The Independent Valuation Advisors’ valuation ranges are compared to the Investment Adviser’s valuations to ensure the Investment Adviser’s valuations are reasonable. VOG presents the valuations to the Asset Management Private Investment Valuation and Side Pocket Working Group of the Asset Management Valuation Committee (the “Asset Management Private Investment Valuation and Side Pocket Working Group”), which is comprised of a number of representatives from different functions and areas of expertise related to GSAM’s business and controls who are independent of the investment decision making process;
(4)The Asset Management Private Investment Valuation and Side Pocket Working Group reviews and preliminarily approves the fair valuations and makes fair valuation recommendations to the Asset Management Valuation Committee;
(5)The Asset Management Valuation Committee reviews the valuation information provided by the Asset Management Private Investment Valuation and Side Pocket Working Group, the VOG, the investment professionals of the Investment Adviser responsible for valuations, and the Independent Valuation Advisors. The Asset Management Valuation Committee then assesses such valuation recommendations; and
(6)Through the Asset Management Valuation Committee, the Valuation Designee, discusses the valuations, provides written reports to the Board of Directors on at least a quarterly basis, and, within the meaning of the Investment Company Act, determines the fair value of the investments in good faith, based on the inputs of the Asset Management Valuation Committee, the Asset Management Private Investment Valuation and Side Pocket Working Group, the VOG, the investment professionals of the Investment Adviser responsible for valuations, and the Independent Valuation Advisors.
Money Market Funds
Investments in money market funds are valued at net asset value (“NAV”) per share. See Note 3 “Significant Agreements and Related Party Transactions.”
Cash
Cash consists of deposits held at State Street Bank and Trust (in such capacity, the "Custodian"). As of December 31, 2024 and December 31, 2023, the Company held an aggregate cash balance of $11,353 and $5,789, respectively. Foreign currency of $167 (acquisition cost of $174) is included in cash as of December 31, 2024.
Foreign Currency Translation
Amounts denominated in foreign currencies are translated into USD on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into USD based upon currency exchange rates effective on the last business day of the period; and (ii) purchases and sales of investments, borrowings and repayments of such borrowings, income, and expenses denominated in foreign currencies are translated into USD based upon currency exchange rates prevailing on the transaction dates.
The Company does not isolate the portion of the results of operations resulting from changes in foreign exchange rates on investments from fluctuations arising from changes in market prices of securities held. Such fluctuations are included within the net realized and unrealized gains or losses on investments. Fluctuations arising from the translation of non-investment assets and liabilities, if any, are included with the net change in unrealized gains (losses) on foreign currency translations in the Consolidated Statements of Operations.
Foreign securities and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S. companies or U.S. government securities.
Income Taxes
The Company recognizes tax positions in its consolidated financial statements only when it is more likely than not that the position will be sustained upon examination by the relevant taxing authority based on the technical merits of the position. A position that meets this standard is measured at the largest amount of benefit that will more likely than not be realized upon settlement. The Company reports any interest expense related to income tax matters in income tax expense, and any income tax penalties under expenses in the Consolidated Statement of Operations.
The Company’s tax positions have been reviewed based on applicable statutes of limitation for tax assessments, which may vary by jurisdiction, and based on such review, the Company has concluded that no additional provision for income tax is required in the consolidated financial statements. The Company is subject to potential examination by certain taxing authorities in various jurisdictions. The Company’s tax positions are subject to ongoing interpretation of laws and regulations by taxing authorities.
The Company elected to be treated as a RIC commencing with its taxable year ended December 31, 2022. So long as the Company maintains its qualification for tax treatment as a RIC, it will generally not be required to pay corporate-level U.S. federal income tax on any ordinary income or capital gains that it distributes at least annually to its unitholders (the "Unitholders") as dividends. As a result, any U.S. federal income tax liability related to income earned and distributed by the Company represents obligations of the Company’s Unitholders and will not be reflected in the consolidated financial statements of the Company.
To maintain its tax treatment as a RIC, the Company must meet specified source-of-income and asset diversification requirements and timely distribute to its Unitholders for each taxable year at least 90% of its investment company taxable income (generally, its net ordinary income plus the excess of its realized net short-term capital gains over realized net long-term capital losses, determined without regard to the dividends paid deduction). In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the calendar year, (ii) 98.2% of its capital gains in excess of capital losses for the one-year period ending on October 31 of the calendar year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income. If the Company chooses to do so, this generally would increase expenses and reduce the amount available to be distributed to Unitholders without reducing the Company’s required distribution. The Company will accrue excise tax on estimated undistributed taxable income as required.
Certain of the Company’s consolidated subsidiaries are subject to U.S. federal and state corporate level income taxes. Income tax expense, if any, is included under the income category for which it applies in the Consolidated Statement of Operations.
Distributions
Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal income tax regulations, which may differ from those amounts determined in accordance with GAAP. The Company may pay distributions in excess of its taxable net investment income. This excess would be a tax-free return of capital in the period and reduce a Unitholder’s tax basis in its Units. These book/tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to Units or distributable earnings, as appropriate, in the period that the differences arise. Temporary and permanent differences are primarily attributable to differences in the tax treatment of certain loans and the tax characterization of income and non-deductible expenses. These differences are generally determined in conjunction with the preparation of the Company’s annual RIC tax return. Distributions to Unitholders are recorded on the record date. The amount to be paid out as a distribution is determined by the Board of Directors each quarter and is generally based upon the earnings estimated by the Investment Adviser. The Company may pay distributions to its Unitholders in a year in excess of its net ordinary income and capital gains for that year and, accordingly, a portion of such distributions may constitute a return of capital for U.S. federal income tax purposes. The Company intends to timely distribute to its Unitholders substantially all of its annual taxable income for each year, except that the Company may retain certain net capital gains for reinvestment and, depending upon the level of the Company’s taxable income earned in a year, the Company may choose to carry forward taxable income for distribution in the following year and pay any applicable tax. The specific tax characteristics of the Company’s distributions will be reported to Unitholders after the end of the calendar year. All distributions will be subject to available funds, and no assurance can be given that the Company will be able to declare such distributions in future periods.
The Company has a distribution reinvestment plan that provides for reinvestment of all cash distributions declared by the Board of Directors unless a Unitholder elects to “opt out” of the plan. As a result, if the Board of Directors declares a cash distribution, then the Unitholders who have not “opted out” of the dividend reinvestment plan will have their cash distributions automatically reinvested in additional Units, rather than receiving the cash distribution. Unitholders who receive distributions in the form of additional Units will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions and, for this purpose, Unitholders receiving distributions in the form of Units will generally be treated as receiving distributions equal to the amount of cash that would have been received if the Unitholder had received the distribution in cash; however, since their cash distributions will be reinvested, those Unitholders will not receive cash with which to pay any applicable taxes.
Deferred Financing Costs
Deferred financing costs consist of fees and expenses paid in connection with the closing of and amendments to the revolving credit facility with Ally Bank (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Facility”). These costs are amortized using the straight-line method over the term of the Credit Facility. Deferred financing costs related to the Credit Facility are presented separately as an asset on the Company’s Consolidated Statements of Financial Condition.
Organization Costs
Organization costs include costs relating to the formation and organization of the Company. These costs were expensed as incurred. Upon the Initial Drawdown Date, Unitholders bore such costs. Unitholders making capital commitments after the Initial Drawdown Date will bear a pro rata portion of such costs at the time of their first investment in the Company.
Offering Costs
Offering costs consist primarily of fees and expenses incurred in connection with the continuous offering of Units, including legal, printing and other costs, as well as costs associated with the preparation and filing of the Company’s registration statement on Form 10. Offering costs are recognized as a deferred charge and are amortized on a straight-line basis over 12 months beginning on the date of commencement of operations.
Segment Reporting
As described under ASC 280 - Segment reporting, the Company operates through a single operating and reporting segment with the investment objectives to generate current income and, to a lesser extent, capital appreciation through direct origination of secured debt, unsecured debt and select equity investments. The chief operating decision maker (“CODM”) is comprised of the Company’s chief executive officers, chief financial officer and chief operating officer. The CODM uses Net increase (decrease) in members' capital from operations in the Company’s Consolidated Statements of Operations to assess the Company’s performance and allocate resources. The evaluation and assessment of this metric is used in implementing investment policy decisions, managing the Company’s portfolio, evaluation of the Company’s distribution policy and assessing the performance of the portfolio. As the Company’s operations comprise of a single reporting segment, the segment assets are reflected on the accompanying Consolidated Statements of Financial Condition as "Total members' capital" and the significant segment expenses are listed on the accompanying Consolidated Statements of Operations.
New Accounting Pronouncements
In November 2023, the FASB issued Accounting Standard Update (“ASU”) No. 2023-07, “Improvements to Reportable Segment Disclosures.” This ASU requires enhanced disclosures about significant segment expenses. In addition, the ASU requires specific disclosures related to the title and position of the individual (or the name of the group or committee) identified as the CODM; and an explanation of how the CODM uses the reported measures of segment profit or loss in assessing segment performance and deciding how to allocate resources. The Company has adopted ASU 2023-07 effective December 31, 2024 and concluded that the application of this guidance did not have any material impact on its consolidated financial statements. For further information, see Note 2 Significant Accounting Policies - Segment Reporting.
In December 2023, the FASB issued ASU No. 2023-09, “Improvements to Income Tax Disclosures.” This ASU requires additional disaggregation of income taxes paid, specific rate reconciliation categories, and disaggregation within those categories if a defined quantitative threshold is met. The Company has elected early adoption of this standard and the adoption did not affect the Company’s consolidated financial statements.
3.	SIGNIFICANT AGREEMENTS AND RELATED PARTY TRANSACTIONS
Investment Management and Advisory Agreement
The Company entered into an investment management and advisory agreement effective as of October 19, 2022 (the “Investment Management Agreement”) with the Investment Adviser, pursuant to which the Investment Adviser manages the Company’s investment program and related activities.
Management Fee
The Company pays the Investment Adviser a management fee (the “Management Fee”), accrued and payable quarterly in arrears. The Management Fee is calculated at, (i) prior to the calendar quarter-end that the aggregate amount of capital contributions to the Company made by Unitholders equals or exceeds $450 million, 0.325% (i.e., an annual rate of 1.30%), and (ii) on and after such date 0.2375% (i.e., an annual rate of 0.95%), in each case, of the average NAV of the Company at the end of the then-current calendar quarter and the prior calendar quarter. For the avoidance of doubt, the Management Fee for the Company's first quarter (i.e., the period beginning on the Initial Drawdown Date and ending on the last day of the quarter in which the Initial Drawdown Date occurred) shall be equal to 0.325% (i.e., an annual rate of 1.30%) of the average of the Company's NAV at the end of such quarter and zero. The Management Fee for any partial quarter will be appropriately prorated. The Management Fee will be reduced by an amount equal to any fees the Investment Adviser earns for any affiliated money market funds in which the Company invests.
For the years ended December 31, 2024, 2023 and for the period from October 6, 2022 (commencement of operations) to December 31, 2022, Management Fees amounted to $3,490, $1,441 and $97, and the Investment Adviser voluntarily waived $0, $286, and $0 of its Management Fees, respectively. As of December 31, 2024, $1,245 remained payable.
Incentive Fee
The Company pays to the Investment Adviser a quarterly incentive fee (the “Incentive Fee”) with respect to pre-incentive fee net investment income (as defined below) as follows:
(a)
First, no Incentive Fee will be payable to the Investment Adviser based on pre-incentive fee net investment income in any calendar quarter in which our pre-incentive fee net investment income does not exceed a hurdle rate of 1.25% of the Company's NAV (5.0% annualized) (the “Hurdle Rate”); and
(b)
Thereafter, the Investment Adviser will be entitled to receive 15% of the pre-incentive fee net investment income, if any, that exceeds 1.25% of the Company's NAV in any calendar quarter (5.0% annualized), which reflects that once the Hurdle Rate is reached, 15% of all pre-incentive fee net investment income in excess of the Hurdle Rate is paid to the Investment Adviser.
The Hurdle Rate will be determined on a quarterly basis, and will be calculated by multiplying 1.25% by the Company's NAV at the beginning of each applicable calendar quarter, adjusted for the Company’s subscriptions and distributions during the applicable calendar quarter. The Incentive Fee will be calculated and paid quarterly in arrears. The Incentive Fee is a fee owed by the Company to the Investment Adviser and is not paid out of distributions made to Unitholders.
Pre-incentive fee net investment income means interest income, distribution income and any other income accrued during the calendar quarter, minus operating expenses for the quarter, including the base Management Fee, expenses payable to State Street Bank and Trust Company ("the Administrator") under the Administration Agreement (as defined below), any interest expense and distributions paid on any issued and outstanding private equity securities (the “Preferred Units”), but excluding the Incentive Fee. Pre-incentive fee net investment income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation. Pre-incentive fee net investment income includes, in the case of investments with a deferred interest feature (such as debt instruments with PIK interest and zero coupon securities), accrued income that the Company has not yet received in cash. The Investment Adviser is not obligated to return to Unitholders the Incentive Fee it receives on PIK interest that is later determined to be uncollectible in cash.
For the years ended December 31, 2024, 2023 and for the period from October 6, 2022 (commencement of operations) to December 31, 2022, the Company accrued Incentive Fees of $1,725, $206 and $0, respectively. As of December 31, 2024, $676 was payable in accordance with the terms of the Investment Advisory Agreement.
Administration and Custodian Fees
The Company has entered into an administration agreement with the Administrator (the "Administration Agreement") under which the Administrator provides various accounting and administrative services to the Company. The Company pays the Administrator fees for its services as it determines to be commercially reasonable in its sole discretion. The Company also reimburses the Administrator for all reasonable expenses. To the extent that the Administrator outsources any of its functions, the Administrator pays any compensation associated with such functions. The Administrator also serves as the Company's Custodian.
For the years ended December 31, 2024, 2023 and for the period from October 6, 2022 (commencement of operations) to December 31, 2022, the Company incurred expenses for services provided by the Administrator and the Custodian of $462, $296 and $70, respectively. As of December 31, 2024, $144 remained payable.
Transfer Agent Fees
State Street Bank and Trust Company serves as the Company’s transfer agent (the “Transfer Agent”), registrar and disbursing agent. For the years ended December 31, 2024, 2023 and for the period from October 6, 2022 (commencement of operations) to December 31, 2022, the Company incurred expenses for services provided by the Transfer Agent of $51, $51 and $15, respectively. As of December 31, 2024, $18 remained payable.
Affiliates
GSAM Holdings, LLC owned 500 of the Company's Units as of December 31, 2024 and December 31, 2023. The table below presents the Company’s affiliated investments:
Beginning Fair Value Balance
Gross
Additions (1)
Gross
Reductions(2)
Net Realized
Gain (Loss)
Net Change in
Unrealized
Appreciation
(Depreciation)
Ending
Fair Value
Balance
Dividend,
Interest
and Other
Income
For the Year Ended December 31, 2024
Non-Controlled Affiliates
Goldman Sachs Financial Square Government Fund - Institutional Shares
$
9,542
$
508,196
$
(508,509
)
$
-
$
-
$
9,229
$
ABC Investment Holdco Inc. (dba ABC Plumbing)
-
11,187
(284
)
-
(29
)
10,874
Total Non-Controlled Affiliates
$
9,542
$
519,383
$
(508,793
)
$
-
$
(29
)
$
20,103
$
1,536
For the Year Ended December 31, 2023
Non-Controlled Affiliates
Goldman Sachs Financial Square Government Fund - Institutional Shares
$
79,725
$
297,188
$
(367,371
)
$
-
$
-
$
9,542
$
2,044
Total Non-Controlled Affiliates
$
79,725
$
297,188
$
(367,371
)
$
-
$
-
$
9,542
$
2,044
(1)Gross additions may include increases in the cost basis of investments resulting from new portfolio investments, PIK, the accretion of discounts, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company into this category from a different category.
(2)Gross reductions may include decreases in the cost basis of investments resulting from principal collections related to investment repayments or sales, the exchange of one or more existing securities for one or more new securities and the movement of an existing portfolio company out of this category into a different category.
Due to Affiliates
The Investment Adviser pays certain general and administrative expenses on behalf of the Company in the ordinary course of business. As of December 31, 2024 and December 31, 2023, there were $36 and $123, respectively, included within Professional fees payable, $0 and $58, respectively, included within Accrued deferred offering costs, and $26 and $1, respectively, included within Interest and other debt expenses payable that were paid by the Investment Adviser and its affiliates on behalf of the Company.
Co-Investment Activity
In certain circumstances, the Company can make negotiated co-investments pursuant to an exemptive order from the SEC permitting it to do so. On November 16, 2022, the SEC granted to the Investment Adviser, the BDCs advised by the Investment Adviser and certain other affiliated applicants exemptive relief on which the Company expects to rely to co-invest alongside certain other client accounts managed by the Investment Adviser (collectively with the Company, the “Accounts”), which may include proprietary accounts of Goldman Sachs, in a manner consistent with the Company's investment objectives and strategies, certain Board-established criteria, the conditions of such exemptive relief and other pertinent factors (as amended, the “Relief”). On June 25, 2024, the SEC granted an amendment to the Relief, which permits the Company to participate in follow-on investments in the Company’s existing portfolio companies with certain affiliates covered by the Relief if such affiliates, that are not BDCs or registered investment companies, have an investment in such existing portfolio company. Additionally, if the Investment Adviser forms other funds in the future, the Company may co-invest alongside such other affiliates, subject to compliance with the Relief, applicable regulations and regulatory guidance, as well as applicable allocation procedures. As a result of the Relief, there could be significant overlap in the Company’s investment portfolio and the investment portfolios of other Accounts, including, in some cases, proprietary accounts of Goldman Sachs. The Goldman Sachs Asset Management Private Credit Team is composed of investment professionals dedicated to the Company’s investment strategy and to other funds that share a similar investment strategy with the Company. The Goldman Sachs Asset Management Private Credit Team is responsible for identifying investment opportunities, conducting research and due diligence on prospective investments, negotiating and structuring the Company’s investments and monitoring and servicing the Company’s investments. The team works together with investment professionals who are primarily focused on investment strategies in syndicated, liquid credit. Under the terms of the Relief, a “required majority” (as defined in Section 57(o) of the Investment Company Act) of the Company’s independent directors must make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the proposed transaction are reasonable and fair to the Company and the Company’s Unitholders and do not involve overreaching in respect of the Company or its Unitholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s Unitholders and is consistent with the then-current investment objectives and strategies of the Company.
4.	INVESTMENTS
The Company’s investments (excluding investments in money market funds, if any) consisted of the following:
December 31, 2024
December 31, 2023
Investment Type
Cost
Fair Value
Cost
Fair Value
1st Lien/Senior Secured Debt
$
562,624
$
562,474
$
149,451
$
149,830
1st Lien/Last-Out Unitranche
39,671
39,636
27,544
27,588
Common Stock
2,247
2,309
-
-
Total investments
$
604,542
$
604,419
$
176,995
$
177,418
The industry composition of the Company’s investments as a percentage of fair value and net assets was as follows:
December 31, 2024
December 31, 2023
Industry
Fair Value
Net Assets
Fair Value
Net Assets
Software
13.3
%
19.8
%
24.6
%
25.3
%
Diversified Consumer Services
9.1
13.7
11.5
11.9
Commercial Services & Supplies
8.0
12.1
5.9
6.1
Financial Services
7.7
11.6
5.5
5.7
Trading Companies & Distributors
7.4
11.1
2.2
2.3
IT Services
7.4
11.1
3.5
3.6
Wireless Telecommunication Services
6.6
9.9
15.5
16.1
Construction & Engineering
5.8
8.7
-
-
Machinery
4.6
7.0
-
-
Food Products
4.2
6.3
-
-
Containers & Packaging
3.2
4.9
-
-
Hotels, Restaurants & Leisure
3.2
4.9
5.8
6.0
Insurance
2.7
4.1
6.5
6.7
Health Care Equipment & Supplies
2.6
3.9
-
-
Health Care Technology
2.4
3.6
-
-
Professional Services
1.9
2.8
-
-
Specialty Retail
1.7
2.5
-
-
Health Care Providers & Services
1.4
2.1
2.5
2.7
Leisure Products
1.2
1.9
3.6
3.7
Electrical Equipment
1.1
1.6
-
-
Media
1.1
1.6
3.2
3.3
Distributors
0.8
1.2
2.8
2.9
Chemicals
0.8
1.2
2.8
2.9
Consumer Staples Distribution & Retail
0.7
1.1
2.5
2.5
Aerospace & Defense
0.6
0.9
-
-
Textiles, Apparel & Luxury Goods
0.5
0.7
1.6
1.7
Total
100.0
%
150.3
%
100.0
%
103.4
%
The geographic composition of the Company’s investments at fair value was as follows:
Geographic
December 31, 2024
December 31, 2023
United States
100.0
%
100.0
%
Total
100.0
%
100.0
%
5.	FAIR VALUE MEASUREMENT
The fair value of a financial instrument is the amount that would be received to sell an asset or would be paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e., the exit price).
The fair value hierarchy under ASC 820 prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The levels used for classifying investments are not necessarily an indication of the risk associated with investing in these securities. The three levels of the fair value hierarchy are as follows:
Basis of Fair Value Measurement
Level 1 - Inputs to the valuation methodology are quoted prices available in active markets for identical instruments as of the reporting date. The types of financial instruments included in Level 1 include unrestricted securities, including equities and derivatives, listed in active markets.
Level 2 - Inputs to the valuation methodology are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. The types of financial instruments in this category include less liquid and restricted securities listed in active markets, securities traded in other than active markets, government and agency securities and certain over-the-counter derivatives where the fair value is based on observable inputs.
Level 3 - Inputs to the valuation methodology are unobservable and significant to overall fair value measurement. The inputs into the determination of fair value require significant management judgment or estimation. Financial instruments that are included in this category include investments in privately held entities and certain over-the-counter derivatives where the fair value is based on unobservable inputs.
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Note 2 “Significant Accounting Policies” should be read in conjunction with the information outlined below.
The table below presents the valuation techniques and the nature of significant inputs generally used in determining the fair value of Level 2 and Level 3 Instruments.
Level 2 Instruments
Valuation Techniques and Significant Inputs
Equity and Fixed Income
The types of instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency include commercial paper, most government agency obligations, most corporate debt securities, certain mortgage-backed securities, certain bank loans, less liquid publicly listed equities, certain state and municipal obligations, certain money market instruments and certain loan commitments.
Valuations of Level 2 Equity and Fixed Income instruments can be verified to quoted prices, broker or dealer quotations or alternative pricing sources with reasonable levels of price transparency. Consideration is given to the nature of the quotations (e.g. indicative or firm) and the relationship of recent market activity to the prices provided from alternative pricing sources.
Derivative Contracts
Over-the-counter ("OTC") derivatives (both centrally cleared and bilateral) are valued using market transactions and other market evidence whenever possible, including market-based inputs to models, calibration to market-clearing transactions, broker or dealer quotations, or other alternative pricing sources with reasonable levels of price transparency. Where models are used, the selection of a particular model to value an OTC derivative depends upon the contractual terms of, and specific risks inherent in, the instrument, as well as the availability of pricing information in the market. The Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit curves, measures of volatility, voluntary and involuntary prepayment rates, loss severity rates and correlations of such inputs. For OTC derivatives that trade in liquid markets, model inputs can generally be verified and model selection does not involve significant management judgment. OTC derivatives are classified within Level 2 of the fair value hierarchy when significant inputs are corroborated by market evidence.
Level 3 Instruments
Valuation Techniques and Significant Inputs
Bank Loans, Corporate Debt, and Other Debt Obligations
Valuations are generally based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market yields and recovery assumptions. The significant inputs are generally determined based on relative value analyses, which incorporate comparisons both to credit default swaps that reference the same underlying credit risk and to other debt instruments for the same issuer for which observable prices or broker quotes are available. Other valuation methodologies are used as appropriate including market comparables, transactions in similar instruments and recovery/liquidation analysis.
Equity
Recent third-party investments or pending transactions are considered to be the best evidence for any change in fair value. When these are not available, the following valuation methodologies are used, as appropriate and available: (i) Transactions in similar instruments; (ii) Discounted cash flow techniques; (iii) Third party appraisals; and (iv) Industry multiples and public comparables.
Evidence includes recent or pending reorganizations (for example, merger proposals, tender offers and debt restructurings) and significant changes in financial metrics, including: (i) Current financial performance as compared to projected performance; (ii) Capitalization rates and multiples; and (iii) Market yields implied by transactions of similar or related assets.
The table below presents the ranges of significant unobservable inputs used to value the Company’s Level 3 assets as of December 31, 2024 and December 31, 2023. These ranges represent the significant unobservable inputs that were used in the valuation of each type of instrument, but they do not represent a range of values for any one instrument. For example, the lowest discount rate in 1st Lien/Senior Secured Debt is appropriate for valuing that specific debt investment, but may not be appropriate for valuing any other debt investments in this asset class. Accordingly, the ranges of inputs presented below do not represent uncertainty in, or possible ranges of, fair value measurements of the Company’s Level 3 assets.
Level 3 Instruments
Fair Value(1)(2)
Valuation Techniques(3)
Significant Unobservable Inputs
Range of Significant Unobservable Inputs(4)
Weighted Average(5)
As of December 31, 2024
Bank Loans, Corporate Debt, and Other Debt Obligations
1st Lien/Senior Secured Debt
$
416,612
Discounted cash flows
Discount Rate
8.6% - 12.5%
9.9%
1st Lien/Last-Out Unitranche
39,636
Discounted cash flows
Discount Rate
8.8% - 11.4%
10.5%
Equity
Common Stock
$
2,309
Comparable multiples
EV/EBITDA(6)
10.0x - 13.5x
13.0x
As of December 31, 2023
Bank Loans, Corporate Debt, and Other Debt Obligations
1st Lien/Senior Secured Debt
$
81,003
Discounted cash flows
Discount Rate
9.7% - 11.7%
10.7%
1st Lien/Last-Out Unitranche
10,518
Discounted cash flows
Discount Rate
8.9% - 10.7%
9.9%
(1)As of December 31, 2024, included within Level 3 Assets of $577,192 is an amount of $118,635 for which the Investment Adviser did not develop the unobservable inputs (examples include single source broker quotations, third party pricing, and prior transactions). The income approach was used in the determination of fair value for $456,248, or 79.4%, of Level 3 bank loans, corporate debt, and other debt obligations.
(2)As of December 31, 2023, included within Level 3 Assets of $177,418 is an amount of $85,897 for which the Investment Adviser did not develop the unobservable inputs (examples include single source broker quotations, third party pricing, and prior transactions). The income approach was used in the determination of fair value for $91,521, or 51.6%, of Level 3 bank loans, corporate debt, and other debt obligations.
(3)The fair value of any one instrument may be determined using multiple valuation techniques. For example, market comparable and discounted cash flows may be used together to determine fair value. Therefore, the Level 3 balance encompasses both of these techniques.
(4)The range for an asset category consisting of a single investment, if any, is not meaningful and therefore has been excluded.
(5)Weighted average for an asset category consisting of multiple investments is calculated by weighting the significant unobservable input by the relative fair value of the investment. Weighted average for an asset category consisting of a single investment represents the significant unobservable input used in the fair value of the investment.
(6)Enterprise value of portfolio company as a multiple of earnings before interest, taxes, depreciation and amortization (“EBITDA”).
The following is a summary of the Company’s assets categorized within the fair value hierarchy:
December 31, 2024
December 31, 2023
Assets
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
1st Lien/Senior Secured Debt
$
-
$
27,227
$
535,247
$
562,474
$
-
$
-
$
149,830
$
149,830
1st Lien/Last-Out Unitranche
-
-
39,636
39,636
-
-
27,588
27,588
Common Stock
-
-
2,309
2,309
-
-
-
-
Investments in Affiliated Money Market Fund
9,229
-
-
9,229
9,542
-
-
9,542
Total
$
9,229
$
27,227
$
577,192
$
613,648
$
9,542
$
-
$
177,418
$
186,960
The below table presents a summary of changes in fair value of Level 3 assets by investment type:
Assets
Beginning
Balance
Purchases(1)
Net
Realized
Gain (Loss)
Net Change in
Unrealized
Appreciation
(Depreciation)
Sales and
Settlements(1)
Net
Amortization
of Premium/
Discount
Transfers
In (2)
Transfers
Out (2)
Ending Balance
Net Change in
Unrealized
Appreciation
(Depreciation)
for assets still
held
For the Year Ended December 31, 2024
1st Lien/Senior Secured Debt
$
149,830
$
443,947
$
(1
)
$
(616
)
$
(59,584
)
$
1,671
$
-
$
-
$
535,247
$
(600
)
1st Lien/Last-Out Unitranche
27,588
12,044
-
(79
)
-
-
-
39,636
(79
)
Common Stock
-
2,247
-
-
-
-
-
2,309
Total assets
$
177,418
$
458,238
$
(1
)
$
(633
)
$
(59,584
)
$
1,754
$
-
$
-
$
577,192
$
(617
)
For the Year Ended December 31, 2023
1st Lien/Senior
Secured Debt
$
17,352
$
147,511
$
$
$
(16,120
)
$
$
-
$
-
$
149,830
$
1st Lien/Last-Out Unitranche
-
27,531
-
-
-
-
27,588
Total assets
$
17,352
$
175,042
$
$
$
(16,120
)
$
$
-
$
-
$
177,418
$
(1)Purchases may include PIK, securities received in corporate actions and restructurings. Sales and Settlements may include securities delivered in corporate actions and restructuring of investments.
(2)Transfers in (out) of Level 3, if any, are due to a decrease (increase) in the quantity and reliability of broker quotes obtained by the Investment Adviser.
Debt Not Carried at Fair Value
The fair value of the Company’s debt, which would have been categorized as Level 3 within the fair value hierarchy as of December 31, 2024 and December 31, 2023, approximates its carrying value because the Credit Facility has variable interest based on selected short term rates.
6.	DEBT
On October 6, 2022, the Initial Member approved the application of the reduced asset coverage requirements in Section 61(a)(2) of the Investment Company Act to the Company and such election became effective the following day. As a result of this approval, the Company is currently allowed to borrow amounts such that its asset coverage ratio, as defined in the Investment Company Act, is at least 150% after such borrowing (if certain requirements are met). As of December 31, 2024 and December 31, 2023, the Company’s asset coverage ratio based on the aggregate amount outstanding of senior securities was 283% and 1,053%.
The Company's outstanding debt was as follows:
December 31, 2024
December 31, 2023
Aggregate
Borrowing
Amount
Committed
Amount
Available
Carrying
Value
Aggregate
Borrowing
Amount
Committed
Amount
Available
Carrying
Value
Credit Facility(1)
$
500,000
$
279,900
$
220,100
$
250,000
$
232,000
$
18,000
Total debt
$
500,000
$
279,900
$
220,100
$
250,000
$
232,000
$
18,000
(1)Provides, under certain circumstances, a total borrowing capacity of $1,000,000.
The weighted average interest rate of the aggregate borrowings outstanding for the years ended December 31, 2024 and 2023 was 7.94% and 8.28%, respectively. The weighted average debt of the aggregate borrowings outstanding for the years ended December 31, 2024 and 2023 was $104,372 and $5,062, respectively.
Credit Facility
SPV entered into the Credit Facility on February 10, 2023 with Ally Bank (“Ally”) as administrative agent and collateral agent. State Street Bank and Trust Company serves as collateral custodian and securities intermediary. The Company serves as collateral manager under the Credit Facility.
Advances under the Credit Facility bear interest (at SPV’s election) at a per annum rate equal to either (x) Daily Simple SOFR (as defined in the Credit Facility) or (y) Term SOFR (as defined in the Credit Facility) with an Available Tenor (as defined in the Credit Facility) of either one month or three months. The applicable spread is 2.25% per annum. SPV paid a non-usage fee of 0.50% per annum for the first three months on the average daily unused amount of the financing commitments. Thereafter, SPV pays between 0.50% and 1.00% per annum, depending on the unused amount of the financing commitments, on the average daily unused amount of the financing commitments. On September 26, 2024, SPV entered into a second amendment to the Credit Facility (the "Second Amendment"). The Second Amendment, among other things, amended certain components of the Borrowing Base (as defined in the Credit Facility), resulting in an increase in the Borrowing Base. On December 20, 2024, SPV entered into a third amendment to the Credit Facility (the "Third Amendment"). The Third Amendment, among other things, extended the maturity date, decreased the applicable spread, increased the total commitments under the Credit Facility, and increased the accordion feature and amended certain components of the Borrowing Base (as defined in the Credit Facility), resulting in an increase in the Borrowing Base.
The Credit Facility is drawable in USD. As of December 31, 2024, the total commitments under the Credit Facility were $500,000. The Credit Facility also has an accordion feature, subject to the satisfaction of various conditions, which could bring total commitments under the Credit Facility to $1,000,000. Proceeds from borrowings under the Credit Facility may be used to acquire portfolio loans by SPV, fund unfunded commitments of SPV with respect to loans, make distributions to the Company or pay related expenses. All amounts outstanding under the Credit Facility must be repaid by December 20, 2029.
SPV’s obligations to the lenders under the Credit Facility are secured by a first priority security interest in all of SPV’s portfolio of investments. The obligations of SPV under the Credit Facility are non-recourse to the Company, and the Company’s exposure under the Credit Facility is limited to the value of the Company’s investment in SPV.
In connection with the Credit Facility, SPV and the Company have made certain customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar facilities. The Credit Facility contains customary events of default for similar financing transactions, including if a change of control of SPV occurs or if the Company is no longer the collateral manager of SPV. Upon the occurrence and during the continuation of an event of default, Ally may declare the outstanding advances and all other obligations under the Credit Facility immediately due and payable. As of December 31, 2024, SPV and the Company were in compliance with these covenants.
Costs of 7,434 were incurred in connection with obtaining the Credit Facility, which have been recorded as deferred financing costs on the Consolidated Statements of Financial Condition and are being amortized over the life of the Credit Facility using the straight-line method. As of December 31, 2024 and December 31, 2023, outstanding deferred financing costs were $5,816 and $2,963.
The below table presents the summary information of the Credit Facility:
For the Year Ended December 31,
For the Year Ended December 31,
For the period from October 6, 2022 (commencement of operations) to December 31,
Borrowing interest expense
$
8,283
$
$
-
Facility fees
1,492
1,928
-
Amortization of financing costs
-
Total
$
10,751
$
2,943
$
-
Weighted average interest rate
7.94
%
8.28
%
0.00
%
Average outstanding balance
$
104,372
$
5,062
*
$
-
* Average outstanding debt balance was calculated beginning on February 10, 2023, the date on which SPV entered into the Credit Facility.
7.	COMMITMENTS AND CONTINGENCIES
Capital Commitments
The Company had aggregate capital commitments and undrawn capital commitments from investors as follows:
December 31, 2024
December 31, 2023
Capital
Commitments
Unfunded
Capital
Commitments
% of Capital
Commitments
Funded
Capital
Commitments
Unfunded
Capital
Commitments
% of Capital
Commitments
Funded
Common Units
$
750,010
$
367,500
%
$
750,010
$
577,500
%
Portfolio Company Commitments
The Company may enter into investment commitments through executed credit agreements or commitment letters. In many circumstances for executed commitment letters, borrower acceptance and final terms are subject to transaction-related contingencies. As of December 31, 2024, the Company believed that it had adequate financial resources to satisfy its unfunded commitments. The Company had the following unfunded commitments by investment types:
Unfunded Commitment Balances
December 31, 2024
December 31, 2023
1st Lien/Senior Secured Debt
ABC Investment Holdco Inc. (dba ABC Plumbing)
$
2,967
$
-
Admiral Buyer, Inc. (dba Fidelity Payment Services)
2,465
-
AI Titan Parent, Inc. (dba Prometheus)
1,908
-
AQ Sunshine, Inc.
5,071
-
AQ Sunshine, Inc. (dba Relation Insurance)
3,383
Ark Data Centers, LLC
9,751
-
Arrow Buyer, Inc. (dba Archer Technologies)
Artifact Bidco, Inc. (dba Avetta)
4,433
-
ASM Buyer, Inc.
2,100
4,878
Blast Bidco Inc. (dba Bazooka Candy Brands)
Buffalo Merger Sub, LLC (dba Oliver Packaging)
2,323
-
Charger Debt Merger Sub, LLC (dba Classic Collision)
3,932
-
CI (Quercus) Intermediate Holdings, LLC (dba SavATree)
2,751
-
Circustrix Holdings, LLC (dba SkyZone)
1,256
Coding Solutions Acquisition, Inc. (dba CorroHealth)
-
Crewline Buyer, Inc. (dba New Relic)
DFS Holding Company, Inc.
Eagle Family Foods Group Holdings, LLC
2,255
-
Easy Mile Fitness, LLC
1,841
-
Engage2Excel, Inc.
-
Formulations Parent Corporation (dba Chase Corp)
Fullsteam Operations LLC
10,654
3,821
Geotechnical Merger Sub, Inc.
6,902
-
GPS Phoenix Buyer, Inc. (dba Guidepoint)
2,935
2,935
Groundworks, LLC
-
Hamilton Thorne, Inc.
5,768
-
Harrington Industrial Plastics, LLC
HealthEdge Software, Inc.
1,358
-
Highfive Dental Holdco, LLC
3,725
Mandrake Bidco, Inc. (dba Miratech)
3,076
-
NCWS Intermediate, Inc. (dba National Carwash Solutions)
2,082
-
Onyx CenterSource, Inc.
Project Accelerate Parent, LLC (dba ABC Fitness)
-
PT Intermediate Holdings III, LLC (dba Parts Town)
-
QBS Parent, Inc. (dba Quorum Software)
-
Recorded Books Inc. (dba RBMedia)
Rock Star Mergersub LLC (dba Triumvirate Environmental)
3,578
-
Rocky Debt Merger Sub, LLC (dba NContracts)
6,415
1,973
Rotation Buyer, LLC (dba Rotating Machinery Services)
3,181
-
Rubrik, Inc.
1,102
Runway Bidco, LLC (dba Redwood Software)
5,114
-
Singlewire Software, LLC
1,438
1,438
Sonar Acquisitionco, Inc. (dba SimPRO)
4,906
-
Spotless Brands, LLC
5,651
-
Sunshine Cadence HoldCo, LLC (dba Cadence Education)
3,498
-
Superior Environmental Solutions
3,701
1,217
Superman Holdings, LLC (dba Foundation Software)
7,112
-
TM Restaurant Group LLC
4,286
4,286
Tropical Bidco, LLC (dba Tropical Cheese)
-
Trystar, LLC
3,488
-
United Flow Technologies Intermediate Holdco II, LLC
8,193
-
UP Acquisition Corp. (dba Unified Power)
-
US Signal Company, LLC
7,043
-
USA DeBusk, LLC
1,257
-
Valet Waste Holdings, Inc. (dba Valet Living)
1,739
-
VASA Fitness Buyer, Inc.
1,685
VisionSafe Holdings, Inc.
-
Westwood Professional Services Inc.
1,563
-
Total 1st Lien/Senior Secured Debt
$
158,547
$
37,255
\
Unfunded Commitment Balances
1st Lien/Last-Out Unitranche
December 31, 2024
December 31, 2023
EIP Consolidated, LLC (dba Everest Infrastructure)
$
1,000
$
3,745
K2 Towers III, LLC
2,607
Skyway Towers Intermediate LLC
1,886
2,305
Tarpon Towers II LLC
1,438
-
Thor FinanceCo LLC (dba Harmoni Towers)
2,289
3,778
Towerco IV Holdings, LLC
1,203
3,194
Total 1st Lien/Last-Out Unitranche
$
8,530
$
15,629
Total
$
167,077
$
52,884
Contingencies
In the normal course of business, the Company enters into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist or are expected to arise and, accordingly, the Company has not accrued any liability in connection with such indemnifications.
8.	MEMBERS’ CAPITAL
Capital Drawdowns
The following table summarizes the total Units issued and proceeds related to capital drawdowns:
Unit Issue Date
Units Issued
Proceeds Received
For the Year Ended December 31, 2024
May 24, 2024
1,134,153
$
22,500
June 17, 2024
1,878,400
37,500
July 5, 2024
1,863,521
37,500
August 15, 2024
3,756,273
75,000
November 15, 2024
1,875,000
37,500
Total capital drawdowns
10,507,347
$
210,000
For the Year Ended December 31, 2023
September 18, 2023
1,906,612
$
37,500
October 31, 2023
1,887,267
37,500
Total capital drawdowns
3,793,879
$
75,000
For the period from October 6, 2022 (commencement of operations) to December 31, 2022
October 6, 2022
$
November 2, 2022
1,500,000
30,000
December 20, 2022
3,454,647
67,500
Total capital drawdowns
4,955,147
$
97,510
Total capital drawdowns
19,256,373
$
382,510
Distributions
The Company has a voluntary distribution reinvestment plan (the "DRIP") that provides for the automatic reinvestment of all cash distributions declared by the Board of Directors unless a Unitholder elects to “opt out” of the plan. As a result, if the Board of Directors declares a cash distribution, then the Unitholders who have not “opted out” of the DRIP will have their cash distributions automatically reinvested by the plan administrator, as agent for the Unitholders in administering the DRIP, in additional Units of the same class of Units, rather than receiving the cash distribution. Participation in the DRIP is completely voluntary. The company will use newly issued Units to implement the DRIP. The number of Units to be issued to a Unitholder is determined by dividing the total dollar amount of the distribution payable to such Unitholder, net of any applicable withholding tax, by the then-current NAV per Unit. For purposes of this calculation, the NAV per Unit may be based on the NAV per Unit calculated at the end of the most recent calendar month prior to the date of the applicable distribution, subject to adjustments for material changes and to the limitations of the Investment Company Act. The Company may terminate the DRIP upon notice in writing to each participant at least 60 days prior to any record date for the payment of any distribution by the Company. The Initial Member has opted out of the DRIP.
There were no distributions declared on the Company’s common Units for the period from October 6, 2022 (commencement of operations) to December 31, 2022.
The following table summarizes the distributions declared on the Units and Units distributed pursuant to the DRIP to Unitholders who had not opted out of the DRIP:
Date Declared
Record Date
Payment Date
Amount Per Unit
Units
For the Year Ended December 31, 2024
February 27, 2024
April 2, 2024
April 29, 2024
$
0.43
(1)
190,814
May 1, 2024
July 2, 2024
July 30, 2024
$
0.35
211,833
August 7, 2024
October 2, 2024
November 1, 2024
$
0.39
351,530
November 7, 2024
December 31, 2024
January 29, 2025
$
0.45
456,719
For the Year Ended December 31, 2023
November 1, 2023
December 29, 2023
January 29, 2024
$
0.59
261,789
(1)$0.05 is considered a capital gain distribution.
9.	EARNINGS (LOSS) PER UNIT
The following information sets forth the computation of basic and diluted earnings (loss) per Unit:
For the Year Ended December 31,
For the Year Ended December 31,
For the period from October 6, 2022 (commencement of operations) to December 31,
Net increase (decrease) in Members' Capital from operations
$
24,676
$
5,072
$
(850
)
Weighted average units outstanding
13,555,799
5,824,201
1,511,486
Basic and diluted earnings (loss) per units
$
1.82
$
0.87
$
(0.56
)
Diluted earnings (loss) per Unit equal basic earnings per Unit because there were no Unit equivalents outstanding during the periods presented.
10. TAX INFORMATION
The below table presents the tax character of distributions:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the period from October 6, 2022 (commencement of operations) to December 31, 2022
Distributions paid from:
Ordinary Income
$
24,260
$
5,162
$
-
Net Long-Term Capital Gains
$
-
-
Total Taxable Distributions
$
24,278
$
5,162
$
-
As of the dates indicated, the components of Accumulated Earnings (Losses) on a tax basis were as follows:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the period from October 6, 2022 (commencement of operations) to December 31, 2022
Undistributed Ordinary Income - net
$
$
$
-
Undistributed Long-Term Capital Gains
$
$
-
Total Undistributed Earnings
$
$
$
-
Capital Loss Carryforward
Perpetual Long-Term
$
-
$
-
$
-
Perpetual Short-Term
-
-
-
Timing Differences (Organizational Costs)
(364
)
(392
)
(386
)
Unrealized Earnings (Losses)-net
(154
)
(8
)
Total Accumulated Earnings (Losses)-net
$
$
$
(394
)
As of the date indicated, the Company’s aggregate unrealized appreciation and depreciation based on cost for U.S. federal income tax purposes were as follows:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the period from October 6, 2022 (commencement of operations) to December 31, 2022
Tax cost
$
613,795
$
186,537
$
97,085
Gross unrealized appreciation
2,374
-
Gross unrealized depreciation
(2,521
)
(185
)
(8
)
Net unrealized investment appreciation on investments
$
(147
)
$
$
(8
)
The difference between GAAP-basis and tax basis unrealized gains (losses) is attributable primarily to wash sales and differences in the tax treatment of material modification of debt securities.
In order to present certain components of the Company's capital accounts on a tax-basis, certain reclassifications have been recorded to the Company's accounts. These reclassifications have no impact on the net asset value of the Company and result primarily from certain non-deductible expenses and differences in the tax treatment of underlying investments. For the years ended December 31, 2024 and December 31, 2023, and for the period from October 6, 2022 (commencement of operations) to December 31, 2022, the Company reclassified $448, ($937) and $(456) from total distributable earnings (loss) to common units.
The following table reconciles net increase in net assets resulting from operations to taxable income:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the period from October 6, 2022 (commencement of operations) to December 31, 2022
Net increase (decrease) in members' capital resulting from operations
$
24,676
$
5,072
$
(850
)
Adjustments:
Net unrealized losses (gains)
$
$
(431
)
$
Income not currently taxable
(390
)
(61
)
-
Income for tax but not for book
-
-
-
Expenses not currently deductible
(58
)
1,032
Expenses for tax but not for book
(29
)
(29
)
(7
)
Realized gain (loss) differences
-
-
Taxable income net of capital loss carryforward
$
24,778
$
5,583
$
(198
)
Nondeductible net investment loss
-
-
Taxable income(1)
$
24,778
$
5,583
$
-
(1) Taxable Income is an estimate and is not fully determined until the Company's tax return is filed.
ASC Topic 740 Accounting for Uncertainty in Income Taxes (“ASC 740”) provides guidance on the accounting for and disclosure of uncertainty in tax position. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Based on its analysis of its tax position for all open tax years (the current and prior years, as applicable), the Company has concluded that it does not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740. Such open tax years remain subject to examination and adjustment by tax authorities.
10.	FINANCIAL HIGHLIGHTS
The below table presents the schedule of financial highlights of the Company:
For the Year Ended December 31,
For the Year Ended December 31,
For the period from October 6, 2022 (commencement of operations) to December 31,
Per Unit Data:(1)
Members' Capital, beginning of period
$
19.61
$
19.51
$
20.00
Net investment income (loss)
1.82
0.79
(0.56
)
Net realized and unrealized gains (losses)(2)
0.03
(0.10
)
0.07
Net increase (decrease) in Members' Capital from operations(2)
$
1.85
$
0.69
(0.49
)
Distributions from net investment income
(1.62
)
(0.59
)
-
Total increase (decrease) in Members' Capital
$
0.23
$
0.10
(0.49
)
Members' Capital, end of period
$
19.84
$
19.61
$
19.51
Units outstanding, end of period
20,272,339
8,749,026
4,955,147
Weighted average units outstanding
13,555,799
5,824,201
1,511,486
Total return based on Members' Capital (3)
9.43
%
3.54
%
(2.45
)%
Supplemental Data/Ratio(4):
Members' Capital, end of period
$
402,234
$
171,570
$
96,660
Ratio of net expenses to average Members' Capital
6.50
%
6.13
%
12.64
%
Ratio of net expenses before Management fee waiver to average Members' Capital
6.50
%
6.38
%
12.64
%
Ratio of net expenses (without incentive fees and interest and other debt expenses) to average Members' Capital
1.92
%
3.38
%
12.64
%
Ratio of interest and other debt expenses to average Members' Capital
3.95
%
2.57
%
-%
Ratio of incentive fees to average Members' Capital
0.63
%
0.18
%
-%
Ratio of total expenses to average Members' Capital
6.50
%
6.38
%
12.64
%
Ratio of net investment income to average Members' Capital
9.08
%
4.04
%
(7.76
)%
Portfolio turnover
%
%
-
%
(1)The per Unit data was derived by using the weighted average Units outstanding during the applicable period, except for distributions recorded, which reflects the actual amount of distribution recorded per Unit for the applicable period.
(2)The amount shown may not correspond for the period as it includes the effect of the timing of capital drawdowns.
(3)Calculated as the change in members' capital per Unit during the period plus distributions recorded per Unit, divided by the beginning members' capital per Unit.
(4)Ratios for the period from October 6, 2022 (commencement of operations) to December 31, 2022 are annualized, except for, as applicable, organization costs.
12.	SUBSEQUENT EVENTS
Subsequent events after the date of the Consolidated Statements of Financial Condition have been evaluated through the date the consolidated financial statements were issued. Other than the item discussed below, the Company has concluded that there is no impact requiring adjustment or disclosure in the consolidated financial statements.
The Company will pay a distribution equal to an amount up to the Company’s taxable earnings per Unit, including net investment income (if positive) for the period January 1, 2025 through March 31, 2025, payable on or about April 28, 2025 to Unitholders of record as of March 31, 2025.
Phillip Street Middle Market Lending Fund LLC - Tax Information (unaudited)
During the year ended December 31, 2024, the Company designated 97.66% of its distributions from net investment income as interest-related dividends pursuant to Section 871(k) of the Internal Revenue Code.
During the year ended December 31, 2024, the Company designated 94.11% of the dividends paid from net investment company taxable income as section 163(j) Interest Dividends.
Pursuant to Section 852 of the Internal Revenue Code, the Company designated $17,604, or if different, the maximum amount allowable, as capital gain dividends paid during the year ended December 31, 2024.
During the year ended December 31, 2024, the Company designated $401,465 as short-term capital gain dividends pursuant to Section 871(k) of the Internal Revenue Code.

---

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
None.

---

ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures. As of the end of the period covered by this report, our management carried out an evaluation, under the supervision and with the participation of our Co-Chief Executive Officers and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our Co-Chief Executive Officers and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December 31, 2024. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Changes in Internal Control over Financial Reporting. There have been no changes in our internal control over financial reporting that occurred during our most recently completed fiscal quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act). Under the supervision and with the participation of management, including the Co-Chief Executive Officers and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2024.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

---

ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
(a) None.
(b) None.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Our business and affairs are managed under the direction of our Board of Directors. The Board of Directors consists of four directors, three of whom are Independent Directors. “Independent Directors” are directors who (1) are not deemed to be “interested persons” of the Company (as defined in the Investment Company Act), (2) meet the definition of “independent directors” under the corporate governance standards of the New York Stock Exchange and (3) meet the independence requirements of Section 10A(m)(3) of the Exchange Act. The Board of Directors elects our officers, who serve at the discretion of the Board of Directors. The responsibilities of the Board of Directors include quarterly valuation of our assets, corporate governance activities, oversight of our financing arrangements and oversight of our investment activities.
The Board of Directors’ role in our management is one of oversight. Oversight of our investment activities extends to oversight of the risk management processes employed by our Investment Adviser as part of its day-to-day management of our investment activities. The Board of Directors reviews risk management processes at both regular and special Board meetings throughout the year, consulting with appropriate representatives of our Investment Adviser as necessary and periodically requesting the production of risk management reports or presentations. The goal of the Board of Directors’ risk oversight function is to ensure that the risks associated with our investment activities are accurately identified, thoroughly investigated and responsibly addressed. The Board’s oversight function cannot, however, eliminate all risks or ensure that particular events do not adversely affect the value of the investments held by us. Pursuant to Rule 2a-5 under the Investment Company Act, the Board of Directors designated the Investment Adviser as the valuation designee (the “Valuation Designee”) primarily responsible for the valuation of our assets, subject to the oversight of the Board of Directors.
The Board of Directors has established an Audit Committee (the “Audit Committee”), Governance and Nominating Committee (the “Governance and Nominating Committee”), Compliance Committee (the “Compliance Committee”) and Contract Review Committee (the “Contract Review Committee”). The scope of each committee’s responsibilities is discussed in greater detail below.
Jaime Ardila, an Independent Director, serves as Chairperson (“Chair”) of the Board of Directors. The Board of Directors believes that it is in the best interests of Unitholders for Mr. Ardila to lead the Board of Directors because of his broad corporate background and experience with financial and investment matters, as described below. The Chair will generally act as a liaison between our management, officers and attorneys between meetings of the Board of Directors and presides over all executive sessions of the Independent Directors without management. The Board of Directors believes that its leadership structure is appropriate because the structure allocates areas of responsibility among the individual directors and the committees in a manner that enhances effective oversight. The Board of Directors also believes that its size creates an efficient corporate governance structure that provides opportunity for direct communication and interaction between management and the Board of Directors.
Board of Directors and Executive Officers
The current directors were appointed to their positions in August 2022, and each director will hold office until his or her death, resignation, removal or disqualification. In addition, our Board of Directors has adopted policies which provide that (a) no director shall hold office for more than fifteen (15) years and (b) a director shall retire as of December 31st of the calendar year in which he or she reaches his or her 74th birthday, unless a waiver of such requirement has been adopted by a majority of the other directors. Such policies may be changed by the directors without a Unitholder vote.
Directors
Information regarding the members of the Board of Directors is as follows:
Name and Age (1)
Term of Office
Principal Occupation(s) During Past 5 Years
Other Directorships
Independent Directors
Jaime Ardila (69)
Chairperson of the Board of Directors and Director since August 2022
Mr. Ardila is retired. He is Director, Accenture plc (2013-Present); Chairperson, Nexa Resources (2019- Present) and Director, Grupo Energía Bogotá (GEB) (2024 - Present). Formerly, he was Director, Ecopetrol (2016 - 2019); and held senior management positions with General Motors Company (an automobile manufacturer) (1984-1996 and 1998-2016), most recently as Executive Vice President, and President of General Motors’ South America region (2010-2016).
Chairperson of the Board of Directors-the Company; SCH and GS PMMC II.
Director-GS BDC, and GS Credit.
Accenture plc (a management consulting services company); Grupo Energía Bogotá (an electric utility company); Nexa Resources (a mining company); GS BDC; SCH; GS PMMC II; GS Credit
Ross J. Kari (66)
Director since August 2022
Mr. Kari is retired. Formerly, he was Director, Summit Bank (2014-2022); Executive Vice President and Chief Financial Officer, Federal Home Loan Mortgage Corporation (Freddie Mac) (2009-2013); and was a member of the Board of Directors of KKR Financial Holdings, LLC (2007-2014).
Director-the Company; GS BDC; SCH; GS PMMC II and GS Credit.
GS BDC; SCH; GS PMMC II; GS Credit
Susan B. McGee (65)
Director since August 2022
Ms. McGee is retired. She is Director, ETTL Engineers and Consultants (2018-Present); and Director, HIVE Digital Technologies Ltd (2021-Present). She was formerly Director, Nobul Corporation (2019-2022) and held senior management positions with U.S.
ETTL Engineers and Consultants; HIVE Digital Technologies Ltd; GS BDC; SCH; GS PMMC II; GS Credit
Global Investors, Inc. (an investment management firm), including Chief Compliance Officer (2016-2018), President (1998-2018) and General Counsel (1997-2018). She was also formerly Vice President of the U.S. Global Investors Funds (2016-2018).
Director-the Company; GS BDC; SCH; GS PMMC II and GS Credit.
﻿Interested Director*
Katherine (“Kaysie”) P. Uniacke (63)
Director since August 2022
Ms. Uniacke is Chair of the Board-Goldman Sachs Asset Management International (2013-Present); and Advisory Director-Goldman Sachs (2013-Present). She was formerly Director-Goldman Sachs Dublin and Luxembourg family of funds (2013-2023).
Director- the Company; GS BDC; SCH; GS PMMC II; GS MMLC II, GS Credit, and West Bay.
Goldman Sachs Asset Management International; GS BDC; SCH; GS PMMC II; GS MMLC II; GS Credit; West Bay
*
Ms. Uniacke is considered to be an “Interested Director” because she holds positions with Goldman Sachs and owns securities issued by GS Group Inc. Ms. Uniacke holds comparable positions with certain other companies of which Goldman Sachs, GSAM or an affiliate thereof is the investment adviser, administrator and/or distributor.
(1)
Each director may be contacted by writing the director, c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New York 10282.
Executive Officers
Information regarding our executive officers who are not directors is as follows:
Name
Age
Position(s)
Alex Chi
Co-Chief Executive Officer and Co-President
David Miller
Co-Chief Executive Officer and Co-President
Tucker Greene
Chief Operating Officer
Stanley Matuszewski
Chief Financial Officer and Treasurer
John Lanza
Principal Accounting Officer
Julien Yoo
Chief Compliance Officer
Caroline Kraus
Chief Legal Officer
Justin Betzen
Vice President
Greg Watts
Vice President
Jennifer Yang
Vice President
Matthew Carter
Vice President
The address for each director and executive officer is c/o Goldman Sachs Asset Management, L.P., 200 West Street, New York, New York 10282. Each officer holds office at the pleasure of the Board until the next election of officers or until his or her successor is duly elected and qualifies.
Biographical Information
Directors
Independent Directors:
Jaime Ardila. Mr. Ardila is retired. Mr. Ardila has served on the Board of Directors of the Company and as Chairperson of the Board of Directors of the Company since August 2022. He also serves as a member of the Board of Directors of GS BDC and GS Credit and serves as Chairperson of the Board of Directors of SCH and GS PMMC II. Mr. Ardila is a member of the Board of Directors of Accenture plc, a management consulting services company, where he serves as Chair of the Finance Committee, a member of the Audit Committee, and a member of the Governance and Nominations Committee. He also serves as the Chairperson of the Board of Directors of Nexa Resources S.A., a mining company, and a member of the Board of Directors of Grupo Energía Bogotá, an electric utility company. Previously, he was a member of the Board of Directors of Ola Electric Mobility, an electric vehicle manufacturer, and was also a member of the Board of Directors of Ecopetrol, an integrated oil company, where he served as Chair of the Audit Committee and a member of the Business Committee and the Corporate Governance and Sustainability Committee, from 2016 to 2019. Mr. Ardila also worked for 29 years at General Motors Company, an automobile manufacturer, where he held several senior management positions, most recently as Executive Vice President of the company and President of General Motors’ South America region. Mr. Ardila joined General Motors in 1984. From 1996 to 1998, Mr. Ardila served as the managing director, Colombian Operations, of N M Rothschild & Sons Ltd, before rejoining General Motors in 1998. Based on the foregoing, Mr. Ardila is experienced with financial and investment matters, which we believe makes him well qualified to serve on the Board of Directors.
Ross J. Kari. Mr. Kari is retired. Mr. Kari has served on the Board of Directors of the Company since August 2022. He also serves on the Board of Directors of GS BDC, SCH, GS PMMC II and GS Credit. Previously, Mr. Kari was Executive Vice President and Chief Financial Officer of Federal Home Loan Mortgage Corporation (Freddie Mac), where he worked for four years. Previously, he held senior management positions at SAFECO Corporation, a personal insurance company, Federal Home Loan Bank of San Francisco, and Wells Fargo & Company, where he began his career and worked for 19 years. Mr. Kari also served as a Director and a member of the Audit Committee and ALCO Chairman of Summit Bank. Based on the foregoing, Mr. Kari is experienced with financial and investment matters, which we believe makes him well qualified to serve on the Board of Directors.
Susan B. McGee. Ms. McGee is retired. Ms. McGee has served on the Board of Directors of the Company since August 2022. She also serves on the Board of Directors of GS BDC, SCH, GS PMMC II and GS Credit. Ms. McGee also serves on the Board of Directors for ETTL Engineers and Consultants and HIVE Digital Technologies Ltd. Ms. McGee formerly served as a Director for Nobul Corporation, a digital real estate company, from 2019 to 2022. Ms. McGee worked for 26 years at U.S. Global Investors, Inc., an investment management firm, until June 2018, during which time she held several senior management positions, including President, General Counsel and Chief Compliance Officer. She was also involved in the governance of the U.S. Global Investors Funds, serving as Vice President until June 2018. In addition, Ms. McGee serves on the Board of Governors of the Investment Company Institute and as Chairperson of the Investment Company Institute Small Funds Committee. She is also a member of the Board of Directors of the San Antonio Sports Foundation, a not-for-profit organization. Based on the foregoing, Ms. McGee is experienced with financial and investment matters, which we believe makes her well qualified to serve on the Board of Directors.
Interested Director:
Kaysie Uniacke. Ms. Uniacke is the sole interested director on the Board and has served in such capacity since August 2022. Ms. Uniacke is the chair of the board of Goldman Sachs Asset Management International, serves on the boards of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay, and is an advisory director to GS Group Inc. Previously, she was global chief operating officer of GSAM’s portfolio management business until 2012 and served on the Investment Management Division Client and Business Standards Committee. Prior to this, she was president of Goldman Sachs Trust, the GS mutual fund family, and was head of the Fiduciary Management business within Global Manager Strategies, responsible for business development and client service globally. Earlier in her career, Ms. Uniacke managed GSAM’s U.S. and Canadian Distribution groups. In that capacity, she was responsible for overseeing all North American institutional and third-party sales channels, marketing and client service functions, for which client assets exceeded $200 billion. Before that, Ms. Uniacke was head of GSAM’s Global Cash Services business, where she was responsible for overseeing the management of assets exceeding $100 billion. Ms. Uniacke worked at Goldman Sachs from 1983 to 2012, where she was named managing director in 1997 and partner in 2002. Based on the foregoing, Ms. Uniacke is experienced with financial and investment matters, which we believe makes her well qualified to serve on the Board of Directors.
Executive Officers who are not Directors:
Alex Chi. Mr. Chi is the Co-Chief Executive Officer and Co-President of the Company and has served in such capacity since August 2022. Mr. Chi is also the Co-Chief Executive Officer and Co-President of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. Mr. Chi is co-head of Goldman Sachs Asset Management Private Credit in the Americas. Before assuming his current role, Mr. Chi spent 25 years in Goldman Sachs’s Investment Banking Division. Mr. Chi worked in the Financial and Strategic Investors Group from 2006 to 2019, managing Goldman Sachs’s relationships with private equity and related portfolio company clients. Prior to that, Mr. Chi worked in Leveraged Finance, where he spent six years structuring and executing leveraged loan and high yield debt
financings for corporate and private equity clients across industries. He also spent three years in Asia focused on mergers and acquisitions and corporate finance transactions. Mr. Chi was named managing director in 2006 and partner in 2012.
David Miller. Mr. Miller is the Co-Chief Executive Officer and Co-President of the Company and has served in such capacity since August 2022. Mr. Miller is also the Co-Chief Executive Officer and Co-President of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. Mr. Miller is co-head of Goldman Sachs Asset Management Private Credit in the Americas. He has spent his nearly 30-year career as an investor in middle market companies and has originated billions of dollars in commitments across all industries to companies in various stages of the lifecycle. In 2004, he co-founded Goldman Sachs’s middle market origination effort investing primarily firm capital and has led that business since 2013. Prior to joining Goldman Sachs in 2004, Mr. Miller was senior vice president of originations for GE Capital, where he was responsible for structuring and originating loans in the media and telecommunications sectors. Previously, Mr. Miller was a director at SunTrust Bank, responsible for originating and managing a portfolio of middle market loans. Mr. Miller was named managing director in 2012 and partner in 2014.
Tucker Greene. Mr. Greene is the Chief Operating Officer of the Company and has served in such capacity since May 2023. Mr. Greene is also the Chief Operating Officer of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. Mr. Greene previously served as a Vice President of the Company from August 2022 to May 2023, and also previously served as a Vice President of GS BDC, SCH, GS PMMC II, GS MMLC II and GS Credit. He is also a managing director in Goldman Sachs Asset Management Private Credit. He is a senior portfolio manager focused on fund management. Prior to his current role, Mr. Greene was a senior originator and underwriter in Goldman Sachs Asset Management Private Credit. Mr. Greene joined Goldman Sachs in 2004 in the Specialty Lending Group, primarily investing firm capital in directly originated middle market loans. Prior to joining Goldman Sachs, Mr. Greene worked at GE Capital, focusing on underwriting loans in the media and telecommunications sector. Mr. Greene was named managing director in 2021.
Stanley Matuszewski. Mr. Matuszewski is the Chief Financial Officer and Treasurer of the Company and has served in such capacity since November 2023. Mr. Matuszewski also is the Chief Financial Officer and Treasurer of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. He is a Vice President in Private Credit within GSAM. Prior to his current role, he managed the Business Development Companies Asset Management Product Controllers team, which is responsible for valuation oversight. Prior to joining Goldman Sachs & Co. LLC in 2013, he worked at Morgan Stanley in the Valuation Review Group.
John Lanza. Mr. Lanza is the Principal Accounting Officer of the Company and has served in such capacity since November 2023. Mr. Lanza is also the Principal Accounting Officer of GS BDC, SCH, GS PMMC II, GS MMLC II and GS Credit. Mr. Lanza has held several positions with GSAM. Mr. Lanza currently manages the Business Development Companies and Direct Hedge Funds Asset Management Fund Controllers teams, which are responsible for accounting and financial reporting oversight. He previously served as the head of Operational Risk and Governance in the Consumer and Wealth Management Division. Prior to that, Mr. Lanza was the global head of Regulatory Reform and Control Oversight and before that he managed the GSAM Alternative Investments Global Fund Services Group.
Julien Yoo. Ms. Yoo is the Chief Compliance Officer of the Company and has served in such capacity since August 2022. Ms. Yoo is also the Managing Director of GSAM Compliance, Head of the U.S. Regulatory Compliance team with GSAM Compliance, and Chief Compliance Officer of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. Ms. Yoo joined Goldman Sachs in 2013. Prior to joining Goldman Sachs, Ms. Yoo was a Vice President in the legal department of Morgan Stanley Investment Management. Prior to joining Morgan Stanley, she was an associate at Shearman & Sterling, LLP and at Swidler Berlin Shereff Friedman, LLP.
Caroline Kraus. Ms. Kraus is the Chief Legal Officer and Secretary of the Company and has served in such capacity since August 2022. Ms. Kraus is also a Managing Director and Senior Counsel at GSAM and the Chief Legal Officer and Secretary of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay, as well as various other Goldman Sachs funds. Ms. Kraus joined Goldman Sachs in 2006. Prior to joining Goldman Sachs, she was an associate at Weil, Gotshal & Manges, LLP.
Justin Betzen. Mr. Betzen is a Vice President of the Company and has served in such capacity since August 2022. Mr. Betzen is also a Vice President of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. He is also a managing director and senior underwriter in Goldman Sachs Asset Management Private Credit in the Americas. Mr. Betzen initially joined Goldman Sachs in 2006 as an associate and rejoined the firm as a vice president in 2013. He was named managing director in 2019. Prior to rejoining the firm, Mr. Betzen worked at Newstone Capital Partners and was focused on second lien, mezzanine and minority equity investing. Prior to initially joining Goldman Sachs, he worked at JPMorgan Chase in the Technology Corporate Banking Group, focused on software, services and payments companies.
Greg Watts. Mr. Watts is a Vice President of the Company and has served in such capacity since August 2022. Mr. Watts is also a Vice President of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit, and West Bay. He also serves as head of underwriting and portfolio management for Goldman Sachs Asset Management Private Credit in the Americas. He has spent greater than 20 years as a credit investor in middle market companies and has overseen billions of dollars of investments from origination to exit as well as a significant amount of experience in workouts and restructurings. Mr. Watts is a member of the Private Credit Investment Committee and the Private Credit Investment Subcommittee, which focuses on middle market lending primarily via the Goldman Sachs balance sheet. Mr. Watts joined Goldman Sachs in 2007 and was named managing director in 2015 and partner in 2022. Prior to joining Goldman Sachs, Mr.
Watts spent five years with GE Capital’s Technology, Media and Telecom Finance Group as a senior vice president and risk team leader in underwriting and portfolio management. Before working at GE Capital, Mr. Watts was an associate at Investcorp International after beginning his career as an investment banking analyst in Salomon Smith Barney’s Mergers and Acquisitions Group.
Jennifer Yang. Ms. Yang is a Vice President of the Company and has served in such capacity since August 2022. Ms. Yang is also a Vice President of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. She is also a managing director in Credit Alternatives within GSAM, with oversight of Healthcare. She is responsible for leading and managing the healthcare investment strategy and portfolio. Ms. Yang joined Goldman Sachs in 2018 as a vice president and was named managing director in 2021. Prior to joining Goldman Sachs, Ms. Yang was an executive director at Varagon Capital Partners, where she was responsible for structuring, executing and managing credit investments in the healthcare sector. Previously, she was a vice president at Fifth Street Asset Management, focused on healthcare deal execution.
Matthew Carter. Mr. Carter is a Vice President of the Company and has served in such capacity since February 2025. Mr. Carter is also a Vice President of GS BDC, SCH, GS PMMC II, GS MMLC II, GS Credit and West Bay. Mr. Carter is a managing director and senior underwriter in Private Credit within Asset & Wealth Management at Goldman Sachs. He leads workout and restructuring activities for the U.S. direct lending business. Mr. Carter joined Goldman Sachs in 2014 as an associate in the Specialty Lending Group within the Special Situations Group and was named managing director in 2023. Prior to joining Goldman Sachs, Mr. Carter worked in the Investment Banking Division at Barclays Capital for five years and started his career in the Private Fund Investments Group at Lehman Brothers.
Committees of the Board of Directors
Audit Committee
The members of the Audit Committee are Mr. Ardila, Mr. Kari and Ms. McGee, each of whom is an Independent Director. Mr. Kari is Chair of the Audit Committee. The Board of Directors and the Audit Committee have determined that Mr. Kari is an “audit committee financial expert,” as defined in Item 407 of Regulation S-K under the Exchange Act. The Audit Committee is responsible for overseeing matters relating to the appointment and activities of our auditors, audit plans and procedures, various accounting and financial reporting issues and changes in accounting policies, and reviewing the results and scope of the audit and other services provided by our independent public accountants. The Audit Committee is also responsible for aiding the Board of Directors in fair value pricing debt and equity securities that are not publicly traded or for which current market values are not readily available.
The Audit Committee held four formal meetings in 2024.
Governance and Nominating Committee
The members of the Governance and Nominating Committee are Mr. Ardila, Mr. Kari and Ms. McGee, each of whom is an Independent Director. Mr. Ardila serves as the Chair of the Governance and Nominating Committee. The Governance and Nominating Committee is responsible for identifying, researching and nominating Independent Directors for selection by the Board (and election by the Preferred Unitholders, if applicable), when necessary, selecting nominees to fill vacancies on the Board of Directors or any committee thereof, developing and recommending to the Board of Directors a set of corporate governance principles and overseeing the evaluation of the Board of Directors and our management.
The Governance and Nominating Committee held two formal meetings in 2024.
Compliance Committee
The members of the Compliance Committee are Mr. Ardila, Mr. Kari and Ms. McGee, each of whom is an Independent Director. Mr. Ardila serves as Chair of the Compliance Committee. The Compliance Committee is responsible for overseeing our compliance processes, and insofar as they relate to services provided to us, the compliance processes of the Investment Adviser, the Placement Agent, the Administrator and the Transfer Agent, except that compliance processes relating to the accounting and financial reporting processes and certain related matters are overseen by the Audit Committee. In addition, the Compliance Committee provides assistance to the full Board of Directors with respect to compliance matters.
The Compliance Committee held four formal meetings in 2024.
Contract Review Committee
The members of the Contract Review Committee are Mr. Ardila, Mr. Kari and Ms. McGee, each of whom is an Independent Director. Mr. Ardila serves as Chair of the Contract Review Committee. Each of the members of the Contract Review Committee will be an Independent Director. The Contract Review Committee is responsible for overseeing the processes of the Board of Directors for reviewing and monitoring performance under the Investment Management Agreement and our placement agency, transfer agency and certain other agreements with the Investment Adviser and its affiliates. The Contract Review Committee also provides appropriate assistance to the Board of Directors in connection with the Board of Directors’ approval, oversight and review of our other service providers, including its custodian/accounting agent, agents, professional (legal and accounting) firms and printing firms.
The Contract Review Committee held one formal meeting in 2024.
Code of Ethics
We have a code of ethics that applies to our principal executive officers, principal financial officer and principal accounting officer. Our Code of Ethics is discussed under “Item 1. Business-Code of Ethics” and a copy of our Code of Ethics is filed as an exhibit to this annual report on Form 10-K.
Code of Business Conduct and Ethics
We have adopted a Code of Business Conduct and Ethics which applies to, among others, our Co-Chief Executive Officers and Chief Financial Officer. We intend to disclose any material amendment to or waivers of required provisions of the Code of Business Conduct and Ethics on a current report on Form 8-K. Our Code of Business Conduct and Ethics is filed as an exhibit to this annual report on Form 10-K.
Director Charter
We have adopted a Director Charter which applies to, among other things, the authority and duties of our directors, composition of our Board of Directors and the election and role of the Chairperson of our Board of Directors.
Insider Trading Policy
The Company’s directors and officers do not own any Units. The Company also does not expect any subsequent closings and its Units are subject to certain transfer restrictions, as outlined in the Company’s LLC Agreement. Accordingly, the Company has not adopted an insider trading policy governing the purchase, sale and other dispositions of the Company’s securities by its directors, officers, or itself.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION.
Compensation of Executive Officers
None of our executive officers are currently compensated by us. We do not currently have any employees. Our day-to-day operations are managed by the Investment Adviser.
Compensation of Directors
For the fiscal year ended December 31, 2024, each Independent Director was compensated with a $60,000 annual fee (which could increase to $80,000 if our called capital exceeds $375,000,000) for his or her services as a director. In addition, the Chair earned an annual fee of $10,000 (which could increase to $20,000 if the total called capital exceeds $375,000,000), and the director designated as “audit committee financial expert” received an additional $4,000 (which could increase to $8,000 if our total called capital exceeds $375,000,000) for their additional services in such capacities. The Independent Directors are also reimbursed for travel and other expenses incurred in connection with attending meetings. No compensation will be paid to directors who are “interested persons,” as that term is defined in the Investment Company Act.
In addition, we purchase liability insurance on behalf of our directors. We may also pay the incidental costs of a director to attend training or other types of conferences relating to the BDC industry.
Total Compensation from the Company for the Year Ended
December 31, 2024(1)
Total Compensation from the Goldman Sachs Fund Complex for the Year Ended
December 31, 2024(2)
Interested Director
Kaysie Uniacke (3)
-
-
Independent Directors
Jaime Ardila (4)
$
40,000
$
445,000
Ross J. Kari (5)
$
34,000
$
409,000
Susan B. McGee
$
30,000
$
385,000
(1)We do not have a profit-sharing plan, and directors do not receive any pension or retirement benefits from us.
(2)Reflects compensation earned during the year ended December 31, 2024. For purposes of the table, the Goldman Sachs Fund Complex includes GS BDC, SCH, GS PMMC II, GS MMLC II and GS Credit.
(3)Kaysie Uniacke is an interested director and, as such, does not receive compensation from the Company or the Goldman Sachs Fund Complex for her service as director or trustee.
(4)Includes compensation as Chair of the Board.
(5)Includes compensation as audit committee financial expert.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED UNITHOLDER MATTERS
The following table sets forth, as of March 4, 2025, certain ownership information with respect to the Units for those persons who directly or indirectly own, control or hold with the power to vote, five percent or more of our outstanding Units and all executive officers and directors, on an individual and group basis. Unless otherwise indicated, we believe that each beneficial owner set forth in the table has sole voting and investment power over such Units.
Name and Address (1)
Type of Ownership
Number of Shares
Owned
Percentage
Interested Director
Kaysie Uniacke
-
-
-
Independent Directors
Jaime Ardila
-
-
-
Ross J. Kari
-
-
-
Susan B. McGee
-
-
-
Executive Officers
Alex Chi
-
-
-
David Miller
-
-
-
Tucker Greene
-
-
-
Stanley Matuszewski
-
-
-
John Lanza
-
-
-
Caroline Kraus
-
-
-
Julien Yoo
-
-
-
Justin Betzen
-
-
-
Greg Watts
-
-
-
Jennifer Yang
-
-
-
Matthew Carter
-
-
-
All officers and directors as a group (15 persons)
Record/Beneficial
-
-
(1)
The business address for each of our officers and directors is c/o Phillip Street Middle Market Lending Fund LLC, 200 West Street New York, New York 10282. The Company does not have a profit-sharing plan, and directors do not receive any pension or retirement benefits from us.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
(a) Transactions with Related Persons; Review, Approval or Ratification of Transaction with Related Persons
Investment Management and Advisory Agreement
GSAM serves as our Investment Adviser. GSAM has been registered as an investment adviser with the SEC since 1990 and is an indirect, wholly owned subsidiary of GS Group Inc., a bank holding company and an affiliate of Goldman Sachs & Co. LLC, our Placement Agent.
Subject to the supervision of the Board of Directors, the Investment Adviser provides day-to-day advice regarding the Company’s portfolio transactions and is responsible for the Company’s business affairs and other administrative matters.
For the year ended December 31, 2024, we paid GSAM a total of $4.00 million in fees (excluding fees that are accrued but not paid) pursuant to the Investment Management Agreement, which consisted of $2.74 million in Management Fees and $1.26 Incentive Fees.
Co-Investment Opportunities
In certain circumstances, we can make negotiated co-investments pursuant to an exemptive order from the SEC permitting us to do so. On November 16, 2022, the SEC granted the Relief to the Investment Adviser, the BDCs advised by the Investment Adviser and certain other affiliated applicants. On June 25, 2024, the SEC granted an amendment to the Relief, which permits us to participate in follow-on investments in our existing portfolio companies with certain affiliates covered by the Relief if such affiliates, that are not BDCs or registered investment companies, did not have an investment in such existing portfolio company. If our Investment Adviser forms other funds in the future, we may co-invest alongside such other affiliates, subject to compliance with the Relief, applicable regulations and regulatory guidance, as well as applicable allocation procedures. As a result of the Relief, there could be significant overlap in our investment portfolio and the investment portfolios of other Accounts, including, in some cases, proprietary accounts of Goldman Sachs.
For information regarding our co-investment opportunities, see “Item 1. Business-Allocation of Investment Opportunities.”
Related Party Transaction Review Policy
The Audit Committee will conduct quarterly reviews of any potential related party transactions brought to its attention and, during these reviews, it also considers any conflicts of interest brought to its attention pursuant to the Company’s Code of Ethics. Each of our directors and executive officers will complete a questionnaire on an annual basis designed to elicit information about any potential related party transactions.
Director Independence
For information regarding the independence of our directors, see “Item 10. Directors, Executive Officers and Corporate Governance.”

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
The aggregate audit fees billed by PricewaterhouseCoopers LLP for the year ended December 31, 2024 were $312,800.
Fees included in the audit fees category are those associated with the annual audits of financial statements and services that are normally provided in connection with statutory and regulatory filings.
Audit-Related Fees
No audit-related fees were billed by PricewaterhouseCoopers LLP for the year ended December 31, 2024.
Audit-related fees are for any services rendered to the Company that are reasonably related to the performance of the audits or reviews of the Company’s financial statements (but not reported as audit fees above). These services include attestation services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards.
The aggregate audit-related fees billed by PricewaterhouseCoopers LLP to GSAM, and any entity controlling, controlled by, or under common control with, GSAM, that provides ongoing services to the Company, for engagements directly related to the Company’s operations and financial reporting, for the year ended December 31, 2024 were $1,500,337. These amounts represent fees PricewaterhouseCoopers LLP billed to GSAM for services related to the SSAE 18 report.
Tax Fees
No tax compliance, tax advice and tax planning fees were billed by PricewaterhouseCoopers LLP for the year ended December 31, 2024.
Fees included in the tax fees category comprise all services performed by professional staff in the independent registered public accountant’s tax division except those services related to the audits. This category comprises fees for tax compliance services provided in connection with the preparation and review of the Company’s tax returns.
No tax fees were billed by the Company’s independent registered public accountant to GSAM, and any entity controlling, controlled by, or under common control with, GSAM, that provides ongoing services to the Company, for engagements directly related to the Company’s operations and financial reporting, for the year ended December 31, 2024.
All Other Fees
No fees were billed by PricewaterhouseCoopers LLP for products and services provided to the Company, other than the services reported in “Audit Fees,” and “Tax Fees” above, for the year ended December 31, 2024.
Other than services reported under “Audit-Related Fees,” no other fees were billed by the Company’s independent registered public accountant to GSAM, and any entity controlling, controlled by, or under common control with, GSAM, that provides ongoing services to the Company, for engagements directly related to the Company’s operations and financial reporting, for the year ended December 31, 2024.
Aggregate Non-Audit Fees
No non-audit fees were billed to the Company’s investment adviser and service affiliates by PricewaterhouseCoopers LLP for non-audit services for the year ended December 31, 2024. This includes any non-audit services required to be pre-approved or non-audit services that did not require pre-approval since they did not directly relate to the Company’s operations or financial reporting.
Pre-Approval of Audit and Non-Audit Services Provided to the Company
The Audit and Non-Audit Services Pre-Approval Policy (the “Policy”) adopted by the Audit Committee sets forth the procedures and the conditions pursuant to which services performed by an independent auditor for the Company may be pre-approved. Services may be pre-approved specifically by the Audit Committee as a whole or, in certain circumstances, by the Audit Committee Chairperson or the person designated as the audit committee financial expert. In addition, subject to specified cost limitations, certain services may be pre-approved under the provisions of the Policy. The Policy provides that the Audit Committee will consider whether the services provided by an independent auditor are consistent with the SEC’s rules on auditor independence. The Policy provides for periodic review and pre-approval by the Audit Committee of the services that may be provided by the independent auditor.
De Minimis Waiver. The pre-approval requirements of the Policy may be waived with respect to the provision of non-audit services that are permissible for an independent auditor to perform, provided (1) the aggregate amount of all such services provided constitutes no more than five percent of the total amount of revenues subject to pre-approval that was paid to the independent auditors during the fiscal year in which the services are provided; (2) such services were not recognized by the Company at the time of the engagement to be non-audit services; and (3) such services are promptly brought to the attention of the Audit Committee and approved prior to the completion of the audit by the Audit Committee or by one or more members of the Audit Committee to whom authority to grant such approvals has been delegated by the Audit Committee, pursuant to the pre-approval provisions of the Policy.
Pre-Approval of Non-Audit Services Provided to GSAM. The Policy provides that, in addition to requiring pre-approval of audit and non-audit services provided to the Company, the Audit Committee will pre-approve those non-audit services provided to the Company’s investment adviser (and entities controlling, controlled by or under common control with the investment adviser that provide ongoing services to the Company) where the engagement relates directly to the operations or financial reporting of the Company.
The Audit Committee has considered these fees and the nature of the services rendered, and has concluded that they are compatible with maintaining the independence of PricewaterhouseCoopers LLP. The Audit Committee did not approve any of the audit-related, tax, or other non-audit fees described above pursuant to the “de minimis exceptions” set forth in Rule 2-01(c)(7)(i)(C) and Rule 2-01(c)(7)(ii) of Regulation S-X. PricewaterhouseCoopers LLP did not provide any audit-related services, tax services or other non-audit services to GSAM or any entity controlling, controlled by or under common control with GSAM that provides ongoing services to the Company that the Audit Committee was required to approve pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X. The Audit Committee considered whether the provision of non-audit services rendered to GSAM and any entity controlling, controlled by, or under common control with GSAM that provides ongoing services to the Company that were not pre-approved by the Audit Committee because the engagement did not relate directly to the operations and financial reporting of the Company is compatible with maintaining PricewaterhouseCoopers LLP’s independence.
PART IV.

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this annual report on Form 10-K:
(1)Financial Statements-Financial statements are included in Item 8. See the Index to the Consolidated Financial Statements on page 74 of this annual report on Form 10-K.
(2)Financial Statement Schedules-None. We have omitted financial statements schedules because they are not required or are not applicable, or the required information is shown in the consolidated financial statements or notes to the consolidated financial statements included in this annual report on Form 10-K.
(3)Exhibits-The following is a list of all exhibits filed as a part of this annual report on Form 10-K, including those incorporated by reference.
INDEX TO EXHIBITS
EXHIBIT NO.
EXHIBIT
3.1
Certificate of Formation (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form 10 (File No. 000-56488), filed on October 21, 2022).
3.2
Amended and Restated Limited Liability Company Agreement, dated as of October 19, 2022, between the Company and Goldman Sachs Asset Management, L.P. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form 10 (File No. 000-56488), filed on October 21, 2022).
3.3
Amendment No. 1 to the Amended and Restated Limited Liability Company Agreement of Phillip Street Middle Market Lending Fund LLC, dated as of March 1, 2023, between the Company and Goldman Sachs Asset Management, L.P. (incorporated by reference to Exhibit 3.3 to the Company’s Annual Report on Form 10-K (File No. 000-56488), filed on March 2, 2023).
4.1*
Description of Securities.
10.1
Investment Management and Advisory Agreement, dated as of October 19, 2022, between the Company and Goldman Sachs Asset Management, L.P. (incorporated by reference to Exhibit 10.1 to the Company’s Registration Statement on Form 10 (File No. 000-56488), filed on October 21, 2022).
10.2
Administration Agreement, dated as of October 6, 2022, between the Company and State Street Bank and Trust Company. (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form 10 (File No. 000-56488), filed on October 21, 2022).
10.3
Custodian Contract, dated as of October 6, 2022, between the Company and State Street Bank and Trust Company. (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form 10 (File No. 000-56488), filed on October 21, 2022).
10.4
Distribution Reinvestment Plan (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form 10 (File No. 000-56488), filed on October 21, 2022).
10.5
Loan, Security and Collateral Management Agreement, dated as of February 10, 2023, by and among Phillip Street Middle Market Lending Fund LLC, as collateral manager and transferor, Phillip Street Middle Market Lending Investment Holdings LLC, as equityholder, Phillip Street Middle Market Lending Investments LLC, as borrower, each of the lenders from time to time party thereto, Ally Bank, as administrative agent and arranger, State Street Bank and Trust Company, as collateral custodian, and Alter Domus (US) LLC, as document agent (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-56488), filed on February 15, 2023).
10.6
Omnibus Amendment to Transaction Documents, dated as of January 17, 2024, among Phillip Street Middle Market Lending Investments LLC, as borrower, Phillip Street Middle Market Lending Fund LLC, as collateral manager, Ally Bank, as arranger and administrative agent, the lenders party thereto, State Street Bank and Trust Company, as collateral custodian and as securities intermediary and Alter Domus (US) LLC, as document agent (incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K (File No. 814-01579), filed on March 5, 2024).
10.7
Amendment No. 2 to Loan, Security and Collateral Management Agreement, dated as of September 26, 2024, by and among Phillip Street Middle Market Lending Fund LLC, as collateral manager and transferor, Phillip Street Middle Market Lending Investment Holdings LLC, as equityholder, Phillip Street Middle Market Lending Investments LLC, as borrower, each of the lenders party thereto, Ally Bank, as administrative agent and arranger, and State Street Bank and Trust Company, as collateral custodian (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01579), filed on October 2, 2024).
10.8
Amendment No. 3 to Loan, Security and Collateral Management Agreement, dated as of December 20, 2024, by and among Phillip Street Middle Market Lending Fund LLC, as collateral manager, Phillip Street Middle Market Lending Investments LLC, as borrower, each of the lenders party thereto, Ally Bank, as administrative agent and arranger, and State Street Bank and Trust Company, as collateral custodian (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 814-01579), filed on December 23, 2024).
14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 to the Company's Annual Report on Form 10-K (File No. 000-56488), filed on March 2, 2023).
14.2
Code of Business Conduct and Ethics (incorporated by reference to Exhibit 14.2 to the Company's Annual Report on Form 10-K (File No. 000-56488), filed on March 2, 2023).
21.1*
Subsidiaries of Phillip Street Middle Market Lending Fund LLC.
24.1*
Power of Attorney (included on the signature page hereto).
31.1*
Certification of Co-Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*
Certification of Co-Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.3*
Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*
Certification of Co-Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.3*
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
104*
Cover Page Interactive Data File (embedded within the Inline XBRL document)
* Filed herewith.