EDGAR 10-K Filing

Company CIK: 1849894
Filing Year: 2025
Filename: 1849894_10-K_2025_0000950170-25-042155.json

---

ITEM 1. BUSINESS
Item 1. Business.
General
We are a closed-end, externally managed, non-diversified management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the “1940 Act”). We were established as a Delaware limited liability company on February 18, 2021, and converted to MSD Investment, LLC, a Maryland limited liability company, on October 22, 2021. Prior to the Conversion (as defined below), the Company entered into purchase agreements with three affiliated entities (MSD Credit Opportunities Fund, L.P., MSD Credit Opportunities Master Fund, L.P., and SOF Investments II, L.P. (collectively, the “Funds”)) pursuant to which the Company agreed to acquire from the Funds certain investment assets (or participation interests therein pending re-documentation of the Portfolio in the name of the Company) (the “Portfolio”) for an aggregate cash purchase price equal to the fair value of such assets, plus accrued but unpaid interest as of the closing date, less any principal payments received between signing of the purchase agreements and the closing of the transactions contemplated thereby. The closing of the purchase of the Portfolio by the Company occurred on December 21, 2021. As consideration for the Portfolio, the Company paid the Funds an aggregate purchase price of $656.5 million. On December 28, 2021, the Company filed Articles of Conversion (and related Articles of Incorporation) with the Maryland Department of Assessments and Taxation in order to convert the Company from a Maryland limited liability company to a Maryland corporation named “MSD Investment Corp.” (the “Conversion”). In accordance with the Articles of Conversion and Maryland law, the Conversion became effective as of 12:01 a.m. on January 1, 2022 and, as result of the Conversion, each unit representing a portion of the membership interests of the Company prior to the effective time of the Conversion was automatically converted into one share of common stock, par value $0.001 per share, of the Company.
On January 1, 2023, the Adviser completed a previously announced business combination with BDT & Company Holdings, L.P. (the “Transaction”), and its subsidiaries, which includes BDT Capital Partners, LLC (“BDT Capital”), an SEC-registered investment adviser, and BDT & MSD Partners, LLC, an SEC registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”). Upon the closing of the Transaction, BDT & Company Holdings, L.P. was renamed BDT & MSD Holdings, L.P. (“BDT”) and BDT, and its subsidiaries, became affiliates of the Adviser and the Company. BDT, together with BDT Capital, MSD and their affiliated entities, are collectively referred to as “BDT & MSD.”
As a non-diversified investment company within the meaning of the 1940 Act, we will not be limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer, excluding limitations on investments in other investment companies.
In addition, we have elected, and intend to qualify annually, to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (together with the rules and regulations promulgated thereunder, the “Code”).
The Adviser and the Administrator - MSD Partners, L.P.
The Adviser serves as the investment adviser of the Company. The Adviser is registered as an investment adviser with the SEC pursuant to the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Adviser provides certain investment advisory and management services to the Company pursuant to an investment advisory agreement between the Company and the Adviser, dated January 1, 2023 (the “Advisory Agreement”).
The Administrator serves as the Company’s administrator pursuant to an “Administration Agreement” between the Company and the Administrator, dated January 1, 2023. The Administrator may retain a sub-administrator to provide certain administrative services to the Company and enter in a sub-administration agreement.
Advisory Agreement
The Adviser is responsible for the overall management of the Company’s business and activities pursuant to the Advisory Agreement. The Adviser will manage the Company’s loans and day-to-day operations, subject at all times to the terms and conditions set forth in the Advisory Agreement and such further limitations or parameters as may be imposed from time to time by our Board. Under the Advisory Agreement, the Adviser has contractual responsibilities to the Company, including to provide the Company with a management team (whether our Adviser’s own employees or individuals for which our Adviser has contracted with other parties to provide services to its clients), who will be our executive officers, and members of the Investment Committee. The Adviser will use its commercially reasonable efforts to perform its duties under the Advisory Agreement.
Compensation of the Adviser
Management Fee. Pursuant to the Advisory Agreement, the Company will pay to the Adviser an annual management fee (the “Management Fee”), payable quarterly in arrears. Management Fees for any partial month or quarter will be appropriately prorated and adjusted for any share issuances or repurchases during the relevant month or quarter. The Management Fee shall be calculated as follows:
(i)Prior to an initial public offering of the Company’s common stock and/or listing on a nationally recognized stock exchange (an “Exchange Listing”), the Management Fee shall be calculated at a rate of 0.1875% per quarter (0.75% per annum) of the Company’s average gross asset value at the end of the two most recently completed calendar quarters (or for the first quarter which the Company has operations, the average gross assets at the date of the initial drawdown from investors and the end of such calendar quarter), including assets purchased with borrowed funds or other forms of leverage (including, but not limited to, the SPV I Facility, the SPV II Facility, the Revolving Credit Facility, the Repurchase Obligations, and the 2023 Debt Securitization (each as defined below, each, a “Credit Facility” and together the “Credit Facilities”) but excluding (i) cash and cash equivalents (as defined below) and (ii) undrawn commitments (commitments that are not yet property of the Company and therefore are not included in the calculation). “Cash equivalents” means U.S. government securities, money market fund investments, commercial paper instruments, and other similar cash equivalent investments maturing within one year of purchase.
(ii)Following an Exchange Listing, the Management Fee will be calculated at a rate 0.3125% per quarter (1.25% per annum) of the Company’s average gross asset value including assets purchased with borrowed amounts under any credit facility but excluding cash and cash equivalents at the end of the two most recently completed calendar quarters (or for the first quarter following an Exchange Listing, the average gross assets as of the date of the Exchange Listing and the end of such calendar quarter).
Incentive Fee. Pursuant to the Advisory Agreement, the Company will pay to the Adviser an incentive fee (the “Incentive Fee”).
The Incentive Fee consists of two components that are independent of each other with the result that one component may be payable even if the other is not. A portion of the Incentive fee is based on the Company’s income (the “Income-Based Fee”) and a portion is based on the Company’s capital gains (the “Capital Gains Fee”), each is described below.
(i)The Income-Based Fee will be determined and paid quarterly in arrears based on the amount by which the aggregate “Pre-Incentive Fee Net Investment Income” (as defined below) in any calendar quarter exceeds the “Hurdle Amount” (as defined below). The Hurdle Amount will be determined on a quarterly basis and will be calculated by multiplying 1.5% (6% annualized) by the Company’s net asset value at the beginning of each applicable calendar quarter.
The calculation of the Income-Based Fee for each quarter is as follows:
A. No Income-Based Fee shall be payable to the Adviser in any calendar quarter in which the Company’s aggregate Pre-Incentive Fee Net Investment Income does not exceed the Hurdle Amount;
B. 100% of the Company’s aggregate Pre-Incentive Fee Net Investment Income, if any, that exceeds the Hurdle Amount but is less than or equal to an amount (the “Catch-Up Amount”) determined on a quarterly basis by multiplying 1.77% (7.06% annualized) by the Company’s net asset value at the beginning of each applicable calendar quarter. The Catch-Up Amount is intended to provide the Adviser with an incentive fee of 15% on all of the Company’s Pre-Incentive Fee Net Investment Income when the Company’s Pre-Incentive Fee Net Investment Income reaches the Catch-Up Amount for any calendar quarter; and
C. For any quarter in which the Company’s aggregate Pre-Incentive Fee Net Investment Income exceeds the Catch-Up Amount, the Income-Based Fee shall equal 15% of the amount of the Company’s Pre-Incentive Fee Net Investment Income for such quarter, as the Hurdle Amount and Catch-Up Amount will have been achieved.
(ii)The Capital Gains Fee will be determined and payable in arrears as of the end of each calendar year (or upon termination of the Advisory Agreement), commencing with the first calendar year ended after the Company elects to be treated as a BDC, and is calculated at the end of each applicable year by subtracting (a) the sum of the Company’s cumulative aggregate realized capital losses and aggregate unrealized capital depreciation from (b) the Company’s cumulative aggregate realized capital gains. If such amount is positive at the end of such year, then the Capital Gains Fee payable for such year is equal to 15% of such amount, less the cumulative aggregate amount of Capital Gains Fees paid in all prior years commencing with the first calendar year ended after the Company elects to be treated as a BDC. If such amount is negative, then there is no Capital Gains Fee payable for such year. If the Advisory Agreement is terminated as of a date that is not a calendar year end, the termination date shall be treated as though it were a calendar year end for purposes of calculating and paying a Capital Gains Fee. The Company will accrue, but will not pay, a Capital Gains Incentive Fee with respect to unrealized appreciation, in accordance with generally accepted account principals in the United States (“U.S. GAAP”), because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain. In no event will the Capital Gains Incentive Fee calculated on unrealized appreciation be payable until such gains are realized, if at all.
“Pre-Incentive Fee Net Investment Income” shall mean interest income, dividend income and any other income (including any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies but excluding fees for providing managerial assistance) accrued during the calendar quarter, minus operating expenses for the quarter (including the Management Fee, any expenses payable under the Administration Agreement, and any interest expense and dividends paid on any outstanding preferred stock, but excluding the Incentive Fee). In addition, “Pre-Incentive Fee Net Investment Income” shall include, in the case of investments with a deferred interest feature such as market discount, original issue discount (“OID”), debt instruments with payment-in-kind (“PIK”) interest, preferred stock with PIK dividends and zero-coupon securities, accrued income that the Company has not yet received in cash. For avoidance of doubt, Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
Examples of the quarterly incentive fee calculation are annexed to the Advisory Agreement. Such examples are included for illustrative purposes only and are not considered part of the Advisory Agreement. The fees payable under the Advisory Agreement for any partial period will be appropriately prorated.
Both the calculation of the Management Fee and the Income-Based Fee will be appropriately adjusted for any capital calls done by the Company during the quarter (based on the actual number of days elapsed relative to the total number of days in such calendar quarter).
For purposes of computing the Income-Based Fee and the Capital Gains Fee, the calculation methodology will look through derivative financial instruments or swaps as if the Company owned the reference assets directly, in the manner described above. With respect to the calculation of quarterly Pre-Incentive Fee Net Investment Income for purposes of calculating the Income-Based Fee, net interest, if any, associated with a derivative or swap (which is defined as the difference between (i) the interest income and transaction fees received in respect of the reference assets of the derivative or swap and (ii) all interest and other expenses paid by us to the derivative or swap counterparty) will be included in calculating the Income-Based Fee. The notional value of any such derivatives or swaps is not used for these purposes. With respect to the calculation of the Capital Gains Fee, realized gains and realized losses on the disposition of any reference assets, as well as unrealized depreciation on reference assets retained in the derivative or swap, will be included on a cumulative basis in calculating the Capital Gains Fee.
The following is a graphical representation of the quarterly calculation of the Incentive Fee:
Administration Agreement
Pursuant to the Administration Agreement, the Administrator will furnish the Company with office facilities and equipment and provides clerical, bookkeeping, recordkeeping and other administrative services at such facilities. The Administrator will perform, or oversee the performance of, our required administrative services, which include, among other things, assisting the Company with the preparation of the financial records that the Company is required to maintain and with the preparation of reports to shareholders and reports filed with the SEC. The Administrator will also assist the Company in determining and publishing our net asset value (“NAV”), overseeing the preparation and filing of tax returns, printing and disseminating reports to shareholders and generally overseeing the payment of expenses and the performance of administrative and professional services rendered to the Company by others. At the request of the Adviser, the Administrator will also provide (or cause to be provided) managerial assistance on the Company’s behalf to those portfolio companies that have accepted the Company’s offer to provide such assistance.
The Board
The business and affairs of the Company are managed under the direction and oversight of the Board. The Board consists of four members, three of whom are not “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser (each an “Independent Director”). The Board appoints the officers of the Company, who serve at the discretion of the Board. The responsibilities of the Board include quarterly oversight of the valuation of the Company’s assets, corporate governance activities, oversight of the Company’s operations, financing arrangements, investment activities, and risk management.
The Board reviews risk management processes at both regular and special board meetings throughout the year, consulting with appropriate representatives of the Adviser as necessary and periodically requesting the production of risk management reports or presentations. The goal of the Board’s risk oversight function is to ensure that the risks associated with the Company’s investment activities are accurately identified, thoroughly investigated and responsibly addressed. Investors should note, however, that the Board’s oversight function cannot eliminate all risks or ensure that particular events do not adversely affect the value of the Company’s investments.
The Board has established an Audit Committee, a Pricing Committee and a Nominating and Corporate Governance Committee.
Employees
We do not currently have any employees and do not expect to have any employees in the future. Services necessary for our business are provided by individuals who are employees of the Adviser or its affiliates, pursuant to the terms of the Advisory Agreement and the Administration Agreement. Our day-to-day investment operations are managed by the Adviser. The services necessary for the origination and administration of our investment portfolio will be provided by investment professionals employed by the Adviser or its affiliates.
Investment Strategy
Investment Objective
The Company’s investment objective is to maximize dividend yields by investing in a broad range of portfolio companies, primarily investing in senior secured loans and notes where we believe the probability of losses are limited. The Advisor expects to execute this strategy by continuing its long history of leveraging its network to source and diligence what we believe to be attractive opportunities across a broad range of industries. The strategy will be executed by a team of experienced investment professionals who have more than a 20-year history of successfully deploying capital in both liquid and illiquid opportunities. The Company may invest in non-U.S. investments, convertible securities, structured investments (including junior and equity tranches) and real estate on a limited basis, if at all.
The portfolio will be comprised primarily of senior secured loans and notes sourced in both the private and more broadly syndicated markets. While the Company will focus primarily on investing in senior secured loans, it has a flexible mandate that allows it to invest across the capital structure, including, first and second lien debt, notes, bonds, preferred and mezzanine securities and, on a limited basis, equities. First-lien debt may include traditional first-lien senior secured loans or unitranche loans that combine the characteristics of traditional first lien senior secured loans with second lien and subordinated loans. Unitranche loans are often a potentially attractive way to mitigate downside risk because of their seniority in the capital structure, while potentially realizing higher returns by providing more leverage than would be typical for traditional first lien senior secured debt.
The Company will source opportunities through industry relationships as well as BDT & MSD’s advisory capabilities and referrals from its network. The Adviser invests across a wide range of industries and asset classes and has an extensive network that spans most industries.
The Company’s strategy will be principally executed by the Adviser’s credit team (the “Credit Team”), led by senior investment professionals with an average of 28 years of experience in sourcing and investing, and 19 years working together as a team. The senior investment professionals of the Company have demonstrated investment expertise throughout the lifecycle of credit markets. As a consequence, the Company is well positioned to invest across a wide array of industries and opportunities. The team has a highly disciplined, fundamental, research-intensive approach to investing, where downside risk assessment is central to each investment decision.
Target Investment Criteria
The Company focuses on sourcing opportunities in businesses that tend to exhibit some or all of the following characteristics:
•History of Predictable, Positive Free Cash Flow. We seek to invest in companies that have a multi-year history of positive free cash flow that can be identified from audited financial statements. We attempt to manage adjustments when evaluating the predictability of cashflow streams as we believe that history can be a strong indicator of future performance.
•Experienced Management Teams. We seek to invest in companies with management teams that have a successful history managing businesses in their respective industries. We perform reference checks on key members of management and frequently develop relationships with management teams that are helpful in allowing us to monitor performance and anticipate future financing needs.
•Flexible Cost Structure. In our experience, companies with flexible cost structures provide a higher degree of downside protection than those with a high degree of operational leverage. As a result, we look to invest in businesses where cost structures are more variable in nature.
•Defensive Industries. We seek to invest in companies in defensive industries that can succeed throughout economic environments. In instances where we have been exposed to more cyclical industries, we have focused on lower loan-to-value opportunities collateralized by hard assets or long-term contractual cash flows with high quality counterparties.
•Reasonable Leverage. We seek to invest in businesses whose owners and management teams are focused on reasonable leverage relative to both the asset value and cash flow generation in all operating environments, avoiding businesses whose business models and economics depend heavily on leverage.
•Regulatory certainty. We seek to invest in opportunities that exhibit a stable regulatory environment, and where changes in regulations are unlikely to materially impact the value of our collateral and cash flows of the business.
•Low competitive intensity. We have historically preferred investing in businesses in industries where competition is low, and barriers to entry are high, resulting in less price competition, the ability to pass through inflationary costs, and generally higher margins and return on assets.
The industry composition of investments at fair value as of December 31, 2024 and December 31, 2023 was as follows:
December 31, 2024
December 31, 2023
Aerospace & Defense
4.72
%
6.06
%
Automotive
0.24
0.05
Banking, Finance, Insurance & Real Estate
6.82
4.81
Beverage, Food & Tobacco
0.46
0.97
Capital Equipment
3.23
5.26
Chemicals, Plastics & Rubber
1.50
1.88
Construction & Building
7.77
-
Consumer Goods: Durable
1.98
1.80
Consumer Goods: Non-durable
6.90
2.79
Containers, Packaging & Glass
1.72
-
Energy: Oil & Gas
0.05
3.50
Environmental Industries
0.40
-
Healthcare & Pharmaceuticals
6.53
8.87
High Tech Industries
4.66
3.59
Hotel, Gaming & Leisure
10.73
10.14
Media: Advertising, Printing & Publishing
2.60
3.33
Media: Broadcasting & Subscription
0.49
-
Media: Diversified & Production
1.68
3.48
Retail
1.92
7.60
Services: Business
18.38
12.82
Services: Consumer
8.84
7.16
Sovereign & Public Finance
1.11
-
Telecommunications
4.02
8.33
Transportation: Cargo
1.46
2.94
Transportation: Consumer
1.29
3.56
Wholesale
0.50
1.06
Total
100.00
%
100.00
%
Target Portfolio Characteristics
The Company aims to construct a unique and diversified portfolio comprised of senior secured loans, which may include “covenant-lite” loans (as defined below), to deliver high current yield with a compelling risk-reward profile. The portfolio may deviate from these long-term portfolio targets at various points in time due to market conditions and available investment opportunities.
•Leverage of ~50-52.5% of AUM
•Mix of liquid and private loans
•5% gross exposure individual investment limit
•>80% senior secured and unitranche loans
•>80% floating rate loans
•Debt maturities generally ranging from 3 to 8 years
There are no restrictions on the credit quality of the investments that the Company may make. Securities in which the Company may invest may be deemed by rating companies to have substantial vulnerability to default in payment of interest and/or principal. Other securities may be unrated. Lower-rated and unrated securities in which the Company may invest have large uncertainties or major risk exposures to adverse conditions, and are considered to be predominantly speculative. Generally, such securities offer a higher return potential than higher-rated securities, but involve greater volatility of price and greater risk of loss of income and principal.
Types of Principal Investments
First Lien Senior Secured Loans. These loans are generally the most senior financing in the capital structure, supported by first-priority liens on all or substantially all of the Portfolio Company’s collateral. First lien senior secured loans generally allow the borrower to defer the majority of principal repayments to the end of the loan term, and as a result there is a risk of loss if the borrower is unable to pay the lump sum or refinance the principal amount owed at maturity. In some instances we may structure these loans to provide for loan amortization of varying amounts over the loan term, excess cash flow sweeps, and sweeps on proceeds from asset sales.
Unitranche Loans. These loans are also generally characterized by being the most senior financing in the capital structure, supported by first-priority liens on all or substantially all of the Portfolio Company’s collateral. These loans differ from First Lien Senior Secured Loans in that they generally provide incremental proceeds to the borrower (beyond what a typical First Lien Senior Secured Loan would provide). In return, lenders generally receive a higher return on these loans. Unitranche loans generally allow the borrower to defer the majority of principal repayments to the end of the loan term, and as a result there is a risk of loss if the borrower is unable to pay the lump sum or refinance the principal amount owed at maturity. In some instances, we may structure these loans to provide for loan amortization of varying amounts over the loan term, excess cash flow sweeps, and sweeps on proceeds from asset sales.
Second Lien Loans. These loans are generally characterized by a second-out position in the capital structure, supported by second-priority liens on all or substantially all of the Portfolio Company’s collateral. Once all first lien loans have been repaid, remaining proceeds generally accrue to paying back the second lien loans before repayment of any other liabilities.
Preferred Investments. In a limited number of cases, the Company may make preferred investments in Portfolio Companies where we believe there is attractive downside protection relative to the opportunity to achieve higher rates of return. Returns may come in the form of a fixed rate of interest, or in the form of capital appreciation through a conversion feature. These investments are typically structured in a senior position to common equity and may impose restrictions on the Portfolio Company meant to protect our downside.
Equity Investments. In a limited number of cases, the Company may make equity investments in Portfolio Companies where we believe the potential returns are attractive and there is significant potential to enhance the overall yield to our investors.
The composition of the Company’s investment portfolio at amortized cost and fair value as of December 31, 2024 and December 31, 2023 was as follows:
December 31, 2024
December 31, 2023
Amortized Cost
Fair Value
% of Total Investments at Fair Value
Amortized Cost
Fair Value
% of Total Investments at Fair Value
First lien debt
$
4,380,981
$
4,375,355
96.61
%
$
1,942,665
$
1,942,843
88.43
%
Second lien debt
89,589
89,485
1.98
234,306
226,318
10.30
Subordinated debt
0.02
-
-
0.00
Equity and Other Investments
63,397
63,234
1.39
31,846
27,892
1.27
Total investments
$
4,534,957
$
4,529,064
100.00
%
$
2,208,817
$
2,197,053
100.00
%
BDT & MSD Advantage
We believe the Company is uniquely positioned to generate compelling risk-adjust returns in its target market for the following reasons:
•BDT & MSD’s Broad & Integrated Platform. BDT & MSD has built a strong reputation and established itself as a leading investor in credit, real estate equity, and private capital. BDT & MSD’s investment teams operate on an integrated platform and are able to work closely together and consistently share ideas. This allows the Credit Team to leverage BDT & MSD’s knowledge base to pursue attractive investment opportunities and diligence in a wide range of industries and companies. Additionally, the BDT & MSD investment teams are supported by an established infrastructure of legal, accounting, tax, IT, human capital, communication and fundraising professionals, among others. BDT & MSD considers its legal transactional team to be a unique differentiator in deal structuring and diligence.
•Credit Team’s Extensive Experience. The Credit Team is comprised of experienced professionals: the four portfolio managers average 27 years of industry experience and are supported by a team of 11 professionals averaging 10 years of industry experience. Additionally, the team is purposely made up of individuals with diverse investment backgrounds (private equity, venture capital, legal, accounting, consulting, etc.), which helps build a fulsome understanding of investment opportunities and risks.
•Reputation as a Solutions Provider. The leadership of the Credit Team has been providing loans for over 20 years and through its history has built long-standing relationships with borrowers, advisors and management teams. BDT & MSD has built a reputation for providing creative solutions to efficiently meet the financing requirements of borrowers. As a result, borrowers often seek out BDT & MSD and think of it as a competitive advantage to have BDT & MSD in their capital structure over other lenders.
•Value-Add to our Partners. The Credit Team is actively involved with its borrowers and is known for being a constructive partner who can use its extensive industry relationships to recruit best-in-class board members, management and operators. We are not just a capital provider, we are a long-term partner.
•Unique Sourcing Capabilities. BDT & MSD is able to source unique investment opportunities resulting from BDT & MSD’s strong brand, its advisory business and referrals from its global network of business-owning clients and investors, the Credit Team’s longstanding experience and expertise, and our reputation for being a solutions provider and partner. In the private credit markets we have sourced attractive opportunities because our unique capital base and constructive approach make us a desirable long-term partner. Similarly, in the liquid credit markets we leverage our vast network and knowledge base to uncover attractive opportunities across sectors and win substantial allocations.
Investment Process
Origination / Pre-Screen. The Credit Team will source opportunities through the Team's and broader BDT & MSD’s network of relationships with families and founders, companies, brokers, and private equity firms. We believe these relationships and the brand that BDT & MSD has built enables them to maximize deal flow, engage in a highly selective investment process, and provide the opportunity to construct a well-diversified portfolio. As opportunities are sourced, the investment team, which is generally composed of a Portfolio Manager, and other team members, as applicable, (the “Investment Team”), reviews the offering memorandum and other high-level information and screens the deal to determine if it fits BDT & MSD’s target investment criteria, taking into consideration economic terms and structure. In addition, the Team engages other BDT & MSD investment teams to understand any work previously performed in evaluating similar businesses or the respective industry. The screening process concludes with a discussion among the Credit Team’s investment committee whether to proceed with the opportunity. The Credit Team considers sponsor track record and reputation when deciding whether to pursue an investment.
Credit Evaluation. Once the decision has been made to move forward with an investment opportunity, a team of investment professionals will begin the formal due diligence process. This may include signing a confidentiality agreement or non-disclosure agreement to gain access to relevant financial and operational data for the underlying company. The Investment Team may attend meetings or phone calls with the prospective company’s management team, review historical audits, review forecasted financial information and third-party diligence reports, conduct independent research, engage experts in the relevant industry, and perform an analysis of base case and downside scenarios. The Investment Team also contacts BDT & MSD’s legal department to discuss the transaction, and gain insight into key issues that might be relevant in evaluating the credit and negotiating the terms. Throughout this process, the Investment Team and the portfolio managers communicate on a regular basis to discuss any diligence findings that materially alter the initial thesis. If we do not find a material issue in the underwriting process, and we are selected by the counterparty, we will move to the documentation stage.
Documentation. Once we move to definitive documentation, we engage our internal team of lawyers who - along with select third-party counsel, where applicable, with relevant sector expertise - work closely with the deal team to ensure that the documents reflect the Company’s agreement with the borrower.
Investment Monitoring. Once an investment has closed, the Investment Team that completed the underwriting will generally remain in charge of monitoring the investment. We take an active approach to monitoring all of our investments, including quarterly calls with management, updating internal financial and operational performance tracking, and evaluating comparable companies’ performance to benchmark the performance of our underlying portfolio companies. We hold weekly meetings with the Credit Team to discuss our portfolio companies, and we hold weekly meetings with the entire firm where we discuss macroeconomic news that may impact our individual portfolio companies.
Exit Strategies / Refinancing. While we generally expect to exit most investments through the refinancing or repayment of our debt, we may also engage in secondary market sales of investments.
Risk Ratings
We monitor the operational and financial trends of our portfolio companies on at least a quarterly basis. We attempt to identify any developments in the underlying company or industry that may alter any material element of our original investment thesis. We discuss each position at least once quarterly to ensure the Investment Team, and the portfolio managers, are apprised of any material developments and to determine any required portfolio management actions.
We utilize an investment rating system to monitor the credit profile of our underlying portfolio companies. We use a five-level rating scale to classify individual investments.
•Investment Rating 1 - Investment is performing materially above expectations;
•Investment Rating 2 - Investment is performing above expectations;
•Investment Rating 3 - Investment is performing materially with expectations. All new loans received a rating of 3 at initial investment;
•Investment Rating 4 - Investment is performing materially below expectations. Investments with a rating of 4 receive more frequent attention from our team as the risks of impairment have increased substantially since investment. Loss of principal is not expected, however there may be lost interest; and
•Investment Rating 5 - Investment is performing materially below expectations and there is a high probability of impairment. Loss of principal and interest is probable.
The following table shows the investment rankings of the debt investments in our portfolio as of December 31, 2024 and December 31, 2023:
As of December 31, 2024
As of December 31, 2023
Risk Rating
Fair Value
% of Portfolio
# of Investments
Fair Value
% of Portfolio
# of Investments
$
-
0.0
%
-
$
-
0.0
%
-
138,919
3.1
70,386
3.2
4,325,456
95.5
2,123,142
96.7
60,298
1.3
1,096
0.0
4,391
0.1
2,429
0.1
$
4,529,064
100.0
%
$
2,197,053
100.0
%
Emerging Growth Company
We are an emerging growth company as defined in the JOBS Act and we are eligible to take advantage of certain specified reduced disclosure and other requirements that are otherwise generally applicable to public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). We expect to remain an emerging growth company for up to five years following the completion of our initial public offering (“IPO”) or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues equals or exceeds $1.235 billion, (ii) December 31 of the fiscal year that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act which would occur if the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the last business day of our most recently completed second fiscal quarter and we have been publicly reporting for at least 12 months or (iii) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the preceding three-year period. In addition, we will take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “1933 Act”) for complying with new or revised accounting standards.
The Private Offering
Common Stock
Pursuant to a private offering, we are offering shares of our common stock to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated under the 1933 Act in reliance on exemptions from the registration requirements of the 1933 Act (the “Private Offering”). There will be no limit on the number of shares or the amount of capital raised in connection with the Private Offering. Each investor will make a capital commitment to purchase shares of our common stock pursuant to a subscription agreement entered into with us. At each closing in the Private Offering, investors will be required to purchase additional shares up to the amount of their respective unfunded capital commitments. The first closing date took place on December 21, 2021 (“Initial Closing Date”). Additional closings are expected to occur from time to time as determined by the Company, and the final such closing will occur no later than the fifth anniversary of the Initial Closing Date, subject to a one-year extension at the discretion of the Board.
Series A Preferred Stock
	On November 29, 2023, the Company issued 250 shares of its 12.0% Series A Cumulative Preferred Stock (the “Series A Preferred Stock”) for an aggregate offering price of $750,000. Each individual investor in the offering was entitled to purchase only one share of Series A Preferred Stock. Each holder of Series A Preferred Shares is entitled to a liquidation preference of $3,000.00 per share (the “Liquidation Value”), plus additional amounts as set forth in the Articles Supplementary to the Company’s Articles of Incorporation Relating to the 12.0% Series A Cumulative Preferred Stock. With respect to distributions, including the payment of dividends and distribution of the Company’s assets upon dissolution, liquidation, or winding up, the Series A Preferred Stock will be senior to all other classes and series of the Company’s common shares, whether such class or series is now existing or is created in the future, to the extent of the aggregate Liquidation Value and all accrued but unpaid dividends and any applicable redemption premium on the Series A Preferred Stock. Holders of shares of the Series A Preferred Stock will not, however, participate in any appreciation in the value of the Company.
Dividends on each share of Series A Preferred Stock will accrue on a daily basis at the rate of 12% per annum of the sum of the Liquidation Value thereof plus all accumulated and unpaid dividends thereon, from and including the date of issuance to and including the earlier of (1) the date of any liquidation, dissolution, or winding up of the Company or (2) the date on which such Series A Preferred Share is redeemed. Dividends will accrue whether or not they have been authorized or declared, whether or not the Company has earnings, and whether or not there are funds legally available for payment of dividends.
The outstanding shares of Series A Preferred Stock are subject to redemption at any time, upon the approval of the Board, by notice of such redemption on a date selected by the Company for such redemption (the “Redemption Date”). If the Company elects to cause the redemption of the Series A Preferred Stock, each share of Series A Preferred Stock will be redeemed for a price, payable in cash on the Redemption Date, equal to 100% of such share’s Liquidation Value, plus all accrued and unpaid dividends to the Redemption Date, plus a redemption premium as follows: (1) if the redemption date occurs prior to the second anniversary of the date on which the Preferred Shares were originally issued, a redemption premium of $300; and (2) thereafter, no redemption premium. From and after the close of business on the Redemption Date, all dividends on the outstanding shares of Series A Preferred Stock will cease to accrue, such shares will no longer be deemed to be outstanding, and all rights of the holders of such shares (except the right to receive the redemption price for such shares from the Company) will cease.
Regulation as a Business Development Company
The following discussion is a general summary of the material prohibitions and descriptions governing BDCs generally. It does not purport to be a complete description of all of the laws and regulations affecting BDCs.
Qualifying Assets. Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “qualifying assets,” unless, at the time the acquisition is made, qualifying assets represent at least 70% of the company’s total assets. The principal categories of qualifying assets relevant to the Company’s business are any of the following:
1.Securities purchased in transactions not involving any public offering from the issuer of such securities, which issuer (subject to certain limited exceptions) is an eligible portfolio company, or from any person who is, or has been during the preceding 13 months, an affiliated person of an eligible portfolio company, or from any other person, subject to such rules as may be prescribed by the SEC. An eligible portfolio company is defined in the 1940 Act as any issuer which:
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 1940 Act; and
c.satisfies any of the following:
i.does not have any class of securities that is traded on a national securities exchange;
ii.has a class of securities listed on a national securities exchange, but has an aggregate market value of outstanding voting and non-voting common equity of less than $250 million;
iii.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
iv.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 controlled by the Company;
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 the Company already owns 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 warrants or rights relating to such securities; or
6.Cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment.
In addition, a BDC must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.
Significant Managerial Assistance. A BDC must have been 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 above. A BDC must also offer to make available to the issuer of the qualifying assets 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. 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 through monitoring of portfolio company operations, selective participation in board and management meetings, consulting with and advising a portfolio company’s officers or other organizational or financial guidance. The Administrator or its affiliate provides such services on our behalf to portfolio companies that accept our offer of managerial assistance.
Temporary Investments. Pending investment in other types of qualifying assets, as described above, the Company’s investments can consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which are referred to herein, collectively, as temporary investments, so that 70% of the Company’s assets would be qualifying assets.
Issuance of Warrants, Options or Rights. Under the 1940 Act, a BDC is subject to restrictions on the issuance, terms and amount of warrants, options or rights to purchase shares of stock that it may have outstanding at any time. In particular, the amount of shares that would result from the conversion or exercise of all outstanding warrants, options or rights to purchase shares cannot exceed 25% of the BDC’s total outstanding shares.
Senior Securities; Asset Coverage Ratio. The Company is generally permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our Shares if our asset coverage, as defined in the 1940 Act, is at least equal to 150% (i.e., we can borrow $2 for every $1 of equity), if certain requirements are met. In connection with the organization of the Company, the Board and the Company’s initial shareholder authorized the Company to adopt the 150% asset coverage ratio.
In addition, while certain types of senior securities remain outstanding, the Company will be required to make provisions to prohibit the payment of any dividend distribution to our shareholders or the repurchase of such shares unless we meet the applicable asset coverage ratio at the time of the dividend distribution or repurchase. The Company will also be permitted to borrow amounts up to 5% of the value of our total assets for temporary purposes, which borrowings would not be considered senior securities. The Company’s borrowings, whether for temporary purposes or otherwise, are subject to the asset coverage requirements of section 61(a)(1) of the 1940 Act.
Code of Ethics. The Company and the Adviser have each adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Advisers Act, respectively, that establishes procedures for personal investments and restricts certain personal securities transactions by the Company’s officers and the Adviser’s employees. The Company has also adopted a separate code of ethics pursuant to Rule 17j-1 under the 1940 Act that establishes procedures for personal investments and restricts certain personal securities transactions by the Company’s independent directors. Individuals subject to these codes are permitted to invest in securities for their personal investment accounts, including securities that may be purchased or held by the Company, so long as such investments are made in accordance with such code’s requirements. You may obtain copies of these codes of ethics by e-mailing our Adviser at compliance@bdtmsd.com, or by writing to our Adviser at Investor Relations IR@bdtmsd.com. The code of ethics is also available on the EDGAR database on the SEC’s Internet site at http://www.sec.gov.
Affiliated Transactions. The Company may be prohibited under the 1940 Act from conducting certain transactions with its affiliates without the prior approval of our independent directors and, in some cases, the prior approval of the SEC.
The Company expects to co-invest on a concurrent basis with other affiliates of the Company and the Adviser, unless doing so would be impermissible under existing regulatory guidance, applicable regulations, the terms of any exemptive relief granted to the Company and its affiliates, and the allocation procedures of MSD. On February 16, 2022, the Adviser, the Company, and certain other funds and accounts sponsored or managed by the Adviser and/or its affiliates were granted an order (the “Order”), which was amended on August 31, 2022, that permits the Company to co-invest in portfolio companies with certain funds and entities managed by the Adviser or its affiliates in certain negotiated transactions where co-investing would otherwise be prohibited under the 1940 Act, subject to the conditions of the Order. The Company believes that the ability to co-invest with similar investment structures and accounts sponsored or managed by the Adviser and its affiliates will provide additional investment opportunities and the ability to achieve greater diversification. Pursuant to the Order, we are permitted to co-invest with our affiliates if a ‘‘required majority’’ (as defined in Section 57(o) of the 1940 Act) of our directors who are not “interested persons” (as defined in Section 2(a)(19) of the 1940 Act) of the Company make certain conclusions in connection with a co-investment transaction, including, but not limited to, that (1) the terms of the potential co-investment transaction, including the consideration to be paid, are reasonable and fair to us and our shareholders and do not involve overreaching in respect of us or our shareholders on the part of any person concerned, and (2) the potential co-investment transaction is consistent with the interests of our shareholders and is consistent with our then-current investment objective and strategies. The Board will regularly review the allocation policy of MSD.
Other. The Company will be periodically examined by the SEC for compliance with the 1940 Act, and be subject to the periodic reporting and related requirements of the Exchange Act.
The Company is also required to provide and maintain a bond issued by a reputable fidelity insurance company to insure against larceny and embezzlement. Furthermore, as a BDC, the Company is prohibited from protecting any director or officer against any liability to shareholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
The Company is also required to designate a chief compliance officer and to adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws and to review these policies and procedures annually for their adequacy and the effectiveness of their implementation.
The Company is not permitted to change the nature of its business so as to cease to be, or to withdraw our election as, a BDC unless approved by a majority of its outstanding voting securities. A majority of the outstanding voting securities of a company is defined under the 1940 Act as the lesser of: (i) 67% or more of such company’s shares present at a meeting if more than 50% of the outstanding shares of such company are present or represented by proxy, or (ii) more than 50% of the outstanding shares of such company.
Proxy Voting Policies and Procedure
We have delegated our proxy voting responsibility to the Adviser. A summary of the Proxy Voting Policies and Procedures of our adviser are set forth below. The guidelines are reviewed periodically by the Adviser and our non-interested directors, and, accordingly, are subject to change.
As an investment adviser registered under the Advisers Act, the Adviser has a fiduciary duty to act solely in the best interests of its clients. As part of this duty, it recognizes that it must vote for securities held by its clients in a timely manner free of conflicts of interest. These policies and procedures for voting proxies for investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
The Adviser votes proxies relating to our portfolio securities in the best interest of Shareholders. The Adviser reviews on a case-by-case basis each proposal submitted for a proxy vote to determine its impact on our investments. Although it generally votes against proposals that may have a negative impact on our investments, it may vote for such a proposal if there exists compelling long-term reasons to do so. The proxy voting decisions of the Adviser are made by the senior investment professionals who are responsible for monitoring each of our investments. To ensure that our vote is not the product of a conflict of interest, it requires that: (i) anyone involved in the decision making process disclose to a managing member of the Adviser any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (ii) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.
You may obtain information about how we voted proxies by making a written request for proxy voting information to: MSD Investment Corp., 550 Madison Avenue, 20th Floor, New York, NY 10022.
Privacy Policy
We are committed to maintaining the privacy of our Shareholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information we may have access to, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, we do not receive any non-public personal information relating to our Shareholders, although certain non-public personal information of our Shareholders may become available to us. We do not disclose any non-public personal information about our Shareholders or former shareholders to anyone, except as permitted by law or as is necessary in order to service Shareholder accounts (for example, through a transfer agent or third-party administrator).
We restrict access to non-public personal information about our Shareholders to employees of our investment adviser and its affiliates with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of our Shareholders.
Reporting Obligations
We will furnish our Shareholders with annual reports containing audited financial statements, quarterly reports, and such other periodic reports as we determine to be appropriate or as may be required by law. We are required to comply with all periodic reporting, proxy solicitation and other applicable requirements under the Exchange Act. The SEC maintains an Internet site that contains reports, proxy and information statements and other information filed electronically by us with the SEC, which are available on the SEC’s website at www.sec.gov.
Taxation as a Regulated Investment Company
We have elected, and intend to qualify annually, to be treated as a RIC for U.S. federal income tax purposes under Subchapter M of the Code. As a RIC, we generally will not be subject to U.S. federal income tax on any net ordinary income or capital gains that we timely distribute to our shareholders as dividends. Rather, dividends distributed by us generally will be taxable to our shareholders, and any net operating losses, foreign tax credits and other tax attributes of ours generally will not pass through to our shareholders, subject to certain exceptions and special rules for certain items such as net capital gains and qualified dividend income recognized by us.
To qualify as a RIC, we must, among other things, meet certain source-of-income and asset diversification requirements (as described below). In addition, to be eligible to be taxed as a RIC, we must timely distribute to our shareholders, for each taxable year, at least 90.0% of our “investment company taxable income,” which is generally our net ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses (the “Annual Distribution Requirement”). The following discussion assumes that we qualify as a RIC and have satisfied the Annual Distribution Requirement.
If the Company:
•qualifies as a RIC; and
•satisfies the Annual Distribution Requirement,
then we will not be subject to U.S. federal income tax on the portion of our income that is timely distributed (or is deemed to be timely distributed) to our shareholders. If we fail to qualify as a RIC, we will be subject to U.S. federal income tax at regular corporate rates on our income and capital gains not distributed (or deemed distributed) to our shareholders.
We will be subject to a 4.0% nondeductible U.S. federal excise tax on certain undistributed income unless we distribute in a timely manner each calendar year an amount at least equal to the sum of (1) 98.0% of our net ordinary income for each 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 ordinary income and net capital gain that we recognized in preceding years, but were not distributed during such years and on which we did not pay U.S. federal income tax (the “Excise Tax Avoidance Requirement”). While we intend to make distributions to our shareholders in each taxable year that will be sufficient to avoid any U.S. federal excise tax on our earnings, there can be no assurance that we will be successful in entirely avoiding this tax.
In order to qualify as a RIC for U.S. federal income tax purposes, we must, among other things:
•continue to qualify as a BDC under the 1940 Act at all times during each taxable year;
•derive in each taxable year at least 90.0% of gross income from dividends, interest, payments with respect to loans of certain securities, gains from the sale or other taxable disposition of stock or other securities or foreign currencies, net income from certain “qualified publicly traded partnerships,” or other income derived with respect to the business of investing in such stock or securities (the “90% Income Test”); and
•diversify our holdings so that at the end of each quarter of the taxable year:
oat least 50.0% of the value of its assets consists of cash, cash equivalents, U.S. government securities, securities of other RICs, and other securities if such other securities of any one issuer do not represent more than 5.0% of the value of its assets or more than 10.0% of the outstanding voting securities of the issuer; and
ono more than 25.0% of the value of its assets is invested in (i) the securities, other than U.S. government securities or securities of other RICs, of one issuer, (ii) securities, other than 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” (the “Diversification Tests”).
For U.S. federal income tax purposes, the Company may be required to include in our taxable income certain amounts that we have not yet received in cash. For example, if the Company holds debt obligations that are treated under applicable tax rules as having original issue discount (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or issued with warrants), it must include in its taxable income in each year the portion of the original issue discount that accrues over the life of the obligation, regardless of whether cash representing such income is received by the Company in the same taxable year. The Company may also have to include in its taxable income other amounts that it has not yet received in cash, such as accruals on a contingent payment debt instrument 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. Because original issue discount or other amounts accrued will be included in the Company’s investment company taxable income for the year of accrual and before the Company receives any corresponding cash payments, it may be required to make a distribution to shareholders in order to satisfy the Annual Distribution Requirement, even though it would not have received any corresponding cash payment.
Accordingly, to enable us to satisfy the Annual Distribution Requirement, 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). If we are unable to obtain cash from other sources to enable us to satisfy 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 U.S. federal income tax at corporate rates (and any applicable state and local taxes).
We may be prevented by financial covenants contained in our debt financing agreements, if any, from making distributions to our Shareholders. In addition, under the 1940 Act, we are generally not permitted to make distributions to our Shareholders while our debt obligations and other senior securities are outstanding unless certain ‘‘asset coverage’’ tests are met. Limits on distributions to our Shareholders may prevent us from satisfying the Annual Distribution Requirement and, therefore, may jeopardize our qualification for taxation as a RIC or subject us to the 4.0% U.S. federal excise tax.
Although the Company does not presently expect to do so, we may borrow funds and sell assets in order to make distributions to our shareholders that are sufficient for us to satisfy the Annual Distribution Requirement. However, the Company’s ability to dispose of assets may be limited by (i) the illiquid nature of its portfolio and/or (ii) other requirements relating to its status as a RIC, including the Diversification Tests. If the Company disposes of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, it may make such dispositions at times that, from an investment standpoint, are not advantageous. If the Company is unable to obtain cash from other sources to satisfy the Annual Distribution Requirement, it may fail to qualify for tax treatment as a RIC and become subject to tax as an ordinary corporation.
Certain of the Company’s investment practices may be subject to special and complex U.S. federal income tax provisions that may, among other things: (i) disallow, suspend or otherwise limit the allowance of certain losses or deductions; (ii) convert lower taxed long-term capital gain into higher taxed short-term capital gain or ordinary income; (iii) convert an ordinary loss or a deduction into a capital loss (the deductibility of which is more limited); (iv) cause the Company to recognize income or gain without a corresponding receipt of cash; (v) adversely affect the time as to when a purchase or sale of securities is deemed to occur; (vi) adversely alter the characterization of certain complex financial transactions; and (vii) produce income that will not be qualifying income for purposes of the 90% Income Test described above. The Company will monitor its transactions and may make certain tax decisions in order to mitigate the potential adverse effect of these provisions.
A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus the excess of net short-term capital gains over net long-term capital losses). If Company expenses in a given year exceed investment company taxable income, the Company would experience a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years. In addition, expenses can be used only to offset investment company taxable income, not net capital gain. Due to these limits on the deductibility of expenses, the Company may, for tax purposes, have aggregate taxable income for several years that it is required to distribute and that is taxable to shareholders even if such income is greater than the aggregate net income it actually earned during those years. Such required distributions may be made from cash assets or by liquidation of investments, if necessary. The Company may realize gains or losses from such liquidations. In the event the Company realizes net capital gains from such transactions, a shareholder may receive a larger capital gain distribution than it would have received in the absence of such transactions.
Failure to Qualify as a RIC
If we fail to qualify for treatment as a RIC, we will be subject to U.S. federal income tax on all of our taxable income at regular corporate rates (and also will be subject to any applicable state and local taxes), regardless of whether we make any distributions to our shareholders. If we have qualified as RIC and then we subsequently fail to satisfy the 90% Income Test or the Diversification Tests for any taxable year or quarter of such taxable year, we may nevertheless continue to qualify as a RIC for such year if certain relief provisions of the Code apply (which may, among other things, require us to pay certain U.S. federal income taxes at corporate rates or to dispose of certain assets). If we fail to qualify for treatment as a RIC and such relief provisions do not apply to us, we will be subject to U.S. federal income tax on all of our taxable income at regular corporate rates (and also will be subject to any applicable state and local taxes), regardless of whether we make any distributions to our shareholders. In any taxable year that we do not qualify as a RIC, distributions would not be required and, if distributions were made, any such distributions would be taxable to our shareholders as ordinary dividend income to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, any such distributions would be eligible for the 20.0% maximum rate applicable to non-corporate taxpayers, and corporate distributees would be eligible for the dividends-received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the shareholder’s adjusted tax basis, and any remaining distributions would be treated as a capital gain. The term “return of capital” merely means distributions in excess of our earnings and as such may constitute a return on an investor's individual investments and does not mean a return on capital.
Subject to a limited exception applicable to RICs that qualified as such under Subchapter M of the Code for at least one year prior to disqualification and that requalify as a RIC no later than the second year following the non-qualifying year, we could be subject to tax on any unrealized net built-in gains in the assets held by us during the period in which we failed to qualify as a RIC that are recognized during the five-year period after our requalification as a RIC, unless we made a special election to pay U.S. federal income tax at corporate rates on such built-in gain at the time of our qualification or requalification as a RIC.

---

ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Investing in our common stock involves significant risks. An investor should consider, among other factors, the risk factors set forth below, which are subject to (or, if applicable, modified by) the requirements and obligations described in the Subscription Agreement before making a decision to purchase our common stock. Additional risks and uncertainties not presently known to us or not presently deemed material by us may also impair our operations and performance. If any of the following events occur, our business, financial condition, results of operations and cash flows could be materially and adversely affected.
Summary of Principal Risk Factors
The following is a summary of the principal risks that you should carefully consider before investing in our securities.
We are subject to risks related to our business and structure, including, but not limited to, the following:
•Our ability to achieve our investment objective depends on our Adviser’s ability to manage and support our investment process. If our Adviser were to lose a significant number of its key professionals, or terminate the Investment Advisory Agreement, our ability to achieve our investment objective could be significantly harmed.
•We borrow money, which magnifies the potential for gain or loss and may increase the risk of investing in us.
•Defaults under our current borrowings or any future borrowing facility or notes may adversely affect our business, financial condition, results of operations and cash flows.
•We are exposed to risks associated with changes in interest rates, including the current rising interest rate environment.
•The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
•Regulations governing our ownership of loans, as well as uncertainty surrounding such regulation, may affect our ability to invest efficiently, which could negatively impact our business and results of operations.
•We are subject to risks related to corporate social responsibility.
•We are subject to litigation risk associated with our business operations.
We are subject to risks related to an investment in our Shares, including, but not limited to, the following:
•A shareholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.
•Certain provisions of our charter and actions of our Board could deter takeover attempts and have an adverse impact on the value of shares of our common stock.
•Investing in our securities involves a high degree of risk.
We are subject to risks related to our investments, including, but not limited to, the following:
•Our investments in portfolio companies may be risky, and we could lose all or part of our investments.
•Our investment portfolio is recorded at fair value as determined in good faith by the Adviser, as the valuation designee, subject to the continued oversight of the Board and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
•A lack of liquidity in our investments may adversely affect us.
•Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
•Defaults by our portfolio companies could jeopardize a portfolio company’s ability to meet its obligations under the debt or equity investments that we hold, which could harm our operating results.
•We generally will not control the business operations of our portfolio companies and, due to the illiquid nature of our holdings in our portfolio companies, we may not be able to dispose of our interest in our portfolio companies.
•International investments create additional risks.
•Our portfolio may be focused on a limited number of portfolio companies or industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
We are subject to risks related to the economy, including, but not limited to, the following:
•Economic recessions or downturns could impair our portfolio companies and harm our operating results.
We are subject to risks related to our Adviser and its affiliates, including, but not limited to, the following:
•The Adviser and its affiliates may face conflicts of interest, which could result in increased risk-taking by us.
•Our fee structure may create incentives for our Adviser to make speculative investments or use substantial leverage.
•We may compete for capital and investment opportunities with other entities managed by our Adviser or its affiliates, subjecting our Adviser to certain conflicts of interest.
•Because our business model depends to a significant extent upon our Adviser’s relationships with corporations, financial institutions and investment firms, the inability of our Adviser to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
•We may be obligated to pay our Adviser incentive fees even if we incur a net loss due to a decline in the value of our portfolio and even if our earned interest income is not payable in cash.
•Our ability to enter into transactions with our affiliates is restricted.
We are subject to risks related to U.S. federal income tax including, but not limited to, the following:
•We will be subject to corporate-level U.S. federal income tax if we are unable to maintain qualification as a RIC under Subchapter M of the Code.
•We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.
Risks Related to Our Business and Structure
Our ability to achieve our investment objective depends on our Adviser’s ability to manage and support our investment process. If our Adviser were to lose a significant number of its key professionals, fail to attract or retain talent, or terminate the Investment Advisory Agreement, our ability to achieve our investment objective could be significantly harmed.
We do not have any employees, and we have no internal management capacity other than our appointed executive officers. Accordingly, we are dependent upon the investment expertise, skill and network of business contacts of our Adviser to actively manage our investment portfolio and to achieve our investment objective. Our Adviser will evaluate, negotiate, execute, monitor, and service our investments. Our success will depend to a significant extent on the continued service and coordination of our Adviser, including its key professionals, to identify, analyze, invest in, finance, and monitor companies that meet our investment criteria. Our Adviser’s capabilities in structuring the investment process, and providing competent, attentive and efficient services to us depend on the involvement of investment professionals of adequate number and sophistication to match the corresponding flow of transactions. To achieve our investment objective, our Adviser may need to retain, hire, train, supervise, and manage new investment professionals to participate in our investment selection and monitoring process. Our Adviser may not be able to find qualified investment professionals in a timely manner or at all. Any failure to do so could have a material adverse effect on our business, financial condition and results of operations. The departure of a significant number of key professionals from our Adviser could have a material adverse effect on our ability to achieve our investment objective.
In addition to the above dependencies, the Adviser’s investment professionals are actively involved in managing the investment decisions of other funds, as well as investment decisions of other clients of MSD. Accordingly, these investment professionals will have demands on their time for the investment, monitoring and other functions of other funds and other clients advised by the Adviser. See “Risks Related to our Adviser and its Affiliates -- We may compete for capital and investment opportunities with other entities managed by our Adviser or its affiliates, subjecting our Adviser to certain conflicts of interest.” There can be no assurance that the Adviser’s investment professionals will continue to be associated with the Adviser throughout the Company’s life, and the failure to attract or retain such investment professionals could have a material adverse effect on us and our Shareholders, including, for example, by limiting the Adviser’s ability to pursue particular investment strategies discussed herein. Competition in the financial services industry for qualified employees is intense, and there is no guarantee that the talents of the Adviser’s investment professionals could be replaced. Our continued ability to effectively manage our portfolio depends on the Adviser’s ability to attract new employees and to retain and motivate its existing employees.
We rely on a substantial number of personnel of BDT & MSD, counterparties and other service providers. Accordingly, risks associated with errors of such personnel are inherent in our business and operations. Further, misconduct by such personnel could cause significant losses. MSD employee misconduct may include binding us to transactions that exceed authorized limits or present unacceptable risks and unauthorized trading activities or concealing unsuccessful trading activities (which, in either case, may result in unknown and unmanaged risks or losses). Losses could also result from misconduct by such personnel, including, without limitation, failing to recognize trades and misappropriating assets. In addition, such personnel may improperly use or disclose confidential information. Any misconduct by such personnel could result in litigation or serious financial harm to us, including limiting our business prospects or our future marketing activities. Although the Adviser and its affiliates will adopt measures to prevent and detect employee misconduct and to transact with reliable counterparties and third party providers, such measures may not be effective in all cases.
Finally, the Investment Advisory Agreement has a termination provision that allows the agreement to be terminated by the vote of a majority of our Board, or by a majority of the holders of our outstanding voting securities, on 60 days’ notice, without penalty. Furthermore, the Investment Advisory Agreement automatically terminates in the event of its assignment, as defined in the 1940 Act, by the Adviser. If the Adviser resigns or is terminated, or if we do not obtain the requisite approvals of shareholders and our Board to approve an agreement with the Adviser after an assignment, we may not be able to find a new investment adviser or hire internal management with similar expertise and ability to provide the same or equivalent services on acceptable terms prior to the termination of the Investment Advisory Agreement, or at all. If we are unable to do so quickly, our operations are likely to experience a disruption and costs under any new agreements that we enter into could increase. Our financial condition, business and results of operations, as well as our ability to meet our payment obligations under our indebtedness and pay distributions, are likely to be adversely affected, and the value of our common stock may decline.
We borrow money, which magnifies the potential for gain or loss and may increase the risk of investing in us.
The use of leverage magnifies the potential for gain or loss on amounts invested. The use of leverage is generally considered a speculative investment technique and increases the risks associated with investing in our securities. However, we have in the future intend to borrow from, and may in the future issue debt securities to, banks, insurance companies and other lenders. Lenders of these funds will have fixed dollar claims on our assets that are superior to the claims of common Shareholders, and we would expect such lenders to seek recovery against its assets in the event of a default. We may pledge up to 100% of our assets and may grant a security interest in all of our assets under the terms of any debt instruments we may enter into with lenders. In addition, under the terms of a Credit Facility and any borrowing facility or other debt instrument that we may enter into, we are likely to be required to use the net proceeds of any investments that we sell to repay a portion of the amount borrowed under such facility or instrument before applying such net proceeds to any other uses. If the value of our assets decreases, leveraging would cause NAV to decline more sharply than it otherwise would have had we not leveraged, thereby magnifying losses or eliminating our stake in a leveraged investment. Similarly, any decrease in our revenue or income will cause our net income to decline more sharply than it would have had we not borrowed. Such a decline would also negatively affect our ability to make dividend payments on its common stock or preferred stock. Our ability to service any debt will depend largely on its financial performance and will be subject to prevailing economic conditions and competitive pressures.
We are required to meet a coverage ratio of total assets to total borrowings and other senior securities of at least 150%. As a BDC, we are generally required to meet a coverage ratio of total assets to total borrowings and other senior securities, which include all of our borrowings and any preferred stock that it may issue in the future, of at least 200%. If this ratio declines below 150%, we will not be able to incur additional debt and could be required to sell a portion of our investments to repay some debt when it is otherwise disadvantageous to do so. This could have a material adverse effect on our operations, and we may not be able to make distributions. The amount of leverage that we employ will depend on the Adviser’s and the Board’s assessment of the market and other factors at the time of any proposed borrowing. We cannot ensure that we will be able to obtain credit at all or on terms acceptable to us.
Finally, a Credit Facility will, and any future debt facilities may, impose financial and operating covenants that restrict our business activities, including limitations that hinder our ability to finance additional loans and investments or to make the distributions required to maintain our qualification as a RIC under the Code.
Defaults under our current borrowings or any future borrowing facility or notes may adversely affect our business, financial condition, results of operations and cash flows.
The Company has entered into multiple Credit Facilities, including through SPV I, the Company’s wholly-owned subsidiary, which entered into a senior secured revolving credit facility with Deutsche Bank AG, New York Branch (the “SPV I Facility”); through SPV II, the Company’s wholly-owned subsidiary, which entered into a loan and security agreement with Citizens Bank N.A as lender and administrative agent, the Company as collateral manager, the other lenders party thereto, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian (the “SPV II Facility”); a senior secured revolving credit facility with JPMorgan Chase Bank, N.A. (the “Revolving Credit Facility”); through Repurchase Obligations with Macquarie Bank Limited (the “Repurchase Obligation”); a term debt securitization (the “2023 Debt Securitization”); and through Unsecured Notes, inclusive of Series A, Series B, Series C, Series D, Series E, Series F and Series G notes (“Notes“). The closing of a Credit Facility is contingent on a number of conditions including, without limitation, the negotiation and execution of definitive documents relating to such Credit Facility. The Company intends to use borrowings under each Credit Facility to make additional investments, repay outstanding indebtedness, and for other general corporate purposes. There can be no assurance that the Company will be able to close any additional Credit Facilities or obtain other financing in the future.
In the event the Company defaults under a Credit Facility or any other future borrowing facility, the Company’s business could be adversely affected as the Company may be forced to sell a portion of its investments quickly and prematurely at what may be disadvantageous prices in order to meet outstanding payment obligations and/or support working capital requirements under such Credit Facility or such future borrowing facility, any of which would have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows. In addition, following any such default, the agent for the lenders under the relevant Credit Facility or such future borrowing facility could assume control of the disposition of any or all of the Company’s assets, including the selection of such assets to be disposed and the timing of such disposition, which would have a material adverse effect on the Company’s business, financial condition, results of operations and cash flows. As part of certain Credit Facilities, the right to make capital calls of Shareholders may be pledged as collateral to the lender, which will be able to call for capital contributions upon the occurrence of an event of default under such Credit Facility. To the extent such an event of default does occur, Shareholders could therefore be required to fund any shortfall up to their remaining capital commitments, without regard to the underlying value of their investment.
We are subject to risks associated with the 2023 Debt Securitization.
As a result of our debt securitization, including the 2023 Debt Securitization, we are subject to a variety of risks, including those set forth below. We use the term “debt securitization” to describe a form of secured borrowing under which an operating company (sometimes referred to as an “originator” or “sponsor”) acquires or originates loans or other assets that earn income, whether on a one-time or recurring basis (collectively, “income producing assets”), and borrows money on a non-recourse basis against a legally separate pool of loans or other income producing assets. In a typical debt securitization, the originator transfers the loans or income producing assets to a single-purpose, bankruptcy-remote subsidiary (also referred to as a “special purpose entity”), which is established solely for the purpose of holding loans and income producing assets and issuing debt secured by these income producing assets. The special purpose entity completes the borrowing through the issuance of notes secured by the loans or other assets. The special purpose entity may issue the notes in the capital markets to a variety of investors, including banks, non-bank financial institutions and other investors. In our debt securitization, institutional investors purchase certain notes issued by our indirect, wholly-owned subsidiary, in private placements. Pursuant to a collateral management agreement governing our debt securitization, we may incur liability as the collateral manager to our indirect, wholly-owned subsidiary. Additionally, as collateral manager to our indirect, wholly-owned subsidiary, we manage multiple tranches of debt associated with the debt securitization. We also hold equity in the debt securitization, and this first loss position may create a more concentrated risk of loss compared to our overall portfolio.
Refinancing Risk
We cannot assure you that the Company’s business will generate sufficient cash flow from operations or that future borrowings will be available to the Company under existing Credit Facilities or otherwise in an amount sufficient to enable the Company to pay its indebtedness or to fund other liquidity needs. We may need to refinance all or a portion of the Company’s indebtedness on or before it matures, including the Credit Facilities. However, we cannot assure shareholders that the Company will be able to refinance any of its indebtedness on commercially reasonable terms or at all. If we cannot service the Company’s indebtedness, we may have to take actions such as selling assets or seeking additional equity. We cannot assure shareholders that any such actions, if necessary, could be effected on commercially reasonable terms or at all, or on terms that would not be disadvantageous to our shareholders or on terms that would not require us to breach the terms and conditions of the Company’s existing or future debt agreements.
The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
As a BDC, we may not acquire any assets other than “qualifying assets” unless, at the time of and after giving effect to such acquisition, at least 70% of our total assets are qualifying assets. We believe that most of the investments that we may acquire in the future will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we do not invest a sufficient portion of our assets in qualifying assets, we could violate the 1940 Act provisions applicable to BDCs. As a result of such violation, specific rules under the 1940 Act could prevent us, for example, from making follow-on investments in existing portfolio companies which could result in the dilution of our position or could require us to dispose of investments at inappropriate times in order to come into compliance with the 1940 Act. If we need to dispose of investments quickly, it could be difficult to dispose of such investments on favorable terms. We may not be able to find a buyer for such investments and, even if we do find a buyer, we may have to sell the investments at a substantial loss. Any such outcomes would have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Regulations governing our operation as a BDC and RIC affect our ability to raise capital and the way in which we raise additional capital or borrow for investment purposes, which may have a negative effect on our growth. As a BDC, the necessity of raising additional capital may expose us to risks, including risks associated with leverage.
The Company will not generally be able to issue and sell its Common Stock at a price below its then-current net asset value per share. Pursuant to Section 23 of the 1940 Act, the Company is required to determine the net asset value of its shares within 48 hours prior to the sale of its shares. The Company may, however, sell Common Stock, or warrants, options or rights to acquire the Company’s Common Stock, at a price below the then-current net asset value per share of the Company’s Common Stock if the Board determines that such sale is in the Company’s best interests, and if Shareholders approve such sale. In any such case, the price at which the Company’s securities are to be issued and sold may not be less than a price that, in the determination of the Valuation Designee (as defined below), closely approximates the fair value of such securities (less any distributing commission or discount). If the Company raises additional funds by issuing Common Stock or senior securities convertible into, or exchangeable for, its Common Stock, then the percentage ownership of Shareholders at that time will decrease, and Shareholders may experience dilution.
The credit markets are volatile and the availability of, and commercially reasonable terms associated with, indebtedness may be difficult to ascertain. Because of this, there can be no assurance that the Company will be able to obtain indebtedness or that indebtedness will be accessible by the Company at any time. If indebtedness is available to the Company, there can be no assurance that such indebtedness will be on terms favorable to the Company and/or terms comparable to terms obtained by competitors, including with respect to interest rates. The terms of any indebtedness are expected to vary based on the counterparty, timing, size, market interest rates, other fees and costs, duration, advance rates, eligible investments, ability to borrow in currencies other than the U.S. dollar and Investor creditworthiness and composition. Moreover, market conditions or other factors may cause or permit the amount of leverage employed by the Company to fluctuate over their life. Furthermore, the Company may seek to obtain indebtedness on an investment-by-investment basis and leverage may not be available or may be available on less desirable terms in connection with particular investments.
Regulations governing our ownership of loans, as well as uncertainty surrounding such regulation, may affect our ability to invest efficiently, which could negatively impact our business and results of operations.
Certain state laws, public policy and general principles of equity relating to the protection of consumers, unfair and deceptive practices and debt collection practices may apply to the servicing and collection of principal and/or interest on the loans owned by or otherwise underlying the Company’s investments.
The loans may also be subject to U.S. federal laws, including:
•the U.S. federal Truth-in-Lending Act and Regulation Z promulgated thereunder, which require certain disclosures to the borrowers regarding the terms of loans;
•the Equal Credit Opportunity Act and Regulation B promulgated thereunder, which prohibit discrimination on the basis of age, race, color, sex, religion, marital status, national origin, receipt of public assistance or the exercise of any right under the Consumer Credit Protection Act, in the extension of credit; and
•the Fair Credit Reporting Act, which regulates the use and reporting of information related to the borrower’s credit experience.
Violations of certain provisions of these U.S. federal laws may limit the ability of the applicable loan servicer to collect all or part of the principal of or interest on the loans. In addition, violations of certain provisions of these U.S. federal laws could subject the Company to damages and administrative enforcement and could result in the borrowers rescinding such loans against either the Company or subsequent holders of such loans.
Owning loans involves the collection of numerous accounts and compliance with various U.S. federal, state and local laws that regulate consumer lending. Owners of loans and servicers may be subject from time to time to various types of claims, legal actions (including class action lawsuits), investigations, subpoenas and inquiries in the course of their business. It is impossible to predict the outcome of any particular actions, investigations or inquiries or the resulting legal and financial liability. If any such proceeding were determined adversely to the Company or any of its affiliates or any other servicer and were to have a material adverse effect on its financial condition, the ability of such servicer to service the loans could be impaired.
The Company may purchase loans that either are subject to regulatory scrutiny or are so new that no clear legal guidelines have been established with respect to the regulation and compliance of such businesses with existing laws, rules and regulations. Therefore, there will be little or no legal authority or precedent governing the practices of the sellers of those loans or, in fact, of the status of those loans. While the Adviser believes that each loan purchased by the Company will be in compliance with applicable laws, rules and regulations, in many cases it might not be possible for the Company to be certain that this is the case or that the loans otherwise will not be subject to regulatory or civil challenge. Moreover, although the Adviser will seek to ensure that borrowers operate their businesses in accordance with applicable law, there can be no assurance that each such business will continue to be so operated or that the law will remain constant or that government regulators or civil litigants will not challenge the legality of the business operations of the borrowers subject to the loans purchased by the Company.
We are subject to risks related to corporate social responsibility.
Our business faces increasing public scrutiny related to environmental, social and governance (“ESG”) activities. ESG issues, including those related to climate change and sustainability, may have an adverse effect on our business, financial condition and results of operations and damage our reputation. Companies across all industries are facing increasing scrutiny relating to their ESG policies. Investor advocacy groups, certain institutional investors, investment funds, lenders, regulators, and other market participants are increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. The increased focus and activism related to ESG and similar matters may hinder access to capital, as investors and lenders may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Companies which do not adapt to or comply with investor, lender or other industry shareholder expectations and standards, which are evolving, or which are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, may suffer from reputational damage and the business, financial condition, and/or stock price of such a company could be materially and adversely affected.
We may face increasing pressures from investors, lenders and other market participants, who are increasingly focused on climate change, to prioritize sustainable energy practices, reduce our carbon footprint and promote sustainability. As a result, we may be required to implement more stringent ESG procedures or standards so that our existing and future investors and lenders remain invested in us and make further investments in us. If we do not meet these standards, our business and/or our ability to access capital could be harmed.
Additionally, certain investors and lenders may exclude companies, such as us, from their investing portfolios altogether due to ESG factors. These limitations in both the debt and equity capital markets may affect our ability to grow as our plans for growth may include accessing the equity and debt capital markets. If those markets are unavailable, or if we are unable to access alternative means of financing on acceptable terms, or at all, we may be unable to implement our business strategy, which would have a material adverse effect on our financial condition and results of operations and impair our ability to service our then indebtedness. Further, it is likely that we will incur additional costs and require additional resources to monitor, report and comply with any actual or proposed regulations. The occurrence of any of the foregoing could have a material adverse effect on our business and financial condition. We risk damage to our brand and reputation if we fail to act responsibly in a number of areas, such as environmental stewardship, corporate governance and transparency and considering ESG factors in our investment processes. Adverse incidents with respect to ESG activities could impact the value of our brand, the cost of our operations and relationships with investors, all of which could adversely affect our business and results of operations. Additionally, new regulatory initiatives related to ESG could adversely affect our business.
We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
Our competitors include both existing and newly formed equity and debt focused public and private funds, other BDCs, investment banks, venture-oriented commercial banks, commercial financing companies and, to the extent they provide an alternative form of financing, private equity and hedge funds. Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than us. For example, some competitors may have a lower cost of capital and access to funding sources (including deposits) that are not available to us. In addition, some of our competitors may have higher risk tolerances or different risk assessments than we have. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC or to the distribution and other requirements we must satisfy to maintain our ability to be subject to tax treatment as a RIC. These characteristics could allow our competitors to consider a wider variety of investments, establish more relationships and offer better pricing and more flexible structuring than we are able to offer.
The competitive pressures we face may have a material adverse effect on our financial condition, results of operations and cash flows. We believe that some competitors may make loans with rates that are comparable or lower than our rates. We may lose some investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may experience decreased net interest income, lower yields and increased risk of credit loss. As a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we may not be able to identify and make investments that are consistent with our investment objective.
In addition, we believe a significant part of our competitive advantage stems from the fact that the market for investments in small, fast-growing, private companies is underserved by traditional commercial banks and other financing sources. A significant increase in the number and/or the size of our competitors in this target market could force us to accept less attractive investment terms.
New or modified laws or regulations governing our operations could adversely affect our business.
We and our portfolio companies are subject to regulation by laws at the U.S. federal, state and local levels. These laws and regulations, as well as their interpretation, could change from time to time, including as the result of interpretive guidance or other directives from the U.S. President and others in the executive branch. Any new or changed laws or regulations, as well as changes in the positions, or existence, of regulatory agencies, which may lead to changes in the level of oversight in the financial service industry, could have a material adverse effect on our business, and political uncertainty could increase regulatory uncertainty in the near term. The nature, timing and economic effects of any potential changes to the current legal and regulatory framework affecting the financial service industry remains uncertain.
We are subject to litigation risk associated with our business operations.
Should we need to collect on a defaulted loan, litigation could result. There is a high cost associated with any litigation and the results of litigation are always uncertain. Even before litigation is commenced, we could experience substantial costs in trying to collect on defaulted investments, such as legal fees, collection agency fees, or discounts related to the assignment of a defaulted loan to a third party. Our investment activities may further subject us to the risks and costs of becoming involved in litigation with third parties due to, among other reasons, the fact that different investor groups may have qualitatively different, and frequently conflicting, interests with respect to certain investments. The risk of litigation with third parties will be elevated in situations where we exercise control or significant influence over an issuer’s direction, including where we own or are otherwise affiliated with a loan servicer or originator, as loan originators are routinely involved in legal proceedings concerning matters that arise in the ordinary course of their business and, on occasion, are the subject of regulatory actions by state and federal regulators. Such proceedings or actions may adversely affect such companies’ financial results. Furthermore, we may be required to pay legal fees, settlement costs, damages, penalties or other charges, any or all of which could materially adversely affect us and our investments.
We are subject to cybersecurity risks.
The Company depends on the Adviser to develop and implement appropriate systems for the Company’s activities. The Company relies extensively on computer programs and systems (and may rely on new systems and technology in the future) for various purposes including, without limitation, to trade, clear and settle securities transactions, to evaluate certain securities based on real-time trading information, to monitor its portfolio and net capital, and to generate risk management and other reports that are critical to oversight of the Company’s activities. In addition, certain of the Company’s and the Adviser’s operations interface will be dependent on systems operated by third parties, including its prime brokers, the Administrator, market counterparties and their sub-custodians and other service providers, and the Company or Adviser may not be in a position to verify the risks or reliability of such third-party systems. These programs or systems may be subject to certain defects, failures or interruptions, including, but not limited to, those caused by computer “worms”, viruses and power failures. Any such defect or failure could have a material adverse effect on the Company. For example, such failures could cause settlement of trades to fail, lead to inaccurate accounting, recording or processing of trades, and cause inaccurate reports, which may affect the Company’s ability to monitor its investment portfolio and its risks.
As part of its business, the Adviser processes, stores and transmits large amounts of electronic information, including information relating to the transactions of the Company and personally identifiable information of the Shareholders. Similarly, service providers of the Adviser, the Company, especially the Administrator, may process, store and transmit such information. The Adviser has procedures and systems in place that it believes are reasonably designed to protect such information and prevent data loss and security breaches. However, such measures cannot provide absolute security. The techniques used to obtain unauthorized access to data, disable or degrade service, or sabotage systems change frequently and may be difficult to detect for long periods of time. Hardware or software acquired from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. Network connected services provided by third parties to the Adviser may be susceptible to compromise, leading to a breach of the Adviser’s network. The Adviser’s systems or facilities may be susceptible to employee error or malfeasance, government surveillance, or other security threats. Online services provided by the Adviser to the Shareholders may also be susceptible to compromise. Breach of the Adviser’s information systems may cause information relating to the transactions of the Company and personally identifiable information of the Shareholders to be lost or improperly accessed, used or disclosed.
The service providers of the Adviser, and the Company, are subject to the same electronic information security threats as the Adviser. If a service provider fails to adopt or adhere to adequate data security policies, or in the event of a breach of its networks, information relating to the transactions of the Company and personally identifiable information of the Shareholders may be lost or improperly accessed, used or disclosed.
The loss or improper access, use or disclosure of the Adviser’s or the Company’s proprietary information may cause the Adviser or the Company to suffer, among other things, financial loss, the disruption of their business, liability to third parties, regulatory intervention or reputational damage. Any of the foregoing events could have a material adverse effect on the Company and in turn the Company and the Shareholders’ investments therein.
Technological innovations and industry disruptions, including those related to artificial intelligence and machine learning, may negatively impact us.
There continues to be significant evolution and developments in the use of artificial intelligence (“AI”) technologies, such as ChatGPT. We cannot fully determine the impact or cybersecurity risk of such evolving technology to our business at this time. We may incorporate, directly or through third-party vendors, the use of AI into our business and operations, and anticipate that usage and adoption of AI in the marketplace will continue to grow. As with many disruptive innovations, AI presents risks and challenges that could affect its accuracy adoption and therefore our business. While we intend the use of any AI to make processes more efficient, AI models may not achieve sufficient levels of accuracy. AI algorithms may be flawed, the datasets on which such algorithms are trained may be insufficient, raise privacy concerns or contain biased information, which could undermine the decisions, predictions or analysis of AI applications produce, subjecting us to competitive harm, legal liability, and brand or reputational harm. A number of jurisdictions have passed laws and implemented regulations, or are considering the same, related to the use of AI and affecting AI companies, which could limit or adversely affect our business. Further, we may not be able to control how third-party AI technologies that we choose to use are developed or maintained, or how data we input is used or disclosed, even where we have sought contractual protections with respect to these matters. The misuse or misappropriation of our data could have an adverse impact on our reputation and could subject us to legal and regulatory investigations and/or actions.
The majority of the Company’s shares are held and controlled by one entity.
While shares of the Company are held by a number of entities, a substantial percentage of shares are held and controlled by entities with the same ultimate beneficial owner. As a result, the voting power of the Company is highly concentrated. Unless and until the Company’s share ownership becomes more diversified, any matters brought before the Company’s shareholders will likely be controlled by the vote of the controlling entities. To the extent an individual shareholder’s interests differ from those of the controlling entities with respect to any matter brought before the shareholders for a vote, such shareholder’s vote will likely not be sufficient to change the outcome of the vote.
Risks Related to an Investment in Our Shares
A shareholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.
Our shareholders do not have preemptive rights to purchase any shares we issue in the future. Our charter authorizes us to issue up to 100 million shares of common stock. Pursuant to our charter, a majority of our entire Board may amend our charter to increase the number of shares of common stock we may issue without shareholder approval. Our Board may elect to sell additional shares in the future or issue equity interests in private offerings. To the extent we issue additional equity interests at or below net asset value, your percentage ownership interest in us may be diluted. In addition, depending upon the terms and pricing of any additional offerings and the value of our investments, you may also experience dilution in the book value and fair value of your shares.
Under the 1940 Act, we generally are prohibited from issuing or selling our common stock at a price below then-current net asset value per share, which may be a disadvantage as compared with other companies. We may, however, sell our common stock, or warrants, options, or rights to acquire our common stock, at a price below the then-current current net asset value of our common stock if our Board and independent directors determine that such sale is in our best interests and the best interests of our shareholders, and our shareholders, including a majority of those shareholders that are not affiliated with us, approve such sale. In any such case, the price at which our securities are to be issued and sold may not be less than a price that, in the determination of our Board, closely approximates the fair value of such securities (less any distributing commission or discount). If we raise additional funds by issuing common stock or senior securities convertible into, or exchangeable for, our common stock, then the percentage ownership of our shareholders at that time will decrease and you will experience dilution.
Certain provisions of our charter and actions of our Board could deter takeover attempts and have an adverse impact on the value of shares of our common stock.
Our charter, as well as certain statutory and regulatory requirements, contain certain provisions that may have the effect of discouraging a third party from attempting to acquire us. Our Board is divided into three classes of directors serving staggered three-year terms, which could prevent shareholders from removing a majority of directors in any given election. Our Board may, without shareholder action, authorize the issuance of shares in one or more classes or series, including shares of preferred stock; and our Board may, without shareholder action, amend our charter to increase the number of shares of our common stock, of any class or series, that we will have authority to issue. These anti-takeover provisions may inhibit a change of control in circumstances that could give the holders of shares of our common stock the opportunity to realize a premium over the value of shares of our common stock.
Investing in our securities involves a high 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, including volatility or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive and, therefore, an investment in our common stock may not be suitable for someone with lower risk tolerance.
Risks Related to Our Preferred Stock
The issuance of preferred stock, such as the Series A Preferred Stock, with dividend or conversion rights, liquidation preferences or other economic terms favorable to the holders of preferred stock could make an investment in shares of Common Stock less attractive. In addition, the dividends on any preferred stock we issue must be cumulative. Payment of dividends and repayment of the liquidation preference of preferred stock must take preference over any distributions or other payments to holders of Common Stock, and holders of preferred stock 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 stock that converts into shares of Common Stock). In addition, under the 1940 Act, preferred stock constitutes a “senior security” for purposes of the 150% asset coverage test.
Risks Related to Our Investments
Our investments in portfolio companies may be risky, and we could lose all or part of our investments.
All investments risk the loss of capital. No guarantee or representation is made that an investment in the Company will be successful. The Company’s investment program will involve, without limitation, risks associated with limited diversification, use of leverage, credit deterioration and default risks, systems risks and other risks inherent in the Company’s activities. Certain investment techniques of the Company can, in certain circumstances, substantially increase the impact of adverse market movements to which the Company may be subject. In addition, the Company’s investments may be materially affected by conditions in the financial markets and overall economic conditions occurring globally and in particular countries or markets where the Company invests its assets.
The Company’s methods of minimizing such risks may not accurately predict future risk exposures. Risk management techniques are based in part on the observation of historical market behavior, which may not predict market divergences that are larger than historical indicators. Also, information used to manage risks may not be accurate, complete or current, and such information may be misinterpreted.
Our strategy focuses primarily on originating and making loans to, and making debt and equity investments in, U.S. middle market companies, with a focus on originated transactions sourced through the networks of our Adviser. Short transaction closing timeframes associated with originated transactions coupled with added tax or accounting structuring complexity and international transactions may result in higher risk in comparison to non-originated transactions.
Most debt securities in which we intend to invest will not be rated by any rating agency and, if they were rated, they would be rated as below investment grade quality and are commonly referred to as “high yield” or “junk.” Debt securities rated below investment grade quality are generally regarded as having predominantly speculative characteristics and may carry a greater risk with respect to a borrower’s capacity to pay interest and repay principal. In addition, some of the loans in which we may invest may be “covenant-lite” loans. We use the term “covenant-lite” loans to refer generally to loans that do not have a complete set of financial maintenance covenants. Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition. 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.
Our investment portfolio is recorded at fair value as determined by the Valuation Designee in accordance with procedures established by our Board and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
Many of our Portfolio Investments take the form of securities that are not publicly traded. The fair value of loans, securities and other investments that are not publicly traded may not be readily determinable and are valued at fair value as determined in good faith by the Valuation Designee, including to reflect significant events affecting the value of our investments. Most, if not all, of our investments (other than cash and cash equivalents) will be classified as Level 3 assets under Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification, Fair Value Measurement and Disclosures (“ASC 820”). This means that our portfolio valuations will be based on unobservable inputs and our assumptions about how market participants would price the asset or liability in question. Inputs into the determination of fair value of our Portfolio Investments require significant management judgment or estimation. Even if observable market data are available, such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimers materially reduces the reliability of such information. We have retained the services of one or more independent service providers to review the valuation of these loans and securities. The types of factors that may be taken into account in determining the fair value of Portfolio Investments generally include, as appropriate, comparison to publicly-traded securities including such factors as yield, maturity and measures of credit quality, the enterprise value of a portfolio company, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, and other relevant factors. Because such valuations, and particularly valuations of private securities and private companies, are inherently uncertain, may fluctuate over short periods of time, and may be based on estimates, determinations of fair value may differ materially from the values that would have been used if a ready market for these loans and securities existed. Our net asset value could be adversely affected if determinations regarding the fair value of our investments were materially higher than the values that we ultimately realize upon the disposal of such loans and securities. In addition, the method of calculating the Management Fee (and the Incentive Compensation) may result in conflicts of interest between the Adviser, on the one hand, and Shareholders on the other hand, with respect to the valuation of investments. See “Risks Related to our Adviser and its Affiliates - Our fee structure may create incentives for our Adviser to make speculative investments or use substantial leverage.”
A lack of liquidity in our investments may adversely affect us.
Certain securities or obligations held by the Company may have terms longer than the term of the Company and certain loans may have grace periods of several years. Furthermore, the Company may, in connection with collateral held by it, acquire non-marketable common or preferred equity securities and other illiquid assets with equity participation features, which, to the extent that they have value at all, will likely not have realizable value for a significant period of time. Accordingly, certain investments may need to be disposed of upon dissolution of the Company for less than their potential value.
The lack of liquidity in the Company’s investments may materially and adversely affect the Company’s value. As the Company primarily invests in loans to private companies, substantially all of their investments are less liquid than publicly traded securities and may be subject to contractual, statutory or regulatory prohibitions on disposition. While the Adviser anticipates that the Company will hold a significant portion of such investments until realization, should the Adviser determine it to be advisable to earlier dispose of any such investments, the Company may have difficulty doing so and in certain cases may only be able to sell such investments at substantial discounts to face value.
Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
Certain of our portfolio companies may be impacted 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 future unrealized losses and therefore reduce our net assets resulting from operations.
We are exposed to risks associated with changes in interest rates, including the current rising interest rate environment.
Following a period of elevated interest rates to address inflation concerns, in the third quarter of 2024, the Federal Reserve cut rates for the first time since March 2020 and, most recently, cut rates in the fourth quarter of 2024. The Federal has indicated that there may be additional rate cuts in the future; however, future reductions to benchmark rates are not certain. An increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates and also could increase our interest expense, thereby decreasing our net income. Also, an increase in interest rates available to investors could make an investment in shares of our common stock less attractive if we are not able to increase our distribution rate, which could reduce the value of our common stock. Further, rising interest rates could also adversely affect our performance if such increases cause our borrowing costs to rise at a rate in excess of the rate that our investments yield. It is possible that the Federal Reserve's tightening cycle could also result in a recession in the United States, which could have a material adverse effect on our business, results of operations and financial condition.
Defaults by our portfolio companies could jeopardize a portfolio company’s ability to meet its obligations under the debt or equity investments that we hold, which could harm our operating results.
Although the Company intends primarily to invest in loans and other debt instruments or obligations secured by collateral, the Company may be exposed to losses resulting from default and foreclosure of any such loans or interests in loans in which it has invested. Therefore, the value of underlying collateral, the creditworthiness of borrowers and the priority of liens are each of great importance in determining the value of the Company’s investments. No guarantee can be made regarding the adequacy of the protection of the Company’s security in the loans or other debt instruments in which it invests. Moreover, in the event of foreclosure, the Company or an affiliate thereof may assume direct ownership of any assets collateralizing such foreclosed loans. The liquidation proceeds upon
the sale of such assets may not satisfy the entire outstanding balance of principal and interest on such foreclosed loans, resulting in a loss to the Company. Any costs or delays involved in the effectuation of loan foreclosures or liquidation of the assets collateralizing such foreclosed loans will further reduce proceeds associated therewith and, consequently, increase possible losses to the Company. In addition, no assurances can be made that borrowers or third parties will not assert claims in connection with foreclosure proceedings or otherwise, or that such claims will not interfere with the enforcement of the Company’s rights.
Under certain circumstances, collateral securing an investment may be released without the consent of the Company. Moreover, the Company’s security interest (with respect to investments in secured debt) may be unperfected for a variety of reasons, including the failure to make required filings by lenders and, as a result, the Company may not have priority over other creditors as anticipated. First-priority lien investments made by the Company may, in certain cases, provide a first-priority lien over some, but not all, of the assets of the relevant borrower. The Company may also invest in second-lien debt, high-yield securities, marketable and nonmarketable common and preferred equity securities and other unsecured instruments each of which involves a higher degree of risk than senior first-lien secured debt, including the re-use and subsequent loss of collateral by the borrower. Furthermore, the Company’s right to payment and its security interest, if any, may be subordinated to the payment rights and security interests of senior lenders (with respect to some or all of the assets of an issuer in which the Company invests). Certain of these investments may have an interest-only payment schedule, with the principal amount remaining outstanding and at risk until the maturity of the investment. In such cases, the ability of the issuer to repay the principal in respect of the Company’s investment may be dependent upon a liquidity event or the long-term success of the company, the occurrence of which is uncertain.
In addition, issuers in which the Company invests could present a high degree of business and credit risk. Issuers in which the Company invests could deteriorate as a result of, among other factors, an adverse development in their businesses, a change in the competitive environment or the occurrence, continuation or worsening of any economic and financial market downturns and dislocations. As a result, issuers that the Company expected to be stable or improve may operate, or expect to operate, at a loss or have significant variations in operating results, may require substantial additional capital to support their operations or maintain their competitive position, or may otherwise have a weak financial condition or be experiencing financial distress.
The terms of any derivative hedging arrangements entered into by the Company may provide that related collateral given to, or received by, the Company may be pledged, lent, re-hypothecated or otherwise re-used by the collateral taker for its own purposes. If collateral received by the Company is reinvested or otherwise reused, the Company is exposed to the risk of loss on that investment. Should such a loss occur, the value of the collateral will be reduced and the Company will have less protection if the counterparty defaults. Similarly, if the counterparty reinvests or otherwise re-uses collateral received from the Company and suffers a loss as a result, it may not be in a position to return that collateral to the Company should the relevant transaction complete, be unwound or otherwise terminate and the Company is exposed to the risk of loss of the amount of collateral provided to the counterparty.
We generally will not control the business operations of our portfolio companies and, due to the illiquid nature of our holdings in our portfolio companies, we may not be able to dispose of our interest in our portfolio companies.
The Company will invest in debt instruments and equity securities of companies that it does not control. Such investments will be subject to the risk that the issuer may make business, financial or management decisions with which the Company does not agree or that the majority stakeholders or the management of the issuer may take risks or otherwise act in a manner that does not serve the Company’s interests. In addition, the Company may share control over certain investments with co-investors, which may make it more difficult for the Company to implement its investment approach or exit the investment when it otherwise would. The occurrence of any of the foregoing could have a material adverse effect on the Company and in turn the Company and the Shareholders’ investments therein.
International investments create additional risks.
The Company may invest in financial instruments of non-U.S. entities and governments. Investing in the financial instruments of entities and governments outside of the United States involves certain considerations not usually associated with investing in financial instruments of U.S. entities or the U.S. government, including political and economic considerations, such as greater risks of expropriation, nationalization, confiscatory or other taxation, imposition of withholding or other taxes on interest, dividends, capital gains or other income or gross sale or disposition proceeds, limitations on the removal of assets and general social, political and economic instability; the relatively small size of the securities markets in such countries and the low volume of trading, resulting in potential lack of liquidity and in price volatility; the evolving and unsophisticated laws and regulations applicable to the securities and financial services industries of certain countries; fluctuations in the rate of exchange between currencies and costs associated with currency conversion; and certain government policies that may restrict the Company’s investment opportunities. In addition, accounting and financial reporting standards that prevail outside of the United States generally are not as high as U.S. standards and, consequently, less information is typically available concerning companies located outside of the United States than for those located in the United States. As a result, the Company may be unable to structure its transactions to achieve the intended results or to mitigate all risks associated with such markets. It may also be difficult to enforce the Company’s rights in such markets.
The Company may, on an opportunistic basis, invest in the securities of companies in various foreign emerging markets. Investments in foreign emerging markets involve certain unique risks, including risks of volatility in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries. There is also generally less publicly available information about foreign companies than about U.S. companies, and foreign companies are subject to accounting, auditing and financial reporting standards and requirements different from those applicable to U.S. companies. The value of companies in foreign emerging markets may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency exchange laws. Companies in foreign emerging markets may be subject to heightened risks, including risks of relatively unstable governments, nationalization of businesses, restrictions on foreign ownership, prohibitions on the repatriation of assets and less protection of property rights. The economies of countries in emerging markets may be based on only a few industries, be highly vulnerable to changes in local or global trade conditions and suffer from extreme and volatile debt burdens or inflation rates. Moreover, the economies in such countries may differ unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency.
Finally, we may, on an opportunistic basis, invest in loans, secured debt or other investments that are denominated in a currency other than the U.S. dollar. In such an event, the prices of such investments will be determined with reference to currencies other than the U.S. dollar but the Company will value its securities and other assets in U.S. dollars. To the extent that the Company makes investments that are denominated in a currency other than the U.S. dollar, the Company generally expects to hedge its foreign currency exposure. However, to the extent that the Company’s foreign currency exposure is not hedged, the value of the Company’s assets will fluctuate with U.S. dollar exchange rates as well as the price changes of the Company’s investments. Among the factors that may affect currency values are trade balances, the level of short-term interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and political developments. An increase in the value of the U.S. dollar compared to the other currencies in which the Company makes its investments will reduce the effect of increases and magnify the effect of decreases in the prices of the Company’s investments in foreign markets. As a result, the Company could realize a net loss on an investment, even if there were a gain on the underlying investment before currency losses were taken into account.
Our portfolio may be focused on a limited number of portfolio companies or industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its 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 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer, excluding limitations on investments in other investment companies. To the extent that we assume large positions in the securities of a small number of issuers or industries, our net asset value 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. Unfavorable performance by a small number of Portfolio Investments could adversely affect the aggregate returns realized by Shareholders. We expect to invest in a number of Portfolio Investments, but such number may be insufficient to afford adequate diversification to mitigate the risk that an insufficient number of Portfolio Investments in which we invest may yield a return.
The Company may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. In addition, the aggregate returns the Company realizes may be significantly adversely affected if a small number of investments perform poorly or if the Company needs to write down the value of any one investment. Additionally, a downturn in any particular industry in which the Company is invested could significantly affect the Company’s aggregate returns.
Because the Company may invest significant amounts of the Company’s available capital in a single investment, any single loss may have a significant adverse impact on the Company’s capital. While the Company will generally focus on borrowers who are U.S. SMBs, the Adviser may determine whether companies meet the foregoing criteria in its sole discretion. In addition, except as may be provided by the requirement to invest at least 70% of its assets in qualifying investments and as may be necessary to qualify as a RIC, the Company is not restricted in its ability to invest in companies of any size or in any geographical location, and may from time to time or over time invest in companies of any size or in any geographical location. The Company’s performance may be adversely affected by industry or region-specific factors. Although the Adviser attempts to identify, monitor and manage significant risks, these efforts do not take all risks into account and there can be no assurance that these efforts will be effective. Many risk management techniques are based on observed historical market behavior, but future market behavior may be entirely different. Any inadequacy or failure in the Adviser’s risk management efforts could result in material losses for the Company.
Our ability to enter into transactions involving derivatives and unfunded commitment transactions may be limited
In 2020, the SEC adopted Rule 18f-4 under the 1940 Act (“Rule 18f-4”), which relates to the use of derivatives and other transactions that create future payment or delivery obligations by BDCs (and other funds that are registered investment companies). Under Rule 18f-4, BDCs that use derivatives are subject to a value-at-risk leverage limit, certain derivatives risk management program and testing requirements and requirements related to board reporting. These new requirements apply unless the BDC qualifies as a “limited derivatives user,” as defined in Rule 18f-4. A BDC that enters into reverse repurchase agreements or similar financing transactions could either (i) comply with the asset coverage requirements of Section 18, as modified by Section 61 of the 1940 Act, when engaging in reverse repurchase agreements or (ii) choose to treat such agreements as derivatives transactions under Rule 18f-4. In addition, under Rule 18f-4, 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 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. If the BDC cannot meet this requirement, it is required to treat the unfunded commitment as a derivatives transaction subject to the aforementioned requirements of Rule 18f-4. Collectively, these requirements may limit our ability to use derivatives and/or enter into certain other financial contracts. We qualify as a “limited derivatives user,” and as a result the requirements applicable to us under Rule 18f-4 may limit our ability to use derivatives and enter into certain other financial contracts. However, if we fail to qualify as a limited derivatives user and become subject to the additional requirements under Rule 18f-4, compliance with such requirements may increase cost of doing business, which could have a material adverse effect on our business, financial condition, results of operations, and cash flows.
Risks Relating to Hedging Transactions.
	We seek to hedge against interest rate and currency exchange rate fluctuations and credit risk by using structured financial instruments such as futures, options, swaps and forward contracts, subject to the requirements of the 1940 Act. Use of structured financial instruments for hedging purposes may present significant risks, including the risk of loss of the amounts invested. Defaults by the other party to a hedging transaction can result in losses in the hedging transaction. Hedging activities also involve the risk of an imperfect correlation between the hedging instrument and the asset being hedged, which could result in losses both on the hedging transaction and on the instrument being hedged. Use of hedging activities may not prevent significant losses and could increase our losses. Further, hedging transactions may reduce cash available to pay distributions to our shareholders.
The success of our hedging strategy will depend on our ability to correctly identify appropriate exposures for hedging. Unanticipated changes in currency exchange rates or other exposures that we might hedge may result in poorer overall investment performance than if we had not engaged in any such hedging transactions. In addition, the degree of correlation between price movements of the instruments used in a hedging strategy and price movements in the portfolio positions being hedged may vary, as may the time period in which the hedge is effective relative to the time period of the related exposure. Also, where a put or call option on a particular security is purchased to hedge against price movements in a related security, the price of the put or call option may move more or less than the price of the related security. If restrictions on exercise were imposed, we might be unable to exercise an option we had purchased. If we were unable to close out an option that we had purchased on a security, it would have to exercise the option in order to realize any profit or the option may expire worthless.
Risks Related to the Economy
The capital markets are currently in a period of disruption and economic uncertainty. Such market conditions have materially and adversely affected debt and equity capital markets, which have had, and may continue to have, a negative impact on our business and operations.
U.S. capital markets have experienced extreme volatility and disruption following, among other things, the conflict between Russia and Ukraine that began in late February 2022 and the ongoing war in the Middle East. Even after the COVID-19 pandemic subsided, the U.S. economy, as well as most other major economies, have continued to experience unpredictable economic conditions, and we anticipate our businesses would be materially and adversely affected by any prolonged economic downturn or recession in the United States and other major markets. In addition, disruptions in the capital markets have increased the spread between the yields realized on risk-free and higher risk securities, resulting in illiquidity in parts of the capital markets. As the result of the current market conditions, and the related adverse local and national economic consequences, we could be subject to any of the following risks, any of which could have a material, adverse effect on our business, financial condition, liquidity, and results of operations:
•Current market conditions may make it difficult to raise equity capital because, subject to some limited exceptions, as a BDC, we are generally not able to issue additional shares of our common stock at a price less than the then-current NAV per Share without first obtaining approval for such issuance from our Shareholders and our Independent Directors. In addition, these market conditions may make it difficult to access or obtain new indebtedness with similar terms to our existing indebtedness.
•Significant changes or volatility in the capital markets may also have a negative effect on the valuations of our investments. 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).
•Significant changes in the capital markets may adversely affect the pace of our investment activity and economic activity generally.
•The illiquidity of our investments may make it difficult for us to sell such investments to access capital if required, and 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 for liquidity purposes. An inability to raise or access 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.
Global economic, political and market conditions may adversely affect our business, financial condition and results of operations, including our revenue growth and profitability.
The current worldwide financial markets situation, as well as various social and political tensions in the United States and around the world (including wars and other forms of conflict, terrorist acts, security operations and catastrophic events such as fires, floods, earthquakes, tornadoes, hurricanes and global health epidemics), may contribute to increased market volatility, may have long term effects on the United States and worldwide financial markets, and may cause economic uncertainties or deterioration in the United States and worldwide. We monitor developments and seek to manage our investments in a manner consistent with achieving our investment objective, but there can be no assurance that we will be successful in doing so.
Russian Invasion of Ukraine and Conflict in the Middle East
Russia’s invasion of Ukraine, the current conflict in the Middle East, and corresponding events, have had, and could continue to have, severe adverse effects on regional and global economic markets. Following Russia’s actions, various governments, including the United States, have issued broad-ranging economic sanctions against Russia. The current sanctions and the potential for future sanctions, and other actions, and Russia’s retaliatory responses to those sanctions and actions, may continue to adversely impact the Russian economy and may result in the further decline of the value and liquidity of Russian securities, a continued weakening of the ruble, exchange closures and may have other adverse consequences on the Russian economy that could impact the value of Russian investments and impair the ability of a client to buy, sell, receive, or deliver those securities. In addition, the ongoing conflict in the Middle East could cause further volatility and uncertainty in global economic markets. Moreover, those events have, and could continue to have, an adverse effect on global markets’ performance and liquidity, thereby negatively affecting the value of a client’s investments beyond any direct exposure to Russian or Middle Eastern issuers. The duration of ongoing hostilities and the vast array of sanctions and related events cannot be predicted. Those events present material uncertainty and risk with respect to markets globally and the performance of a client and its investments or operations could be negatively impacted.
Financial Institution Risk; Distress Events
An investment in the Company is subject to the risk that one of the Company’s banks, brokers, hedging counterparties, lenders or other custodians of some or all of the Company’s assets (each, a “Financial Institution”) fails to perform its obligations or experiences insolvency, closure, receivership or other financial distress or difficulty, similar to that experienced by Silicon Valley Bank and Signature Bank in March 2023 (each, a “Distress Event”). Distress Events can be caused by factors including eroding market sentiment, significant withdrawals, fraud, malfeasance, poor performance or accounting irregularities. In the event a Financial Institution experiences a Distress Event, the Company may not be able to access deposits, borrowing facilities or other services for an extended period of time or ever. Although assets held by regulated Financial Institutions in the United States frequently are insured up to stated balance amounts by organizations such as the Federal Deposit Insurance Corporation (“FDIC”), in the case of banks, or the Securities Investor Protection Corporation (“SIPC”), in the case of certain broker-dealers, amounts in excess of the relevant insurance are subject to risk of loss, and any non-U.S. Financial Institutions that are not subject to similar regimes pose increased risk of loss. In the event of a failure of a banking institution, access to the Company’s bank accounts could be restricted and FDIC protection may not be available for balances in excess of amounts insured by the FDIC (and similar considerations may apply to banking institutions in other jurisdictions not subject to FDIC protection). In such instances, the Company may not recover such excess, uninsured amounts and instead, would only have an unsecured claim against the banking institution and participate pro rata with other unsecured creditors in the residual value of the banking institution’s assets. Investors could also be similarly affected and unable to fund capital calls, further delaying or deferring new investments. In addition, the Company may not be able to identify all potential solvency or stress concerns with respect to a banking institution or to transfer assets from one bank to another in a timely manner in the event a banking institution comes under stress or fails. Although in recent years governmental intervention has resulted in additional protections for depositors, there can be no assurance that governmental intervention will be successful or avoid the risk of loss, substantial delays or negative impact on banking or brokerage conditions or markets.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Many of our portfolio companies may be susceptible to economic slowdowns or recessions and may be unable to repay our debt investments during these periods. In particular, in past periods of instability, the financial services sector was negatively impacted by significant write-offs as the value of the assets held by financial firms declined, impairing their capital positions and abilities to lend and invest. In addition, continued uncertainty surrounding the negotiation of trade deals between the United Kingdom and the European Union following the United Kingdom’s exit from the European Union and uncertainty between the United States and certain other countries, including with respect to trade policies, treaties, sanctions, and tariffs, among other factors, have caused disruption in the global markets. There can be no assurance that market conditions will not worsen in the future.
In an economic downturn, we may have non-performing assets or non-performing assets may increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions may also decrease the value of any collateral securing our loans. A severe recession may further decrease the value of such collateral and result in losses of value in our portfolio and a decrease in our revenues, net income, assets and net worth. 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 on terms we deem acceptable. These events could prevent us from increasing investments and harm our operating results.
The occurrence of recessionary conditions and/or negative developments in the domestic and international credit markets may significantly affect the markets in which we do business, the value of our investments, and our ongoing operations, costs and profitability. Any such unfavorable economic conditions, including rising interest rates, may also increase our funding costs, limit our access to capital markets or negatively impact our ability to obtain financing, particularly from the debt markets. In addition, any future financial market uncertainty could lead to financial market disruptions and could further impact our ability to obtain financing.
These events could limit our investment originations, limit our ability to grow and negatively impact our operating results and financial condition.
Changes to U.S. tariff and import/export regulations may have a negative effect on our portfolio companies and, in turn, negatively impact us.
There has been ongoing discussion and commentary regarding potential significant changes to U.S. trade policies, treaties and tariffs. The current U.S. presidential administration, along with the U.S. Congress, has created significant uncertainty about the future relationship between the United States and certain other countries with respect to trade policies, treaties and tariffs. These developments, or the perception that any of them could occur, may have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global trade and, in particular, trade between the impacted nations and the United States. Any of these factors could depress economic activity and restrict our portfolio companies’ access to suppliers or customers or the cost of such goods and have a material adverse effect on their business, financial condition and results of operations, which in turn could negatively impact us.
Risks Related to our Adviser and its Affiliates
The Adviser and its affiliates may face conflicts of interest, which could result in increased risk-taking by us.
The Adviser will be subject to a variety of actual or perceived conflicts of interest in making investments on behalf of the Company. For example, the Adviser may be subject to conflicts relating to its selection of brokers on behalf of the Company. Portfolio transactions for the Company are allocated to brokers on the basis of best execution and in consideration of a broker’s ability to effect the transactions, its facilities, reliability and financial responsibility and the provision or payment by the broker of the costs of research and research-related services. However, brokers may provide other services that are beneficial to the Adviser, but not necessarily beneficial to the Company, including, without limitations, capital introduction, marketing assistance, consulting with respect to technology, operations, equipment and office space, commitment to capital, access to company management, access to deal flow and other services or items. Such services and items may influence the Adviser’s selection of brokers.
Our fee structure may create incentives for our Adviser to make speculative investments or use substantial leverage.
The Adviser and its affiliates will receive substantial fees from us in return for their services. These fees may include certain incentive fees based on the amount of appreciation of our investments. These fees could influence the advice provided to us. Generally, the more equity we sell in public offerings and the greater the risk assumed by us with respect to our investments, including through the use of leverage, the greater the potential for growth in our assets and profits, and, correlatively, the fees payable by us to our Adviser. These compensation arrangements could affect our Adviser’s or its affiliates’ judgment with respect to public offerings of equity, incurrence of debt, and investments made by us, which allow our Adviser to earn increased asset management fees.
We may compete for capital and investment opportunities with other entities managed by our Adviser or its affiliates, subjecting our Adviser to certain conflicts of interest.
The 1940 Act prohibits or restricts the Company’s ability to engage in certain principal transactions and joint transactions with certain “close affiliates” and “remote affiliates.” For example, the Company is prohibited from buying or selling any security from or to any person who owns more than 25% of its voting securities or certain of that person’s affiliates (each a “close affiliate”), or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. The Company considers the Adviser and its affiliates, to be “close affiliates” for such purposes. The Company is prohibited under the 1940 Act from participating in certain principal transactions and joint transactions with a “remote affiliate” without the prior approval of the Independent Directors. Any person that owns, directly or indirectly, 5% or more of the Company’s outstanding voting securities will be a “remote affiliate” for purposes of the 1940 Act, and the Company is generally prohibited from buying or selling any security from or to such affiliate without the prior approval of the Independent Directors.
The Company may, however, invest alongside the Adviser’s investment funds, accounts and investment vehicles in certain circumstances where doing so is consistent with the Company’s investment strategy as well as applicable law and SEC staff interpretations. For example, the Company may invest alongside such investment funds, accounts and investment vehicles consistent with guidance promulgated by the SEC staff to purchase interests in a single class of privately placed securities so long as certain conditions are met, including that the Adviser, acting on the Company’s behalf and on behalf of such investment funds, accounts and investment vehicles, negotiates no term other than price. The Company may also invest alongside the Adviser’s investment funds, accounts and investment vehicles as otherwise permissible under regulatory guidance, applicable regulations and the Adviser’s allocation policy. An exemptive order was issued by the SEC on February 16, 2022 (the “Order”, which was amended on August 31, 2022) to the Company and certain of its affiliates. The Order permits the Company, subject to certain terms and conditions, to participate in certain co-investment transactions with funds and accounts managed by the Adviser that otherwise would be prohibited under either or both of Section 17(d) and 57(a)(4) of the 1940 Act and Rule 17d-1 thereunder, in accordance with the conditions to the Order. The Order permits the Company to co-invest the Adviser’s investment funds, accounts and investment vehicles in the Adviser’s originated loan transactions under certain enumerated conditions if the Board determines that it would be advantageous for the Company to co-invest with investment funds, accounts and investment vehicles managed by the Adviser in a manner consistent with the Company’s investment objectives, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors.
The Company’s allocation policy provides that allocations among the Company and investment funds, accounts and investment vehicles managed by the Adviser and its affiliates will generally be made in a manner deemed to be fair and equitable over time which does not favor one client or group of clients, taking into consideration such factors as legal, regulatory and tax considerations, availability of capital for investment by the account, liquidity concerns and such other factors as deemed under the particular circumstances to be relevant in making the investment allocation determination as determined, in the Company’s case, by the Adviser as well as the terms of the Company’s governing documents and those of such investment funds, accounts and investment vehicles. It is the Company’s policy to base its determinations on such factors as: the amount of cash on-hand, existing commitments and reserves, if any, the Company’s targeted leverage level, the Company’s targeted asset mix and diversification requirements and other investment policies and restrictions set by the Board or imposed by applicable laws, rules, regulations or interpretations. The Company expects that these allocation determinations will be made similarly for investment funds, accounts and investment vehicles managed by the Adviser. However, the Company can offer no assurance that investment opportunities will be allocated to the Company fairly or equitably in the short-term or over time.
In situations where co-investment with investment funds, accounts and investment vehicles managed by the Adviser is not permitted or appropriate, such as when there is an opportunity to invest in different securities of the same issuer or where the different investments could be expected to result in a conflict between the Company’s interests and those of the Adviser’s clients, subject to the limitations described in the preceding paragraph, the Adviser will need to decide which client will proceed with the investment. Moreover, except in certain limited circumstances as permitted by the 1940 Act, such as when the only term being negotiated is price, the Company will be unable to invest in any issuer in which an investment fund, account or investment vehicle managed by the Adviser has previously invested. Similar restrictions limit the Company’s ability to transact business with its officers or directors or their affiliates. These restrictions will limit the scope of investment opportunities that would otherwise be available to the Company. If the Company is prohibited by applicable law from investing alongside the Adviser’s investment funds, accounts and investment vehicles with respect to an investment opportunity, the Company will not participate in such investment opportunity.
We may be obligated to pay our Adviser incentive fees even if we incur a net loss due to a decline in the value of our portfolio and even if our earned interest income is not payable in cash.
The Investment Advisory Agreement entitles our Adviser to receive an incentive fee based on our pre-incentive fee net investment income regardless of any capital losses. In such case, we may be required to pay our Adviser an incentive fee for a fiscal quarter even if there is a decline in the value of our portfolio or if we incur a net loss for that quarter.
Any incentive fee payable by us that relates to pre-incentive fee net investment income may be computed and paid on income that may include interest that has been accrued but not yet received or interest in the form of securities received rather than cash (“payment-in-kind” or “PIK” income). PIK income will be included in the pre-incentive fee net investment income used to calculate the incentive fee to our Adviser even though we do not receive the income in the form of cash. If a portfolio company defaults on a loan that is structured to provide accrued interest income, it is possible that accrued interest income previously included in the calculation of the incentive fee will become uncollectible. Our Adviser is not obligated to reimburse us for any part of the incentive fee it received that was based on accrued interest income that we never receive as a result of a subsequent default.
The quarterly incentive fee on income is recognized and paid without regard to: (i) the trend of pre-incentive fee net investment income as a percent of adjusted capital over multiple quarters in arrears which may in fact be consistently less than the quarterly preferred return, or (ii) the net income or net loss in the current calendar quarter, the current year or any combination of prior periods.
For federal income tax purposes, we may be required to recognize taxable income in some circumstances in which we do not receive a corresponding payment in cash and to make distributions with respect to such income to maintain our tax treatment as a RIC and/or minimize corporate-level U.S. federal income or excise tax. Under such circumstances, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. This difficulty in making the required distribution may be amplified to the extent that we are required to pay the incentive fee on income with respect to such accrued income. As a result, we may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, we may fail to qualify for RIC tax treatment and thus become subject to corporate-level U.S. federal income tax.
Our ability to enter into transactions with our affiliates is restricted.
The Company generally will be prohibited under the 1940 Act from participating in certain transactions with its affiliates without prior approval of the Independent Directors of the Company and, in some cases, the SEC. Any person that owns, directly or indirectly, 5% or more of the Company’s outstanding voting securities is an affiliate of the Company for purposes of the 1940 Act, and the Company generally will be prohibited from buying or selling any security from or to such affiliate, absent the prior approval of the Independent Directors. The 1940 Act also prohibits certain “joint” transactions with certain of the Company’s affiliates, which could include investments in the same issuers (whether at the same or different times), without prior approval of the Independent Directors and, in some cases, the SEC. If a person acquires more than 25% of the Company’s voting securities, the Company will be prohibited from buying or selling any security from or to such person or certain of that person’s affiliates, or entering into prohibited joint transactions with such persons, absent the prior approval of the SEC. Similar restrictions limit the Company’s ability to transact business with the Company’s officers or directors or their affiliates. These prohibitions will affect the manner in which investment opportunities are allocated between the Company and other funds managed by MSD or its affiliates. Most importantly, the Company generally will be prohibited from co-investing with other BDT & MSD Accounts or affiliates of the Adviser in MSD-originated loans and financings unless the Company co-invests in accordance with the applicable regulatory guidance or has obtained an exemptive order from the SEC permitting such co-investment activities. Accordingly, while the Adviser intends to allocate suitable opportunities among the Company and other BDT & MSD Accounts or affiliates of the Adviser based on the principles described above, the prohibition on co-investing with affiliates could significantly limit the scope of investment opportunities available to the Company. In particular, the decision by MSD to allocate an opportunity to one or more BDT & MSD Accounts or to an affiliate of the Adviser, or the existence of a prior co-investment structure, might cause the Company to forgo an investment opportunity that it otherwise would have made. Similarly, the Company generally may be limited in its ability to invest in an issuer in which a BDT & MSD Account or affiliate of the Adviser had previously invested. The Company may in certain circumstances also be required to sell, transfer or otherwise reorganize assets in which the Company has invested with BDT & MSD Accounts or affiliates of the Adviser at times that the Company may not consider advantageous.
The Order permits the Company, subject to certain terms and conditions, to participate in certain co-investment transactions with funds and accounts managed by the Adviser that otherwise would be prohibited under either or both of Section 17(d) and 57(a)(4) of the 1940 Act and Rule 17d-1 thereunder, in accordance with the conditions to the Order.
Risks Related to U.S. Federal Income Tax
We will be subject to corporate-level U.S. federal income tax if we are unable to maintain qualification as a RIC under Subchapter M of the Code.
To maintain RIC tax treatment under the Code, we must meet the following minimum annual distribution, income source and asset diversification requirements. See “Item 1. Business - Certain U.S. Federal Income Tax Considerations.”
The Annual Distribution Requirement for a RIC will be satisfied if we distribute to our shareholders on an annual basis at least 90% of our “investment company taxable income,” which is generally our net ordinary income plus the excess, if any, of realized net short-term capital gains over realized net long-term capital losses. In addition, a RIC may, in certain cases, satisfy the Annual Distribution Requirement by distributing dividends relating to a taxable year after the close of such taxable year under the “spillback dividend” provisions of Subchapter M. We would be taxed, at regular corporate rates, on retained income and/or gains, including any short-term capital gains or long-term capital gains. We also must make distributions to satisfy an additional Excise Tax Avoidance Requirement in order to avoid a 4% excise tax on certain undistributed income. Because we may use debt financing, we are subject to (i) an asset coverage ratio requirement under the 1940 Act and may, in the future, be subject to (ii) certain financial covenants under loan and credit agreements that could, under certain circumstances, restrict us from making distributions necessary to satisfy the distribution requirements. If we are unable to obtain cash from other sources, or choose or are required to retain a portion of our taxable income or gains, we could (1) be required to pay excise taxes and (2) fail to qualify for RIC tax treatment, and thus become subject to corporate level income tax on our taxable income (including gains).
The income source requirement will be satisfied if we obtain at least 90% of our annual income from dividends, interest, payments with respect to loans of certain securities, gains from the sale of stock or other securities or foreign currencies, net income from certain "qualified publicly traded partnerships," or other income derived from the business of investing in stock or securities.
The asset diversification requirement will be satisfied if we meet certain asset diversification requirements at the end of each quarter of our taxable year. Specifically, at least 50% of the value of our assets must consist of cash, cash equivalents (including receivables), U.S. government securities, securities of other RICs, and other acceptable securities if such securities of any one issuer do not represent more than 5% of the value of our assets or more than 10% of the outstanding voting securities of the issuer; and no more than 25% of the value of our assets can be invested in the securities, other than U.S. government securities or securities of other RICs, of one issuer, 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 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 qualify for or maintain RIC tax treatment for any reason and are subject to U.S. federal income tax at corporate rates, the resulting corporate taxes could substantially reduce our net assets, the amount of income available for distribution, and the amount of our distributions.
We may invest in certain debt and equity investments through taxable subsidiaries and the net taxable income of these taxable subsidiaries will be subject to U.S. federal and state corporate income taxes. We may invest in certain foreign debt and equity investments which could be subject to foreign taxes (such as income tax, withholding, and value added taxes).
We may have difficulty paying our required distributions if we recognize income before, or without, receiving cash representing such income.
For U.S. federal income tax purposes, we may be required to recognize taxable income in circumstances in which we do not receive a corresponding payment in cash. For example, since we will likely hold debt obligations that are treated under applicable tax rules as having OID (such as debt instruments with PIK, secondary market purchases of debt securities at a discount to par, interest or, in certain cases, increasing interest rates or debt instruments that were issued with warrants), we must include in income each year a portion of the OID that accrues over the life of the obligation, regardless of whether cash representing such income is received by us in the same taxable year. We may also have to include in income other amounts that we have not yet received in cash, such as unrealized appreciation for foreign currency forward contracts and deferred loan origination fees that are paid after origination of the loan or are paid in non-cash compensation such as warrants or stock. Furthermore, we may invest in non-U.S. corporations (or other non-U.S. entities treated as corporations for U.S. federal income tax purposes) that could be treated under the Code and U.S. Treasury regulations as “passive foreign investment companies” and/or “controlled foreign corporations.” The rules relating to investment in these types of non-U.S. entities are designed to ensure that U.S. taxpayers are either, in effect, taxed currently (or on an accelerated basis with respect to corporate-level events) or taxed at increased tax rates at distribution or disposition. In certain circumstances this could require us to recognize income where we do not receive a corresponding payment in cash.
Unrealized appreciation on derivatives, such as foreign currency forward contracts, may be included in taxable income while the receipt of cash may occur in a subsequent period when the related contract expires. Any unrealized depreciation on investments that the foreign currency forward contracts are designed to hedge are not currently deductible for tax purposes. This can result in increased taxable income whereby we may not have sufficient cash to pay distributions or we may opt to retain such taxable income and pay a 4% excise tax. In such cases we could still rely upon the “spillback provisions” to maintain RIC tax treatment.
We anticipate that a portion of our income may constitute OID or other income required to be included in taxable income prior to receipt of cash. Further, we may elect to amortize market discounts with respect to debt securities acquired in the secondary market and include such amounts in our taxable income in the current year, instead of upon disposition, as an election not to do so would limit our ability to deduct interest expenses for tax purposes. Because any OID or other amounts accrued will be included in our investment company taxable income for the year of the accrual, we may be required to make a distribution to our shareholders in order to satisfy the Annual Distribution Requirement, even if we will not have received any corresponding cash amount. As a result, we may have difficulty meeting the Annual Distribution Requirement necessary to maintain RIC tax treatment under the Code. We may have to sell some of our investments at times and/or at prices we would not consider advantageous, raise additional debt or equity capital, make a partial share distribution, or forgo new investment opportunities for this purpose. If we are not able to obtain cash from other sources, and choose not to make a qualifying share distribution, we may fail to qualify for RIC tax treatment and thus become subject to U.S. federal income tax at corporate rates.
Tax laws may change over time and such changes could adversely affect our business and financial condition.
From time to time, legislation has been proposed that, if enacted into law, would make significant changes to U.S. federal and state income tax laws, including (i) the elimination of the immediate deduction for intangible drilling and development costs, (ii) changes to a depletion allowance for oil and natural gas properties, (iii) the implementation of a carbon tax, (iv) an extension of the amortization period for certain geological and geophysical expenditures, (v) changes to tax rates, and (vi) the introduction of a minimum tax. While these specific changes were not included in recent legislation such as the Inflation Reduction Act of 2022, no accurate prediction can be made as to whether any such legislative changes will be proposed or enacted in the future or, if enacted, what the specific provisions or the effective date of any such legislation would be. The elimination of U.S. federal tax deductions, as well as any other changes to or the imposition of new federal, state, local or non-U.S. taxes (including the imposition of, or increases in production, severance or similar taxes) could adversely affect our business and financial condition.
On August 16, 2022, the Biden Administration enacted the Inflation Reduction Act of 2022, which modifies key aspects of the Code, including by creating an alternative minimum tax on certain large corporations and an excise tax on stock repurchases by certain corporations. We are currently assessing the potential impact of these legislative changes. Any new or changed laws or regulations could have a material adverse effect on our business, and political uncertainty could increase regulatory uncertainty in the near term.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

---

ITEM 2. PROPERTIES
Item 2. Properties.
We do not own any real estate or other physical properties materially important to our operation. Our corporate headquarters are located at 550 Madison Avenue, 20th Floor, New York, New York, 10022, and are provided for by the Administrator in accordance with the terms of our Administration Agreement. We believe that our office facilities are suitable and adequate for our business as it is contemplated to be conducted.

---

ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
Neither we nor the Adviser are currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceedings threatened against us or them. From time to time, we and/or the Adviser may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of these legal or regulatory 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.

---

ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II.

---

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Our shares of common stock, par value $0.001 per share, of the Company (“Shares,” each a “Share,” and a holder thereof a “Shareholder”) will be offered and sold in transactions exempt from registration under the 1933 Act under Section 4(a)(2) and Regulation D thereunder. There is no public market for our Shares currently, nor can we give any assurance that one will develop.
Because Shares are being acquired by investors in transactions “not involving a public offering,” they are “restricted securities” and may be required to be held indefinitely Our Shares may not be sold, transferred, assigned, pledged or otherwise disposed of unless (i) the Adviser’s consent is granted, and (ii) the shares are registered under applicable securities laws or specifically exempted from registration (in which case the Shareholder 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 shares until we are liquidated. No sale, transfer, assignment, pledge or other disposition, whether voluntary or involuntary, of the shares may be made except by registration of the transfer on our books. Each transferee will be required to execute an instrument agreeing to be bound by these restrictions and the other restrictions imposed on the shares and to execute such other instruments or certifications as are reasonably required by us.
On November 29, 2023, the Company issued 250 shares of its 12.0% Series A Cumulative Preferred Stock (the “Series A Preferred Stock”). The Series A Preferred Stock was offered and sold in transactions exempt from registration under the 1933 Act under Section 4(a)(2) and Regulation D thereunder. There is no public market for our Series A Preferred Stock.
Holders
As of March 19, 2025 there were 549 shareholders of our common stock and 250 holders of Series A Preferred Stock.
Determinations in Connection with our Offerings
In connection with the Private Offering of our Shares, to the extent we do not have Shareholder approval to sell below NAV, our Board or an authorized committee thereof will be required to make a good faith determination that we are not selling our Shares at a price below the then current net asset value of our Shares at the time at which the sale is made. Our Board or an authorized committee thereof will consider the following factors, among others, in making such determination:
•the net asset value of our Shares disclosed in the most recent periodic report we filed with the SEC;
•our management’s assessment of whether any material change in the net asset value of our Shares has occurred (including through the realization of gains on the sale of our portfolio securities) during the period beginning on the date of the most recently disclosed net asset value of our Shares and ending as of a time within 48 hours (excluding Sundays and holidays) of the sale of our Shares; and
•the magnitude of the difference between (i) a value that our Board or an authorized committee thereof has determined reflects the current (as of a time within 48 hours excluding Sundays and holidays) net asset value of our Shares, which is based upon the net asset value of our Shares disclosed in the most recent periodic report we filed with the SEC, as adjusted to reflect our management’s assessment of any material change in the net asset value of our Shares since the date of the most recently disclosed net asset value of our Shares, and (ii) the offering price of our Shares in the proposed offering.
These processes and procedures are part of our compliance policies and procedures. Records will be made contemporaneously with all determinations described in this section and these records will be maintained with other records we are required to maintain under the 1940 Act.
Distribution Policy
Because we intend to maintain our status as a RIC for U.S. federal income tax purposes, we intend to distribute at least 90% of our annual taxable income to our Shareholders. To the extent our taxable earnings fall below the total amount of our paid distributions for any given fiscal year, a portion of those paid distributions may be deemed to be a tax return of capital to our Shareholders. The timing and amount of our distributions, if any, is determined by our Board. Any distributions to shareholders are declared out of assets legally available for distribution. See Note 9. Net Assets to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K for the history of distributions declared for the years ended December 31, 2022, December 31, 2023 and December 31, 2024.
Distribution Reinvestment Plan
We have adopted a distribution reinvestment plan pursuant to which Shareholders may elect to have their distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving distributions. As a result, if the Board authorizes, and the Company declares a distribution, then Shareholders who have opted into the Company’s distribution reinvestment plan will have their distribution automatically reinvested in additional shares of the Company rather than receiving the distribution in cash. Any fractional share of the Company’s common stock otherwise issuable to a participant in the distribution reinvestment plan will instead be paid in cash.
No action will be required on the part of a registered Shareholder to receive his, her, or its dividend in cash. A registered shareholder that wishes to participate in the distribution reinvestment plan must notify U.S. Bank Global Fund Services in writing no later than ten calendar days prior to the record date for any dividend or other distribution and such election will remain in place until the Shareholder notifies U.S. Bank Global Fund Services otherwise.
Unregistered Sales of Equity Securities
There were no Shares issued and sold in reliance upon the available exemptions from the registration requirements of the 1933 Act, including Section 4(a)(2) and Regulation D promulgated thereunder, other than those already disclosed in certain Current Reports on Form 8-K filed with the SEC.

---

ITEM 6. SELECTED FINANCIAL DATA
Item 6. Reserved

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our audited consolidated financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, the following discussion and other parts of this Annual Report on Form 10-K contain forward-looking information that involves risks and uncertainties.
Please see “Risk Factors” and “Special Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements.
Overview
We were established as a Delaware limited liability company on February 18, 2021, and converted to MSD Investment, LLC, a Maryland limited liability company, on October 22, 2021. On December 1, 2021, the Company entered into purchase agreements with the Funds pursuant to which the Company agreed to acquire the Initial Portfolio for an aggregate cash purchase price equal to the fair value of such assets, plus accrued but unpaid interest as of the closing date, less any principal payments received between signing of the purchase agreements and the closing of the transactions contemplated thereby. The closing of the purchase of the Initial Portfolio by the Company occurred on December 21, 2021. As consideration for the Portfolio, the Company paid the Funds an aggregate purchase price of $656.5 million. On December 28, 2021, the Company filed Articles of Conversion (and related Articles of Incorporation) with the Maryland Department of Assessments and Taxation in order to effectuate the Corporate Conversion. In accordance with the Articles of Conversion and Maryland law, the Corporate Conversion became effective as of 12:01 a.m. on January 1, 2022 and, as result of the Corporate Conversion, each share representing a portion of the membership interests of the Company prior to the effective time of the Corporate Conversion was automatically converted into one share of common stock, par value $0.001 per share, of the Company. In connection with the Corporate Conversion the Company changed its name from “MSD Investment, LLC” to “MSD Investment Corp.” On December 29, 2021, the Company filed a Form N-54A to elect to be regulated as a BDC under the 1940 Act.
We have elected to be treated as a RIC for U.S. federal income tax purposes under Subchapter M of the Code for the fiscal year ending December 31, 2024 for U.S. federal income tax purposes. As a BDC and a RIC, we will be required to comply with certain regulatory requirements.
The Company’s investment objective is to invest in a broad range of portfolio companies, primarily through senior secured loans and notes where we believe the probability of losses are limited and the opportunity to generate attractive risk adjusted returns is maximized. The Adviser (as defined below) expects to execute this strategy by continuing its long history of leveraging its network to source and diligence what it believes to be attractive opportunities across a broad range of industries. The strategy will be executed by a team of experienced investment professionals who have more than a 20-year history of successfully deploying capital in both liquid and illiquid investments.
Financial and Operating Highlights
The following table presents financial and operating highlights (i) as of December 31, 2024 and December 31, 2023 and (ii) for the years ended December 31, 2024, 2023 and 2022:
As of
December 31, 2024
December 31, 2023
Total assets
$
4,685,663
$
2,316,063
Investments in portfolio companies, at fair value
$
4,529,064
$
2,197,053
Borrowings
$
2,232,043
$
1,148,025
Net assets
$
2,401,934
$
937,586
Net asset value per common share
$
23.87
$
23.26
Leverage ratio (borrowings / total assets)
47.6
%
49.6
%
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Average net assets
$
1,659,875
$
695,339
$
365,431
Average borrowings
$
1,774,784
$
804,401
$
482,333
Cost of investments purchased
$
3,464,619
$
1,550,830
$
585,382
Sales of investments
$
249,531
$
78,128
$
77,659
Principal repayments
$
950,462
$
319,913
$
185,213
Net investment income
$
183,025
$
96,142
$
39,352
Net realized gains (losses)
$
26,176
$
2,439
$
3,523
Net change in unrealized appreciation (depreciation)
$
16,107
$
37,095
$
(51,283
)
Net increase (decrease) in net assets resulting from operations
$
225,308
$
135,676
$
(8,408
)
Net investment income per share - basic and diluted
$
2.77
$
3.23
$
2.70
Earnings per share - basic and diluted
$
3.41
$
4.56
$
(0.58
)
Portfolio and Investment Activity for the years ended December 31, 2024 and December 31, 2023
The following table presents our portfolio company activity for the years ended December 31, 2024 and December 31, 2023:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
Portfolio companies at beginning of period
Number of added portfolio companies
Number of exited portfolio companies
(24
)
(11
)
Portfolio companies at period end
Number of debt investments period end
Number of preferred equity investments at period end
The following table presents a roll-forward of all investment purchase, sale and repayment activity and changes in fair value, within our investment portfolio for the years ended December 31, 2024 and December 31, 2023:
Year Ended December 31, 2024
First Lien Debt
Second Lien Debt
Subordinated Debt
Equity and Other Investments
Total Investments
Fair value, beginning of year
$
1,942,841
$
226,320
$
-
$
27,892
$
2,197,053
Purchase of investments
3,437,794
1,687
24,148
3,464,619
Proceeds from principal repayments and sales of investments
(1,050,902
)
(149,092
)
-
-
(1,199,994
)
Other changes in fair value (1)
45,622
10,570
-
11,194
67,386
Fair value, end of year
$
4,375,355
$
89,485
$
$
63,234
$
4,529,064
(1)Other changes in fair value includes changes resulting from realized and unrealized gains and losses, amortization/accretion and increases from PIK income.
Year Ended December 31, 2023
First Lien Debt
Second Lien Debt
Preferred Equity
Total Investments
Fair value, beginning of year
$
748,545
$
210,926
$
22,267
$
981,738
Purchase of investments
1,544,425
5,807
1,550,830
Proceeds from principal repayments and sales of investments
(397,729
)
(100
)
(214
)
(398,043
)
Other changes in fair value (1)
47,600
9,687
5,241
62,528
Fair value, end of period
$
1,942,841
$
226,320
$
27,892
$
2,197,053
(1)Other changes in fair value includes changes resulting from realized and unrealized gains and losses, amortization/accretion and increases from PIK income.
The following table presents selected information regarding our investment portfolio as of December 31, 2024 and December 31, 2023:
As of
December 31, 2024
December 31, 2023
Investments:
Number of portfolio companies
Number of investments
Average investment at fair value
$
28,131
$
23,624
Average cost of debt investments as a percentage of par (1)
98.25
%
97.18
%
Debt investments on non-accrual status as a percent of amortized cost of total debt investments
0.25
%
0.51
%
Debt investments on non-accrual status as a percent of fair value of total debt investments
0.10
%
0.11
%
Number of debt investments on non-accrual status
Weighted Average EBITDA (mm) (2)
193.0
245.3
Median EBITDA (mm) (2)
134.5
187.2
Weighted average net debt through tranche (2)
4.2x
4.1x
Weighted average interest rate coverage (2)
2.3x
3.1x
Percentage of sponsored investments
83.50
%
83.65
%
Floating interest rate debt investments:
Percent of debt portfolio (3)
97.4
%
96.3
%
Weighted average interest rate floors
0.89
%
0.73
%
Weighted average coupon spread to base interest rate
bps
bps
Weighted average effective yield on floating rate debt investments at amortized cost (4)
10.65
%
12.85
%
3 Month SOFR
4.31
%
5.33
%
Fixed interest debt investments: (5)
Percent of debt portfolio (3)
2.6
%
3.7
%
Weighted average coupon rate
9.03
%
8.94
%
Weighted average effective yield on fixed rate debt investments at amortized cost (4)
10.45
%
9.89
%
Other metrics:
Weighted average years to maturity on debt investments
4.69
years
4.12
years
Weighted average effective yield on the portfolio at amortized cost (4) (5)
10.70
%
12.74
%
(1)Calculated as amortized cost of all debt investments divided by the par value of all debt investments.
(2)Figures are based on portfolio company financial statements available to the Company at period end.
(3)Percent is calculated as a percentage of fair value of total debt investments.
(4)Weighted average effective yield is calculated as the effective yield of each investment and weighted by its amortized cost as compared to the aggregate amortized cost of all investments.
(5)Calculations exclude non-performing debt investments.
The following table presents the maturity schedule of our funded debt investments based on their principal amount as of December 31, 2024 and December 31, 2023:
December 31, 2024
December 31, 2023
Maturity Year
Principal Amount
Percentage of Debt Portfolio
Principal Amount
Percentage of Debt Portfolio
$
12,853
0.3
%
$
12,853
0.6
%
-
-
43,560
1.9
58,566
1.3
196,430
8.8
362,772
8.0
570,903
25.5
209,661
4.6
114,536
5.1
485,678
10.7
491,877
22.0
1,244,911
27.3
361,356
16.1
1,184,200
26.0
448,518
20.0
992,388
21.8
-
-
$
4,551,029
100.0
%
$
2,240,033
100.0
%
We utilize an investment rating system to monitor the credit profile of our underlying portfolio companies. We use a five-level ratings scale to classify individual investments.
•Investment Rating 1 - Investment is performing materially above expectations.
•Investment Rating 2 - Investment is performing above expectations.
•Investment Rating 3 - Investment is performing materially in-line with expectations. All new loans received a rating of 3 at initial investment.
•Investment Rating 4 - Investment is performing materially below expectations. Investments with a rating of 4 receive more frequent attention from our team as the risks of impairment have increased substantially since investment. Loss of principal is not expected, however there may be lost interest.
•Investment Rating 5 - Investment is performing materially below expectations and there is a high probability of impairment. Loss of principal and interest is probable.
The following tables show the investment rankings of the debt investments in our portfolio as of December 31, 2024 and December 31, 2023:
As of December 31, 2024
As of December 31, 2023
Risk Rating
Fair Value
% of Portfolio
# of Investments
Fair Value
% of Portfolio
# of Investments
$
-
0.0
%
-
$
-
0.0
%
-
138,919
3.1
70,386
3.2
4,325,456
95.5
2,123,142
96.7
60,298
1.3
1,096
0.0
4,391
0.1
2,429
0.1
$
4,529,064
100.0
%
$
2,197,053
100.0
%
Results of Operations
Revenues
We generate revenues primarily in the form of interest on the debt securities of portfolio companies that we acquire and hold for investment purposes. Our investments in debt securities generally have expected maturities of two to eight years, although we have no lower or upper constraint on maturity, and typically earn interest at floating and fixed interest rates. Interest on our debt securities is generally payable to us monthly, quarterly or semi-annually. The outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the respective maturity dates. In addition, we may generate revenue in the form of dividends from preferred and common equity investments, amortization of original issue discount, prepayment fees, commitment fees, origination fees and fees for providing significant managerial assistance.
Operating Expenses
Our primary operating expenses include a management fee and, depending on our operating results, a performance-based incentive fee, interest expense, administrative services, custodian and accounting services and other third-party professional services fees and expenses. The management and performance-based incentive fees compensate the Adviser for its services in identifying, evaluating, negotiating, closing and monitoring our investments.
Operating Results for the years ended December 31, 2024, 2023 and 2022 are presented below:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Total investment income
$
405,172
$
196,724
$
80,568
Total expenses
222,147
100,582
41,216
Net investment income
183,025
96,142
39,352
Net realized gain (loss)
26,176
2,439
3,523
Net change in unrealized appreciation (depreciation)
16,107
37,095
(51,283
)
Net increase (decrease) in net assets resulting from operations
$
225,308
$
135,676
$
(8,408
)
Investment Income
Investment income consisted of the following components for the years ended December 31, 2024, 2023 and 2022:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Interest income on debt securities
Cash interest
$
356,489
$
168,360
$
63,517
PIK interest
15,187
12,365
9,064
Net accretion/amortization of discounts/premiums
15,985
7,760
4,198
Total interest on debt securities
387,661
188,485
76,779
Dividend Income
(230
)
1,040
-
PIK dividend
7,350
2,945
3,488
Total interest and dividend income
394,781
192,470
80,267
Other income
10,391
4,254
Total investment income
$
405,172
$
196,724
$
80,568
Average investments at cost (1)
$
3,355,178
$
1,563,695
$
834,940
Income return (2)
11.77
%
12.31
%
9.61
%
(1)Average investments at cost is calculated as the simple average of the total investments at amortized cost of each quarterly reporting period.
(2)Income return is calculated as total interest and dividend income for the period divided by Average Investments at cost.
Operating Expenses
Our operating expenses can be categorized into fixed operating expenses, variable operating expenses and performance-dependent expenses. Fixed operating expenses are generally static period over period. Variable expenses are calculated based on fund metrics such as total assets, net assets or total borrowings. Performance-dependent expenses fluctuate independent of our size.
The table below shows a breakdown of our operating expenses for the years ended December 31, 2024, 2023 and 2022:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Fixed Operating Expenses
Professional fees (1)
$
3,214
$
2,087
$
1,023
Board of directors' fees
General and other expenses
Organization and offering costs (2)
Total fixed operating expenses
4,285
2,840
1,837
Variable operating expenses:
Interest expense (3)
147,803
66,206
24,152
Management fees
25,213
11,535
6,327
Administrative expense (4)
5,169
2,551
1,958
Custody expense
Transfer agency fees
Total variable operating expenses
179,259
80,792
32,735
Performance-dependent expenses:
Income based incentive fee
33,244
16,950
6,900
Capital gains incentive fee
5,359
-
(256
)
Total performance-dependent expenses
38,603
16,950
6,644
Total expenses
$
222,147
$
100,582
$
41,216
(1)Professional fees includes the expenses for third-party service providers such as internal and independent auditors, tax return preparer and tax consultant, third-party investment valuation firms, and fund legal counsel.
(2)Organization and offering costs are associated with the initial formation, setup and distribution of the Company and may not be recurring.
(3)The composition of our interest expense for the years ended December 31, 2024 and December 31, 2023 are described more fully in Note 7. Borrowings to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
(4)Administrative services include the expenses for third-party services providers such as fund accountant, fund sub-administrator, and independent pricing services. Additionally, administrative expense includes costs reimbursable to the Administrator according to the terms of the administration agreement.
Net Realized and Unrealized Gains
For the year ended December 31, 2024 our net realized gain was $26.2 million and our net change in unrealized appreciation was $16.1 million. For the year ended December 31, 2023 our net realized gain was $2.4 million and our net change in unrealized appreciation was $37.1 million. For the year ended December 31, 2022 our net realized gain was $3.5 million and our net change in unrealized depreciation was $51.3 million.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. The Company’s comprehensive accounting policies are described more fully in Note 2. Significant Accounting Policies to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K. We have identified “Basis of Presentation”, “Valuation of Investments”, and “Revenue Recognition” within Note 2 as critical accounting policies.
Valuation of Portfolio Investments and Net Asset Value of Shares
Pursuant to Rule 2a-5 under the 1940 Act, the Board has designated the Adviser as the Company's valuation designee (the “Valuation Designee”) to determine the fair value of the Company's investments that do not have readily available market quotations, which became effective for the fiscal quarter ended September 30, 2023. Pursuant to the Company’s valuation policy approved by the Board, the Valuation Designee will determine the fair value of the Company’s assets on at least a quarterly basis, in accordance with Accounting Standards Codification Topic 820, Fair Value Measurement. The audit committee of the Board (the “Audit Committee”) is comprised of directors who are not “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser (each an “Independent Director”).
Under procedures established by the Board, the Company intends to value investments for which market quotations are readily available at such market quotations. Assets listed on an exchange will be valued at their last sales prices as reported to the consolidated quotation service at 4:00 p.m. eastern time on the date of determination. If no such sales of such securities occurred, such securities will be valued at the bid price as reported by an independent, third-party pricing service on the date of determination. Debt and equity securities that are not publicly traded or whose market prices are not readily available will be valued at fair value. Such determination of fair values may involve subjective judgments and estimates. The Valuation Designee will also engage independent valuation providers to assist in the valuation of each investment that constitutes a material portion of the Company’s portfolio and that does not have a readily available market quotation at least once annually. Elements that could be used to determine the fair value of an investment include, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. The types of factors that may be considered in determining the fair values of investments include, but are not limited to, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings. The Valuation Designee may appoint additional or different independent valuation firms in the future.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs with respect to a fair-valued portfolio company or comparable company, the Valuation Designee will use the pricing indicated by the external event to corroborate and/or assist the Company in the valuation of such portfolio company. Because the Company expects that there will not be readily available market quotations for many of the investments in its portfolio, the Company expects to value many of its investments at fair value as determined in good faith by the Valuation Designee, subject to the oversight of the Board, using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market quotation, the fair value of the Company’s investments may differ significantly from the values that would have been used had readily available market quotations existed for such investments, and the differences could be material.
On a quarterly basis, with respect to investments for which market quotations are not readily available, the Adviser will undertake a multi-step valuation process each quarter, as described below:
•Securities for which no such market prices are readily available or reliable will be reviewed as part of the valuation process and preliminarily fair valued based on our estimate, or an independent third party's estimate, of the fair value as of the date of determination, and provided to the Adviser's valuation committee;
•Preliminary valuation conclusions are documented and discussed with the Adviser's valuation committee;
•Agreed upon valuation recommendations are presented to the Audit Committee;
•At least once annually, the valuation for each investment that constitutes a material portion of the Company's portfolio and that does not have readily available market quotation will be reviewed by an independent valuation firm; and
•The Valuation Designee will provide the Board with the information relating to the fair value determination pursuant to the Company’s valuation policy in connection with each quarterly Board meeting, will comply with the periodic board reporting requirements set forth in the Company’s valuation policy, and will provide the Board with its determination of the fair value of each investment in good faith.
All values assigned to securities and other assets by the Valuation Designee will be binding on all Company investors. When pricing of the Company’s Shares is necessary outside of the normal quarterly process, the Adviser will, among other things, review whether, to its knowledge, significant events have occurred since the last quarterly valuation which might affect the fair value of any of the Company’s portfolio securities.
The ranges of unobservable inputs used in the fair value measurement of our investments classified as Level 3 fair valued as of December 31, 2024 and December 31, 2023, respectively, are presented in Note 6. Fair Value Measurements to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
In addition to impacting the fair value recorded for our investments on our consolidated statement of assets and liabilities, had we used different key unobservable inputs to determine the fair value of our investments, amounts recorded in our consolidated statement of operations, including the net change in unrealized appreciation and depreciation on investments, management and performance-based incentive fees would also be impacted. The table below outlines the impact on our results of a 5% increase in the fair value of our Level 3 investments for the years ended December 31, 2024, 2023 and 2022:
For The Year Ended December 31, 2024
For The Year Ended December 31, 2023
For The Year Ended December 31, 2022
Fair value of level 3 investments at the end of the period
$
3,760,730
$
1,358,932
$
712,113
Fair value assuming a 5% increase in value
3,948,767
1,426,879
747,719
Increase in unrealized appreciation
188,037
67,947
35,606
(Increase) in management fees
(1,410
)
(510
)
(67
)
(Increase) in capital gains incentive fees (1)
(28,205
)
(10,192
)
(5,340
)
Increase in net assets resulting from operations
$
158,422
$
57,245
$
30,199
Weighted average shares outstanding
66,018,618
29,738,420
14,575,572
Shares outstanding at the end of the period
100,611,506
40,279,212
22,126,135
Increase in earnings per share
$
2.40
$
1.92
$
2.07
Increase in net assets per share
$
1.57
$
1.42
$
1.36
(1)Increase in capital gains incentive fee is calculated as 15% of the increase in unrealized appreciation.
Determination of Net Asset Value
The Valuation Designee will determine the net asset value (”NAV”) of the Shares at least quarterly. The NAV per share is equal to the value of the Company’s total assets minus its liabilities and the liquidation value of any preferred shares outstanding divided by the total number of shares outstanding. Additionally, in connection with each offering of shares, to the extent the Company does not have Shareholder approval to sell below NAV, the Valuation Designee or an authorized committee thereof will be required to make a good faith determination that the Company is not selling shares at a price below the then current NAV of the shares at the time at which the sale is made.
The value of investments for which recent market quotations are readily available will be the market price. The Valuation Designee will be responsible for determining the fair value of the portfolio investments for which market quotations are not readily available in good faith, and in such other instances where portfolio investments require a fair value determination. Because the Company expects that there typically will not be a readily available market quotation for its target portfolio investments, the Company expects that the value of most of its portfolio investments will be their fair value as determined by the Valuation Designee consistent with a documented valuation policy and consistently applied valuation process. In making these determinations, the Valuation Designee will receive input from an independent valuation firm and the Audit Committee.
Hedging
The Company may enter into currency hedging contracts, interest rate hedging agreements such as futures, options, swaps and forward contracts, and credit hedging contracts, such as credit default swaps. As of December 31, 2024 the Company had entered into foreign currency forward contracts in order to hedge its economic exposure to certain foreign currencies in which its investments were denominated, in addition to an interest rate swap to offset fixed rate exposure on our Series F Note (see Note 5. Derivative Instruments to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K). However, no assurance can be given that such hedging transactions will be effective.
Financial Condition, Liquidity and Capital Resources
Our primary sources of cash and cash equivalents may include: (i) the sale of our Shares, (ii) borrowings under various financing arrangements, (iii) cash flows from interest, dividends and transaction fees earned from investment in portfolio companies and (iv) principal repayments and sale proceeds from our investments.
Our primary uses of cash will be for (i) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (ii) the cost of operations (including fees payable to MSD in its capacity as the Adviser and the Administrator), (iii) debt service of any borrowings, and (iv) cash distributions to our Shareholders.
Liquidity
The tables below present a summary of our liquidity position as of December 31, 2024 and December 31, 2023:
December 31, 2024
December 31, 2023
Cash and cash equivalents
$
109,302
$
98,606
Unused borrowing capacity
405,000
422,000
Principal receivable
5,503
-
Unfunded investment commitments (1)
(574,819
)
(207,625
)
Undrawn capital commitments
456,800
619,690
Other net working capital (2)
(48,995
)
(224,415
)
$
352,791
$
708,256
(1)For a comprehensive list of our unfunded investment commitments see the footnotes to our consolidated schedule of investments included in our accompanying consolidated financial statements.
(2)Other networking capital is interest receivable less all liabilities exclusive of debt.
Capital Resources
We may from time to time enter into additional credit facilities and borrowing arrangements to increase the amount of our borrowings as our called equity capital increases. Accordingly, we cannot predict with certainty what terms any such financing would have or the costs we would incur in connection with any such financing arrangements. We are currently required to maintain a minimum asset coverage ratio (total assets-to-senior securities) of 150% under the 1940 Act if certain conditions are met.
The table below summarizes certain financing obligations that are expected to have an impact on our liquidity and cash flow in specified future interval periods:
Payments Due by Period
Total
Less than
1 year
1-3 years
3-5 years
After 5 years
SPV I facility
$
503,000
$
-
$
-
$
503,000
$
-
SPV II facility
537,000
-
-
537,000
-
Collateralized loan obligations
390,000
-
-
-
390,000
Revolving credit facility
150,000
-
-
150,000
-
Loan repurchase obligations
52,043
52,043
-
-
-
Series A Notes
69,000
-
69,000
-
-
Series B Notes
75,000
-
75,000
-
-
Series C Notes
116,000
-
-
116,000
-
Series D Notes
75,000
-
-
75,000
-
Series E Notes
50,000
-
-
50,000
-
Series F Notes
165,000
-
-
-
165,000
Series G Notes
50,000
-
-
-
50,000
Total Contractual Obligations
$
2,232,043
$
52,043
$
144,000
$
1,431,000
$
605,000

---

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Valuation Risk
We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and therefore, we will value these investments at fair value as determined by the Valuation Designee, subject to the continued oversight of the Board, and in accordance with our valuation policy. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.
Interest Rate Risk
We will be subject to financial market risks, including changes in interest rates. As of December 31, 2024, 97.4% of our debt investments (96.1% of our total investments), or $4.35 billion measured at fair value, are subject to floating interest rates. Additionally, the SPV I Facility, the SPV II Facility, the collateralized loan obligations, the Revolving Credit Facility, and certain of the Notes are subject to floating interest rates. In connection with our Series F Notes, which bear interest at fixed rates, we entered into an interest rate swap in order to align the interest rate risk of our liabilities with our investment portfolio. A prolonged period of elevated interest rates can be expected to lead to (i) higher interest income from our floating rate debt investments, (ii) value declines for fixed interest rate investments we may hold and (iii) higher interest expense in connection with our floating rate debt securities. Since the majority of our investments consist of floating rating investments, an increase in interest rates could also make it more difficult for borrowers to repay their loans, and a rise in interest rates may also make it easier for the Adviser to meet or exceed the quarterly threshold for Income-Based Fee as described in Note 3. Agreements and Related Party Transactions to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K.
Following a period of elevated interest rates to address inflation concerns, in the third quarter of 2024, the Federal Reserve cut rates for the first time since March 2020 and, most recently, cut rates in the fourth quarter of 2024. The Federal Reserve has indicated that there may be additional rate cuts in the future; however, future reductions to benchmark rates are not certain. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in base rates, such as SOFR and other alternate rates, are not offset by corresponding increases in the spread over such base rate that we earn on any portfolio investments, a decrease in our operating expenses, or a decrease in the interest rate associated with our borrowings.
The following table estimates the potential changes in net cash flow generated from interest income and expenses, should interest rates increase by 100, 200 or 300 basis points, or decrease by 100 or 200 basis points. Interest income is calculated as revenue from interest generated from our portfolio of investments held on December 31, 2024. Interest expense is calculated based on the terms of the Financing Facility, using the outstanding balance as of December 31, 2024. The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of December 31, 2024. These hypothetical calculations are based on a model of the investments in our portfolio, held as of December 31, 2024, and are only adjusted for assumed changes in the underlying base interest rates. Actual results could differ significantly from those estimated in the table.
Change in Interest Rates
Interest
Income
Interest
Expense
Net
Income
Up 300 basis points
$
129,734
$
(57,791
)
$
71,943
Up 200 basis points
85,507
(37,321
)
48,186
Up 100 basis points
41,279
(16,850
)
24,429
Down 100 basis points
(47,176
)
24,091
(23,085
)
Down 200 basis points
(91,368
)
44,561
(46,807
)
Down 300 basis points
(132,893
)
65,032
(67,861
)
Currency Risk
From time to time, we may make investments that are denominated in a foreign currency. These investments are translated into U.S. dollars at each balance sheet date, exposing us to movements in foreign exchange rates. We have employed and may continue to employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us. We may seek to utilize instruments such as, but not limited to, forward contracts to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates. We also have the ability to borrow in certain foreign currencies under our credit facilities. Instead of entering into a foreign currency forward contract in connection with loans or other investments we have made that are denominated in a foreign currency, we may borrow in that currency to establish a natural hedge against our loan or investment. To the extent the loan or investment is based on a floating rate other than a rate under which we can borrow under our credit facilities, we may seek to utilize interest rate derivatives to hedge our exposure to changes in the associated rate.

---

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Consolidated Financial Statements and Supplementary Data.
Report of Independent Registered Public Accounting Firm
To the shareholders and the Board of Directors of MSD Investment Corp.
Opinion on the Consolidated Financial Statements and Consolidated Financial Highlights
We have audited the accompanying consolidated statements of assets and liabilities of MSD Investment Corp. and subsidiaries (the "Company"), including the consolidated schedules of investments, as of December 31, 2024 and 2023, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period then ended, and the consolidated financial highlights (in Note 12) for each of the three years in the period then ended and for the period from December 21, 2021 (commencement of operations) to December 31, 2021, and the related notes (collectively referred to as the “financial statements and financial highlights”). In our opinion, the financial statements and financial highlights present fairly, in all material respects, the consolidated 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 three years in the period then ended, and the financial highlights for each of the three years in the period then ended and for the period from December 21, 2021 (commencement of operations) to December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements and financial highlights 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 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 and financial highlights 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 and financial highlights, 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 and financial highlights. 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 and financial highlights. Our procedures included confirmation of investments owned as of December 31, 2024 and 2023, by correspondence with the custodian, loan agents, and borrowers; when replies were not received, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ Deloitte & Touche LLP
New York, New York
March 19, 2025
We have served as the Company’s auditor since 2021.
MSD Investment Corp.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share amounts)
December 31, 2024
December 31, 2023
ASSETS
Non-controlled/non-affiliated investments, at fair value (1)
$
4,529,064
$
2,197,053
Cash and cash equivalents
109,302
98,606
Restricted cash
-
Interest and dividends receivable
31,819
19,276
Principal receivable
5,503
-
Unrealized appreciation on forward contracts
9,441
-
Prepaid expenses and other assets
1,128
Total assets
$
4,685,663
$
2,316,063
LIABILITIES
SPV I facility
$
503,000
$
378,000
SPV II facility
537,000
295,000
Collateralized loan obligations
390,000
390,000
Subscription facility
-
35,000
Unsecured Notes
599,141
-
Revolving credit facility
150,000
-
Loan repurchase obligations
52,043
50,025
Deferred financing costs net of accumulated amortization
(28,269
)
(13,239
)
Total debt, net of financing costs
2,202,915
1,134,786
Payable for investments purchased
19,113
214,584
Interest payable
29,984
17,800
Income based incentive fee payable
10,398
5,123
Management fees payable
8,063
3,784
Capital gains incentive fee payable
5,359
-
Accrued expenses and other liabilities
2,190
Accrued professional fees
1,012
Due to affiliates
2,751
Financing costs payable
1,944
Unrealized depreciation on forward contracts
-
Total liabilities
$
2,283,729
$
1,378,477
Commitments and contingencies (Note 8)
NET ASSETS
Preferred Stock, par value $0.001 (250 shares authorized and outstanding) (2)
$
-
$
-
Paid-in capital in excess of par value of Preferred Stock
Common stock, par value $0.001 (200,000,000 shares authorized, 100,611,506 and 40,279,212 shares issued and outstanding, respectively)
Paid-in capital in excess of par value
2,408,415
952,139
Distributable earnings (accumulated losses)
(7,332
)
(15,343
)
Total net assets
$
2,401,934
$
937,586
Net asset value per common share
$
23.87
$
23.26
(1)Non-controlled/non-affiliated investments at amortized cost $4,534,957 and $2,208,817 as of December 31, 2024 and December 31, 2023, respectively.
(2)Preferred Stock par value for both December 31, 2024 and December 31, 2023 is zero due to rounding.
The accompanying notes are an integral part of these consolidated financial statements.
MSD Investment Corp.
Consolidated Statement of Operations
(in thousands, except share and per share amounts)
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Investment income:
From non-controlled/non-affiliated investments:
Interest income
$
372,474
$
176,120
$
67,715
Dividend Income
(230
)
1,040
-
Payment-in-kind interest income
15,187
12,365
9,064
Payment-in-kind dividend income
7,350
2,945
3,488
Other income
10,391
4,254
Total investment income
405,172
196,724
80,568
Expenses:
Interest expense
147,803
66,206
24,152
Income based incentive fee
33,244
16,950
6,900
Management fees
25,213
11,535
6,327
Administration expense
5,169
2,551
1,958
Capital gains incentive fee
5,359
-
(256
)
Professional fees
3,214
2,087
1,023
Custody expense
General and other expenses
Board of directors’ fee
Organization and offering costs
Transfer agency fees
Total expenses
222,147
100,582
41,216
Net investment income (loss)
183,025
96,142
39,352
Realized and unrealized gain (loss):
Net realized gains (losses):
Non-controlled/non-affiliated investments
22,929
4,842
1,985
Foreign currency forward contracts
3,137
(2,076
)
1,653
Foreign currency transactions
(327
)
(115
)
Net realized gain (loss)
26,176
2,439
3,523
Net change in unrealized appreciation (depreciation):
Non-controlled/non-affiliated investments
5,870
37,565
(50,953
)
Foreign currency forward contracts
10,238
(461
)
(336
)
Foreign currency transactions
(1
)
(9
)
Net change in unrealized appreciation (depreciation)
16,107
37,095
(51,283
)
Net realized and unrealized gain (loss)
42,283
39,534
(47,760
)
Net increase (decrease) in net assets resulting from operations
$
225,308
$
135,676
$
(8,408
)
Preferred Stock Dividends
(90
)
(8
)
-
Net increase (decrease) in net assets resulting from operations applicable to common shareholders
$
225,218
$
135,668
$
(8,408
)
Per share information - basic and diluted:
Net investment income (loss) per share (basic and diluted)
$
2.77
$
3.23
$
2.70
Earnings per share (basic and diluted)
$
3.41
$
4.56
$
(0.58
)
Distributions declared per common share
$
3.00
$
3.09
$
2.88
Weighted average shares outstanding (basic and diluted)
66,018,618
29,738,420
14,575,572
The accompanying notes are an integral part of these consolidated financial statements.
MSD Investment Corp.
Consolidated Statement of Changes in Net Assets
(in thousands, except shares)
Accumulated Earnings
Preferred Shares
Common Shares
Paid-in-Capital in
(Loss), net of
Total
Shares
Par Value
Shares
Par Value
Excess of Par Value
Distributions
Net Assets
Balance, December 31, 2021 (1)
-
-
12,000,000
$
$
299,988
$
1,998
$
301,998
Operations:
Net investment income
-
-
-
-
-
39,352
39,352
Net realized gain (loss)
-
-
-
-
-
3,523
3,523
Net change in unrealized appreciation (depreciation)
-
-
-
-
-
(51,283
)
(51,283
)
Net increase (decrease) in net assets resulting from operations
-
-
-
-
-
(8,408
)
(8,408
)
Shareholder distributions:
Distributions to shareholders
-
-
-
-
-
(44,967
)
(44,967
)
Net increase (decrease) in net assets resulting from shareholder distributions
-
-
-
-
-
(44,967
)
(44,967
)
Capital Share Transactions:
Common shares issued from reinvestment of distributions
-
-
1,838,162
43,221
-
43,223
Issuance of shares
-
-
8,287,973
189,992
-
190,000
Tax reclassification of shareholders' equity in accordance with generally accepted accounting principles
-
-
-
-
2,099
(2,099
)
-
Net increase (decrease) for the year
-
-
10,126,135
235,312
(55,474
)
179,848
Balance, December 31, 2022
-
-
22,126,135
$
$
535,300
$
(53,476
)
$
481,846
Operations:
Net investment income
-
-
-
-
-
96,142
96,142
Net realized gain (loss)
-
-
-
-
-
2,439
2,439
Net change in unrealized appreciation (depreciation)
-
-
-
-
-
37,095
37,095
Net increase (decrease) in net assets resulting from operations
-
-
-
-
-
135,676
135,676
Shareholder distributions:
Distributions to shareholders
-
-
-
-
-
(96,770
)
(96,770
)
Net increase (decrease) in net assets resulting from shareholder distributions
-
-
-
-
-
(96,770
)
(96,770
)
Capital Share Transactions:
Common shares issued from reinvestment of distributions
-
-
3,568,598
81,081
-
81,084
Issuance of preferred shares (2)
-
-
-
-
Issuance of shares
-
-
14,584,479
334,985
-
335,000
Tax reclassification of shareholders' equity in accordance with generally accepted accounting principles
-
-
-
-
(773
)
-
Net increase (decrease) for the year
-
18,153,077
417,589
38,133
455,740
Balance, December 31, 2023
-
40,279,212
$
$
952,889
$
(15,343
)
$
937,586
Operations:
Net investment income
-
-
-
-
-
183,025
183,025
Net realized gain (loss)
-
-
-
-
-
26,176
26,176
Net change in unrealized appreciation (depreciation)
-
-
-
-
-
16,107
16,107
Net increase (decrease) in net assets resulting from operations
-
-
-
-
-
225,308
225,308
Shareholder distributions:
Distributions to shareholders
-
-
-
-
-
(217,118
)
(217,118
)
Net increase (decrease) in net assets resulting from shareholder distributions
-
-
-
-
-
(217,118
)
(217,118
)
Capital Share Transactions:
Common shares issued from reinvestment of distributions
-
-
5,498,875
131,152
-
131,158
Issuance of shares
-
-
54,833,419
1,324,945
-
1,325,000
Tax reclassification of shareholders' equity in accordance with generally accepted accounting principles
-
-
-
-
(179
)
-
Net increase (decrease) for the year
-
-
60,332,294
1,456,276
8,011
1,464,348
Balance, December 31, 2024
-
100,611,506
$
$
2,409,165
$
(7,332
)
$
2,401,934
(1)The Company converted from MSD Investment, LLC to MSD Investment Corp. on January 1, 2022.
(2)Issuance of preferred shares par value is zero due to rounding.
The accompanying notes are an integral part of these consolidated financial statements.
MSD Investment Corp.
Consolidated Statement of Cash Flows
(in thousands, except shares)
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Cash flow from operating activities
Net increase (decrease) in net assets resulting from operations
$
225,308
$
135,676
$
(8,408
)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities:
Accrued interest and dividends received in-kind
(22,540
)
(12,365
)
(11,642
)
Net accretion of discount and amortization of premium
(16,046
)
(7,754
)
(4,198
)
Proceeds from sale of investments and principal repayments
1,199,994
398,041
262,873
Purchases of investments
(3,464,619
)
(1,550,830
)
(585,382
)
Net realized (gains) losses on investments
(22,929
)
(4,842
)
(1,985
)
Net change in unrealized (appreciation) depreciation on investments
(5,870
)
(37,565
)
50,953
Net receipt of settlement of derivatives
3,137
(2,076
)
1,653
Net realized (gains) losses on derivatives
(3,137
)
2,076
(1,653
)
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts
(10,238
)
Amortization of deferred financing costs
4,650
2,117
1,541
(Increase) decrease in operating assets:
Interest and dividends receivable
(12,543
)
(12,473
)
(2,833
)
Principal receivable
(5,503
)
16,523
(14,069
)
Prepaid expenses and other assets
1,004
(51
)
(769
)
Increase (decrease) in operating liabilities:
Due to affiliates
2,302
(371
)
Payable for investments purchased
(195,471
)
189,855
24,729
Management fees payable
4,279
3,701
(72
)
Income based incentive fee payable
5,275
5,064
Capital gains incentive fee payable
5,359
-
(256
)
Interest payable
12,184
11,643
5,816
Accrued professional fees
Accrued expenses and other liabilities
Net cash provided (used in) by operating activities
(2,294,101
)
(861,894
)
(283,608
)
Cash flow from financing activities
Proceeds from issuance of common shares (net of change in subscriptions receivable)
1,325,000
335,000
190,000
Proceeds from repurchase obligations
693,990
313,841
-
Repayment of repurchase obligations
(691,973
)
(263,816
)
-
Debt borrowings
2,341,000
1,270,000
327,000
Debt repayments
(1,259,000
)
(709,000
)
(200,000
)
Distributions paid
(85,870
)
(15,678
)
(1,744
)
Deferred financing costs paid
(17,850
)
(11,525
)
(2,915
)
Proceeds from issuance of preferred shares, net of underwriting costs
-
-
Preferred dividends paid
(90
)
(8
)
-
Net cash provided by (used in) financing activities
2,305,207
919,564
312,341
Net increase in cash, cash equivalents, and restricted cash
11,106
57,670
28,733
Cash, cash equivalents, and restricted cash, beginning of period
98,606
40,936
12,203
Cash, cash equivalents, and restricted cash, end of period
$
109,712
$
98,606
$
40,936
Reconciliation of cash, cash equivalents, and restricted cash
Cash and cash equivalents
$
109,302
$
98,606
$
36,616
Restricted cash
$
$
-
$
4,320
Total cash, cash equivalents, and restricted cash
$
109,712
$
98,606
$
40,936
Supplemental disclosure of cash flow information and non-cash financing activities
Cash paid for interest
$
122,750
$
36,625
$
16,796
Reinvestment of shareholder distributions
$
131,158
$
81,084
$
43,223
Incremental financing cost payable
$
1,880
$
$
The accompanying notes are an integral part of these consolidated financial statements.
MSD Investment Corp.
Consolidated Schedule of Investments
December 31, 2024
(in thousands, except shares)
Investments (1)(2)(3)(4)
Footnotes
Reference Rate and Spread (5)
Interest Rate Floor
Interest Rate (6)
Maturity Date
Par Amount / Shares (7)
Cost (8)
Fair Value
Percentage of Net Assets
Investments - non-controlled/non-affiliated
First Lien Debt
Aerospace & Defense
Frontgrade Technologies Inc.
S + 5.00%
0.75%
9.49%
1/9/2030
9,681
9,520
9,681
0.40
%
Frontgrade Technologies Inc.
S + 5.00%
0.75%
9.49%
1/9/2030
59,858
58,714
59,858
2.49
Frontgrade Technologies Inc. - Revolving Credit Facility
(12)
S + 5.00%
0.75%
11.06%
1/9/2028
-
(122
)
-
-
Sky Merger Sub, LLC
S + 6.60%
1.50%
11.11%
5/28/2029
111,094
108,544
108,646
4.52
Sky Merger Sub, LLC - Delayed Draw Term Loan
(12)
S + 6.60%
1.50%
10.91%
5/28/2029
-
-
-
Sky Merger Sub, LLC - Revolving Credit Facility
(12)
S + 6.60%
1.50%
10.91%
5/28/2029
-
(550
)
(551
)
(0.02
)
Systems Planning and Analysis, Inc.
S + 5.00%
1.00%
9.28%
8/16/2027
10,604
10,488
10,510
0.44
Systems Planning and Analysis, Inc. - Delayed Draw Term Loan A
(12)
S + 5.00%
1.00%
9.28%
8/16/2027
7,656
7,400
7,529
0.31
Systems Planning and Analysis, Inc. - Delayed Draw Term Loan
S + 5.00%
1.00%
9.28%
8/16/2027
6,622
6,532
6,563
0.27
Systems Planning and Analysis, Inc. - Revolving Credit Facility
(12)
S + 5.00%
1.00%
10.25%
8/16/2027
-
(53
)
(52
)
-
The Nordam Group Inc.
S + 5.60%
0.00%
9.96%
4/9/2026
11,522
10,963
11,465
0.48
211,436
213,686
8.89
Automotive
Titan Purchaser, Inc.
S + 6.00%
1.00%
10.32%
3/1/2030
10,979
10,893
11,075
0.46
Banking, Finance, Insurance & Real Estate
Accession Risk Management - Delayed Draw Term Loan
S + 4.75%
0.75%
9.34%
11/1/2029
49,277
48,703
49,277
2.05
ALF Finance
(11)
S + 6.00%
1.00%
10.33% PIK
12/10/2029
26,158
25,898
25,900
1.08
ALF Finance - Delayed Draw Term Loan
(11)(12)
S + 6.00%
1.00%
10.33% PIK
12/10/2029
7,524
7,453
7,453
0.31
Ardonagh Midco 3 PLC
UK(10)(11)
S + 4.75%
0.50%
9.90%
2/15/2031
29,398
28,999
29,009
1.21
Foundation Risk Partners
S + 5.25%
0.75%
9.58%
10/29/2030
19,789
19,742
19,745
0.82
Foundation Risk Partners - Delayed Draw Term Loan
S + 5.25%
0.75%
9.58%
10/29/2030
44,813
44,038
44,712
1.86
Foundation Risk Partners - Delayed Draw Term Loan Incremental
(12)
S + 5.25%
0.75%
9.61%
10/29/2030
5,098
5,031
5,100
0.21
Foundation Risk Partners - Revolving Credit Facility
(12)
S + 5.25%
0.75%
9.56%
10/29/2029
-
-
(4
)
-
Foundation Risk Partners - Revolving Credit Facility Incremental
(12)
S + 5.25%
0.75%
9.56%
10/29/2029
-
(33
)
(8
)
-
Onbe Inc.
S + 5.50%
1.00%
9.86%
7/25/2031
130,000
127,478
127,560
5.31
307,309
308,744
12.85
Beverage, Food & Tobacco
LJ Perimeter Buyer, Inc.
S + 6.65%
1.00%
11.24%
10/31/2028
19,073
18,667
18,410
0.77
LJ Perimeter Buyer, Inc. - Delayed Draw Term Loan
S + 6.65%
1.00%
11.24%
10/31/2028
2,452
2,446
2,412
0.10
21,113
20,822
0.87
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2024
(in thousands, except shares)
Investments (1)(2)(3)(4)
Footnotes
Reference Rate and Spread (5)
Interest Rate Floor
Interest Rate (6)
Maturity Date
Par Amount / Shares (7)
Cost (8)
Fair Value
Percentage of Net Assets
First Lien Debt (continued)
Capital Equipment
Faraday Buyer, LLC
S + 6.00%
1.00%
10.33%
10/10/2028
33,139
32,587
32,627
1.36
Faraday Buyer, LLC - Delayed Draw Term Loan
(12)
S + 6.00%
1.00%
10.31%
10/10/2028
-
(19
)
(19
)
-
Neptune Platform Buyer, LLC
S + 5.25%
0.75%
9.58%
1/19/2031
7,402
7,301
7,306
0.30
Neptune Platform Buyer, LLC - Delayed Draw Term Loan
(12)
S + 5.25%
0.75%
9.58%
1/19/2031
-
(9
)
(8
)
-
Texas Hydraulics
S + 6.25%
2.00%
10.61%
11/20/2030
90,000
88,223
88,234
3.67
Trillium FlowControl
LU(10)(11)
S + 5.25%
1.00%
9.60%
12/20/2029
18,333
18,061
18,060
0.75
Trillium FlowControl - Delayed Draw Term Loan
LU(10)(11)(12)
S + 5.25%
1.00%
9.56%
12/20/2029
-
(27
)
(27
)
-
Trillium FlowControl - Revolving Credit Facility
LU(10)(11)(12)
S + 5.25%
1.00%
9.56%
12/20/2029
-
(45
)
(22
)
-
146,072
146,151
6.08
Chemicals, Plastics & Rubber
TPC Group, Inc.
S + 5.75%
0.00%
10.11%
11/24/2031
45,000
44,329
44,719
1.86
Construction & Building
Cook & Boardman Group
S + 6.00%
1.00%
10.33%
3/4/2030
124,062
121,795
121,923
5.08
Cook & Boardman Group - Delayed Draw Term Loan
(12)
S + 6.00%
1.00%
10.33%
3/4/2030
12,584
12,221
12,240
0.51
Elessent Clean Technologies Inc.
S + 6.00%
1.00%
10.40%
11/15/2029
136,842
134,147
134,174
5.59
Elessent Clean Technologies Inc. - Revolving Credit Facility
(12)
S + 6.00%
1.00%
10.31%
11/15/2029
-
(256
)
(257
)
(0.01
)
Great Day Improvements LLC
S + 5.76%
1.50%
10.01%
6/13/2030
85,570
83,964
84,016
3.50
Great Day Improvements LLC - Revolving Credit Facility
(12)
S + 5.76%
1.50%
10.07%
6/13/2030
-
(254
)
(254
)
(0.01
)
351,617
351,842
14.66
Consumer Goods: Durable
Victra Finance Corp.
S + 5.25%
0.75%
9.61%
3/31/2029
88,861
88,590
89,860
3.74
Consumer Goods: Non-durable
1440 Foods Topco LLC
S + 5.00%
0.00%
9.36%
10/31/2031
20,000
18,903
19,025
0.79
GSM Outdoors
S + 5.00%
1.00%
9.33%
9/30/2031
14,963
13,938
14,607
0.61
Parfums Holdings Co.
S + 5.25%
1.00%
9.58%
6/27/2030
96,266
95,345
95,386
3.97
Parfums Holdings Co. - Revolving Credit Facility
(12)
S + 5.25%
1.00%
9.56%
6/27/2029
-
(54
)
(54
)
-
Valeron Group, LLC
S + 5.50%
0.00%
9.93%
10/18/2031
150,000
146,310
146,358
6.09
274,442
275,322
11.46
Containers, Packaging & Glass
Cadogan Tate - Delayed Draw Term Loan
(11)(12)
S + 5.75%
0.00%
10.06%
10/31/2031
-
(428
)
(425
)
(0.02
)
Cadogan Tate - Revolving Credit Facility
(11)(12)
S + 5.75%
0.00%
10.13%
10/31/2031
1,300
1,006
1,007
0.04
Confluent Holdings LLC
S + 7.00%
2.00%
11.33%
3/28/2029
28,789
28,015
28,057
1.17
Dellner Couplers Group AB
UK(10)(11)
L + 5.50%
0.50%
8.22%
6/29/2029
EUR 38,000
40,389
38,792
1.62
Confluent Holdings LLC - Delayed Draw Term Loan
(12)
S + 7.00%
2.00%
11.33%
3/28/2029
10,076
9,823
9,840
0.41
Klockner Pentaplast of America Inc.
(11)
S + 4.75%
0.00%
9.72%
2/9/2026
0.03
79,456
77,888
3.25
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2024
(in thousands, except shares)
Investments (1)(2)(3)(4)
Footnotes
Reference Rate and Spread (5)
Interest Rate Floor
Interest Rate (6)
Maturity Date
Par Amount / Shares (7)
Cost (8)
Fair Value
Percentage of Net Assets
First Lien Debt (continued)
Energy: Oil & Gas
CITGO Petroleum Corp.
N/A
N/A
6.38%
6/15/2026
2,121
2,136
2,123
0.09
Environmental Industries
Inframark
S + 5.50%
0.75%
10.09% (Incl 3.00% PIK)
7/31/2031
18,129
17,952
17,958
0.75
Inframark - Delayed Draw Term Loan
(12)
S + 5.00%
0.75%
9.36%
7/31/2031
0.01
18,076
18,082
0.76
Healthcare & Pharmaceuticals
CareVet LLC - Term Loan A
S + 6.00%
2.00%
10.33%
6/18/2029
112,200
111,475
111,375
4.64
CareVet LLC - Term Loan B
N/A
N/A
14.75% (Incl 7.5% PIK)
6/18/2029
10,385
10,114
10,260
0.43
CareVet LLC - Delayed Draw Term Loan A
(12)
S + 6.00%
2.00%
10.31%
6/18/2029
-
(354
)
(354
)
(0.01
)
CareVet LLC - Delayed Draw Term Loan B
(12)
S + 6.00%
2.00%
10.31%
6/18/2029
-
-
CareVet LLC - Revolving Credit Facility
(12)
S + 6.00%
2.00%
10.31%
6/18/2029
-
(59
)
(59
)
-
Gainwell Acquisition Corp
S + 4.10%
0.75%
8.43%
10/1/2027
0.04
PetVet Care Centers
S + 6.00%
0.75%
10.36%
11/15/2030
52,988
52,035
52,921
2.20
PetVet Care Centers - Delayed Draw Term Loan
(12)
S + 6.00%
0.75%
10.31%
11/15/2030
-
(47
)
-
PetVet Care Centers - Revolving Credit Facility
(12)
S + 6.00%
0.75%
10.31%
11/15/2029
-
(113
)
(66
)
-
Pharmalogic Holdings Corp.
S + 5.00%
1.00%
9.36%
6/21/2030
19,903
19,620
19,630
0.82
Pharmalogic Holdings Corp.
S + 5.00%
1.00%
9.36%
6/21/2030
CAD 74,625
53,726
51,170
2.13
Pharmalogic Holdings Corp. - Delayed Draw Term Loan
(12)
S + 5.00%
1.00%
9.31%
6/21/2030
-
(157
)
(156
)
(0.01
)
Natural Partners, Inc.
S + 4.65%
1.00%
9.16%
11/29/2027
50,847
50,239
49,903
2.08
Natural Partners, Inc. - Revolving Credit Facility
(12)
S + 4.65%
1.00%
8.96%
11/29/2027
-
(83
)
(122
)
(0.01
)
297,416
295,593
12.31
High Tech Industries
Alteryx, Inc.
S + 6.50%
0.75%
10.86%
3/19/2031
26,125
25,752
25,777
1.07
Alteryx, Inc. - Revolving Credit Facility
(12)
S + 6.50%
0.75%
10.81%
3/19/2031
-
(126
)
(127
)
(0.01
)
Alteryx, Inc. - Delayed Draw Term Loan
S + 6.50%
0.75%
10.86%
3/19/2031
59,375
58,552
58,583
2.44
Coreweave - Delayed Draw Term Loan
(12)
S + 6.00%
0.00%
10.66%
8/29/2029
26,703
26,356
26,332
1.10
Inmar, Inc.
S + 5.00%
1.00%
9.36%
5/1/2026
29,925
29,378
29,972
1.25
TIC Bidco LTD
UK(10)(11)
SO + 5.00%
0.00%
9.70%
6/16/2031
GBP 9,240
12,100
11,497
0.48
TIC Bidco LTD - Delayed Draw Term Loan
UK(10)(11)(12)
SO + 5.00%
0.00%
9.70%
6/16/2031
-
(16
)
(9
)
-
Watchguard Technologies, Inc.
S + 5.25%
0.75%
9.61%
7/2/2029
59,695
57,654
59,005
2.46
209,650
211,030
8.79
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2024
(in thousands, except shares)
Investments (1)(2)(3)(4)
Footnotes
Reference Rate and Spread (5)
Interest Rate Floor
Interest Rate (6)
Maturity Date
Par Amount / Shares (7)
Cost (8)
Fair Value
Percentage of Net Assets
First Lien Debt (continued)
Hotel, Gaming & Leisure
Chuck E. Cheese
N/A
N/A
6.75%
5/1/2026
17,534
17,032
17,389
0.72
ClubCorp Holdings Inc.
S + 5.26%
0.00%
9.59%
9/18/2026
71,257
68,706
71,376
2.97
Highgate Hotels, L.P.
S + 5.50%
1.00%
9.83%
11/5/2029
99,000
97,338
99,166
4.13
Highgate Hotels, L.P. - Revolving Credit Facility
(12)
S + 5.50%
1.00%
9.81%
11/3/2029
-
(201
)
-
-
Hotel Equities Group, LLC
S + 5.75%
2.00%
10.38%
1/22/2029
29,292
28,869
28,816
1.20
Hotel Equities Group, LLC - Revolving Credit Facility
(12)
S + 5.75%
2.00%
10.06%
1/22/2029
-
(162
)
(162
)
(0.01
)
J&J Ventures Gaming LLC
S + 5.11%
0.75%
9.47%
4/26/2028
134,662
131,066
131,176
5.46
K1 Speed Inc.
S + 6.25%
1.00%
10.73%
1/2/2029
18,214
17,907
17,865
0.74
K1 Speed Inc. Incremental
S + 6.25%
1.00%
10.73%
1/2/2029
6,193
6,077
6,074
0.25
K1 Speed Inc. Second Incremental
S + 6.25%
1.00%
10.82%
1/2/2029
-
-
-
-
K1 Speed Inc. DDTL B
S + 6.25%
1.00%
10.58%
1/2/2029
3,643
3,576
3,573
0.15
K1 Speed Inc. - Delayed Draw Term Loan
(12)
S + 6.25%
1.00%
10.89%
1/2/2029
2,429
2,325
2,312
0.10
Sandlot Baseball Borrower Co.
S + 5.75%
1.00%
10.08%
12/27/2028
66,000
64,898
64,947
2.70
Sandlot Baseball Borrower Co. - Delayed Draw Term Loan
(12)
S + 5.75%
1.00%
10.08%
12/27/2028
19,413
19,149
19,159
0.80
456,580
461,691
19.21
Media: Advertising, Printing & Publishing
Nottingham Forest
UK(10)(11)
N/A
N/A
12.94% PIK
7/15/2028
GBP 4,184
5,550
5,212
0.22
Sheffield United F.C.
UK(10)(11)
N/A
N/A
10.70%
7/22/2026
GBP 10,783
13,354
13,445
0.56
Southampton FC
UK(10)(11)
SO + 6.00%
0.00%
10.85%
9/23/2029
GBP 70,000
91,300
86,576
3.60
Southampton FC - Revolving Credit Facility
UK(10)(11)
SO + 6.00%
0.00%
10.85%
9/23/2029
GBP 10,000
13,043
12,368
0.51
123,247
117,601
4.89
Media: Broadcasting & Subscription
E.W. Scripps
(11)
S + 2.68%
0.75%
7.03%
5/1/2026
22,722
21,839
21,983
0.92
E.W. Scripps
(11)
N/A
N/A
5.88%
7/15/2027
-
21,909
22,064
0.92
Media: Diversified & Production
Candle Media Co Ltd
S + 6.10%
0.75%
10.43% (Incl 4.00% PIK)
6/18/2027
45,194
44,764
43,197
1.80
Candle Media Co Ltd -Delayed Draw Term Loan
S + 6.10%
0.75%
10.43% (Incl 4.00% PIK)
6/18/2027
17,891
17,736
17,101
0.71
Getty Images Inc.
(11)
S + 4.60%
0.00%
8.88%
2/19/2026
15,927
15,909
15,854
0.66
78,409
76,152
3.17
Retail
Xponential Fitness LLC
(11)
S + 6.61%
1.00%
11.28%
3/15/2026
87,015
85,883
87,015
3.62
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2024
(in thousands, except shares)
Investments (1)(2)(3)(4)
Footnotes
Reference Rate and Spread (5)
Interest Rate Floor
Interest Rate (6)
Maturity Date
Par Amount / Shares (7)
Cost (8)
Fair Value
Percentage of Net Assets
First Lien Debt (continued)
Services: Business
ASC Engineered Solutions
S + 5.00%
0.75%
9.59%
7/10/2031
50,000
49,511
49,534
2.06
AVSC Holding Corporation
S + 5.00%
0.75%
9.36%
12/5/2031
58,717
57,546
57,555
2.40
AVSC Holding Corporation - Revolving Credit Facility
(12)
S + 5.00%
0.75%
9.33%
12/5/2029
-
(124
)
(124
)
(0.01
)
BDO USA, P.C.
S + 5.00%
2.00%
9.52%
8/31/2028
65,654
64,615
64,661
2.69
Best Trash LLC
S + 5.00%
1.00%
9.33%
7/10/2031
52,369
51,732
51,758
2.14
Best Trash LLC - Delayed Draw Term Loan
(12)
S + 5.00%
1.00%
9.31%
7/10/2031
-
(89
)
(88
)
-
Best Trash LLC - Revolving Credit Facility
(12)
S + 5.00%
1.00%
9.33%
7/10/2031
-
Brock Holdings III, LLC
S + 6.00%
0.50%
10.33%
5/1/2030
24,937
24,473
25,021
1.03
Clarion Events Limited
UK(10)(11)
S + 5.73%
1.00%
9.38%
9/30/2027
52,494
52,029
52,641
2.19
DISA Holdings Corp.
S + 5.00%
0.75%
9.50%
9/9/2028
16,580
16,371
16,376
0.68
DISA Holdings Corp. - Delayed Draw Term Loan
(12)
S + 5.00%
0.75%
9.40%
9/9/2028
1,434
1,364
1,364
0.06
DISA Holdings Corp. - Revolving Credit Facility
(12)
S + 5.00%
0.75%
9.31%
9/9/2028
-
(51
)
(51
)
-
Ethos
(11)
S + 6.00%
1.00%
10.32%
12/30/2029
136,500
133,774
133,770
5.57
Legends Hospitality Holding Company
S + 5.50%
0.75%
10.02% (Incl 2.75% PIK)
8/22/2031
64,198
62,955
62,979
2.62
Legends Hospitality Holding Company - Delayed Draw Term Loan
(12)
S + 5.00%
0.75%
9.31%
8/22/2031
-
(34
)
(34
)
-
Legends Hospitality Holding Company - Revolving Credit Facility
(12)
S + 5.00%
0.75%
9.45%
8/22/2031
0.03
RPX Corporation
S + 5.50%
1.00%
10.02%
8/2/2030
68,705
67,717
67,746
2.82
RPX Corporation
(12)
S + 5.50%
1.00%
9.83%
8/2/2030
-
(85
)
(85
)
-
SurveyMonkey Global Inc.
(15)
S + 5.75%
1.00%
10.08%
5/31/2030
125,927
124,248
124,777
5.19
SurveyMonkey Global Inc. - Revolving Credit Facility
(12)(15)
S + 5.75%
1.00%
10.06%
5/31/2029
-
(177
)
(120
)
-
Townsend
S + 6.50%
1.50%
11.09%
8/1/2030
11,970
11,625
11,636
0.48
Townsend - Revolving Credit Facility
(12)
S + 6.50%
1.50%
10.81%
8/1/2029
-
(71
)
(69
)
-
Travelport Finance (Luxembourg) S.A.R.L
LU(10)(11)
S + 8.26%
1.00%
12.85% (Incl 5.85% PIK)
9/30/2028
55,615
55,283
51,890
2.16
USA Debusk LLC
S + 5.25%
0.75%
9.61%
4/30/2031
16,562
16,329
16,337
0.67
USA Debusk LLC - Delayed Draw Term Loan
(12)
S + 5.25%
0.75%
9.89%
4/30/2031
0.03
USA Debusk LLC - Revolving Credit Facility
(12)
S + 5.25%
0.75%
9.61%
4/30/2030
0.03
790,966
789,500
32.84
Services: Consumer
Cadogan Tate
(11)
S + 5.75%
0.00%
10.27%
10/31/2031
110,500
108,860
108,882
4.53
FEG, Inc.
S + 5.25%
1.00%
9.61%
5/10/2030
85,775
84,177
84,244
3.51
FEG, Inc. - Revolving Credit Facility
(12)
S + 5.25%
1.00%
9.56%
5/10/2030
-
(268
)
(268
)
(0.01
)
Metropolis Technologies Inc.
S + 6.10%
1.00%
10.46%
5/16/2031
125,020
122,788
122,741
5.11
Sotheby's
N/A
N/A
7.38%
10/15/2027
17,260
14,818
17,064
0.71
Vision Purchaser Corp.
S + 6.50%
1.00%
10.75%
6/10/2026
35,616
34,982
35,326
1.46
Vision Purchaser Corp. - Fourth Amended Term Loan
S + 6.50%
1.00%
10.75%
6/10/2026
4,190
3,926
4,156
0.17
Vision Purchaser Corp. - Incremental Term Loan
S + 6.50%
1.00%
10.75%
6/10/2026
2,473
2,457
2,452
0.10
371,740
374,597
15.58
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2024
(in thousands, except shares)
Investments (1)(2)(3)(4)
Footnotes
Reference Rate and Spread (5)
Interest Rate Floor
Interest Rate (6)
Maturity Date
Par Amount / Shares (7)
Cost (8)
Fair Value
Percentage of Net Assets
First Lien Debt (continued)
Sovereign & Public Finance
Cotulla Acquisition Co.
S + 7.00%
1.50%
11.33%
5/3/2029
32,565
31,708
31,717
1.32
Cotulla Acquisition Co. - Delayed Draw Term Loan
S + 7.00%
1.50%
11.33%
5/3/2029
18,973
18,497
18,479
0.77
50,205
50,196
2.09
Telecommunications
Innovate Corp.
(11)
N/A
N/A
8.50%
2/1/2026
24,000
24,019
19,908
0.83
Ligado Networks LLC
(13)
N/A
N/A
15.5% PIK
11/1/2023
12,853
11,071
4,391
0.18
Maxar Technologies Inc. - Revolving Credit Facility
(12)
S + 5.75%
1.00%
10.08%
5/3/2029
7,088
6,811
7,088
0.30
Maxar Technologies Inc.
S + 5.75%
1.00%
10.08%
5/3/2030
98,424
96,365
98,424
4.10
ViaSat, Inc.
(11)
S + 4.61%
0.50%
9.06%
5/30/2030
58,595
55,673
52,113
2.17
193,939
181,924
7.58
Transportation: Cargo
Boasso Global - Delayed Draw Term Loan
(12)
S + 4.75%
0.75%
9.34%
7/1/2028
8,078
7,896
8,076
0.34
Boasso Global - Revolving Credit Facility
(12)
S + 4.75%
0.75%
9.06%
7/1/2026
-
(86
)
(11
)
-
Boasso Global
S + 4.75%
0.75%
9.34%
7/1/2028
58,341
57,048
58,217
2.42
Boasso Global - Delayed Draw Term Loan - Incremental
(12)
S + 4.75%
0.75%
9.06%
7/1/2028
-
(14
)
-
64,844
66,294
2.76
Transportation: Consumer
Beacon Mobility Corp. - Delayed Draw Term Loan
S + 8.60%
0.00%
13.07% PIK
12/31/2025
1,387
1,378
1,386
0.06
Beacon Mobility Corp.
S + 8.60%
0.00%
13.07% PIK
12/31/2025
57,179
56,524
57,133
2.38
57,902
58,519
2.44
Wholesale
DFS Holdings Company, Inc. - Delayed Draw Term Loan
(12)
S + 6.25%
1.00%
10.50%
1/31/2029
1,595
1,543
1,546
0.06
DFS Holdings Company, Inc.
S + 6.25%
1.00%
10.50%
1/31/2029
21,766
21,279
21,319
0.89
22,822
22,865
0.95
Total First Lien Debt
4,380,981
4,375,355
182.12
%
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2024
(in thousands, except shares)
Investments (1)(2)(3)(4)
Footnotes
Reference Rate and Spread (5)
Interest Rate Floor
Interest Rate (6)
Maturity Date
Par Amount / Shares (7)
Cost (8)
Fair Value
Percentage of Net Assets
Second Lien Debt
Chemicals, Plastics & Rubber
Hexion Holdings Corporation
S + 7.54%
0.50%
11.89%
3/15/2030
24,706
24,186
23,316
0.97
Hotel, Gaming & Leisure
Mohegan Gaming & Entertainment
N/A
N/A
8.00%
2/1/2026
24,295
24,038
24,150
1.01
Services: Business
DISA Holdings Corp.
S + 8.50%
2.50%
12.99% (Incl 2.00% PIK)
3/9/2029
15,153
14,810
14,963
0.62
DISA Holdings Corp. - Delayed Draw Term Loan
S + 8.50%
2.50%
12.99% (Incl 2.00% PIK)
3/9/2029
2,841
2,779
2,806
0.12
Trace3 Inc.
S + 7.76%
0.50%
12.42%
10/8/2029
24,250
23,776
24,250
1.01
41,365
42,019
1.75
Total Second Lien Debt
89,589
89,485
3.73
%
Subordinated Debt
Services: Business
Ethos - PIK Note
(9)(11)
N/A
N/A
13.00% PIK
3/31/2030
1,000
0.04
Total Subordinated Debt
0.04
%
Preferred Equity
Banking, Finance, Insurance & Real Estate
Accession Risk Management - Preferred Stock
13.25% PIK
8/15/2033
-
-
Consumer goods: Non-durable
Protective Industrial Products Inc. - Series A Preferred
13.00% PIK
37,027
37,155
1.55
Retail
Xponential Fitness LLC - Series A Preferred Stock
(11)
6.50%
6/25/2029
-
0.01
Services: Consumer
Metropolis Technologies Inc. - Class A Preferred Stock
16.00% (Incl 11.00% PIK)
2/13/2034
19,184
19,073
19,004
0.79
Metropolis Technologies Inc. - Class B Preferred Stock
17.5% PIK
2/13/2034
6,950
6,724
6,689
0.29
Metropolis Technologies Inc. - Warrant
2/13/2034
-
25,986
25,772
1.08
Total Preferred Equity
63,397
63,234
2.64
%
Total Investments - non-controlled/non-affiliated
$
4,534,957
$
4,529,064
188.53
%
Cash and Cash Equivalents
Cash and Cash Equivalents
(14)
$
109,302
$
109,302
4.54
Total Cash and Cash Equivalents
109,302
109,302
4.54
%
Total Portfolio Investments, Cash and Cash Equivalents
$
4,644,259
$
4,638,366
193.07
%
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2024
(in thousands, except shares)
December 31, 2024
Derivative Counterparty
Settlement Date
Amount Purchased
Amount Sold
Fair Value
% of Net Assets
Foreign Currency Forward Contracts
Macquarie
March 19, 2025
$
25,407
GBP 20,029
$
0.0
%
Macquarie
July 14, 2028
$
4,655
GBP 3,578
$
0.0
%
Macquarie
July 15, 2027
$
3,341
GBP 2,557
$
0.0
%
Macquarie
July 31, 2025
$
105,726
GBP 80,000
$
5,598
0.2
%
Macquarie
July 31, 2025
$
1,024
GBP 790
$
0.0
%
Macquarie
July 31, 2025
$
1,251
GBP 988
$
0.0
%
Macquarie
March 31, 2025
$
1,354
CAD 1,845
$
0.0
%
Macquarie
March 31, 2026
$
1,268
CAD 1,718
$
0.0
%
Macquarie
June 30, 2025
$
1,340
CAD 1,823
$
0.0
%
Macquarie
June 30, 2026
$
56,704
CAD 76,721
$
2,224
0.1
%
Macquarie
September 29, 2025
$
1,315
CAD 1,786
$
0.0
%
Macquarie
December 31, 2025
$
1,268
CAD 1,719
$
0.0
%
Macquarie
March 19, 2025
$
39,318
EUR 37,240
$
0.0
%
$
9,441
0.4
%
Interest Rate Swaps as of December 31, 2024
Company Receives
Company Pays
Maturity Date
Notional Amount
Fair Market Value
Upfront (Payments) / Receipts
Change in Unreaized Gains / (Losses)
Interest rate swap
7.11%
SOFR + 3.117%
5/20/2030
$
165,000
$
(859
)
$
-
$
(859
)
Cash collateral
-
-
-
Total derivatives
$
165,000
$
(449
)
$
-
$
(859
)
(1)Security may be an obligation of one or more entities affiliated with the named portfolio company.
(2)All debt and equity investments are income producing unless otherwise noted.
(3)All investments are non-controlled/non-affiliated investments as defined by the 1940 Act. The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities. The provisions of the 1940 Act also classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities.
(4)All debt investments are pledged as collateral under the Company's credit facilities. As defined below (see Note 7), credit facilities, a single investment may be divided into parts that are individually pledged as collateral to our credit facilities.
(5)Variable rate loans to the portfolio companies are indexed to the Secured Overnight Financing Rate ("SOFR") (denoted as "S"), Euro Interbank Offered Rate (“EURIBOR”) (denoted as “E”), or Sterling Overnight Index Average (“SONIA”) (denoted as “SO”) and generally reset periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2024
(6)For portfolio companies with multiple interest rate contracts under a single credit agreement, the interest rate shown is a weighted average current interest rate in effect at December 31, 2024.
(7)Unless noted otherwise, the principal amount (par amount) for all debt securities is denominated in U.S. dollars. Equity investments are recorded as number of shares owned.
(8)Cost represents amortized cost, inclusive of any capitalized paid-in-kind income ("PIK"), for debt securities, and cost plus capitalized PIK, if any, for preferred stock.
(9)These debt investments are not pledged as collateral under any of the Company's Credit Facilities. For other debt investments that are pledged to the Company's Credit Facilities, as defined below (see Note 7. Borrowings), a single investment may be divided into parts that are individually pledged as collateral to our Credit Facilities.
(10)The portfolio company is domiciled in a foreign country. The regulatory jurisdiction of security issuance may be a different jurisdiction than the domicile of the portfolio company. Foreign countries include Luxembourg (denoted as “LU”), and the United Kingdom (denoted as “UK”). Portfolio companies domiciled in a foreign country are not “qualifying assets” under Section 55(a) of the 1940 Act.
(11)The investment is not a qualifying asset under Section 55(a) of the 1940 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, qualifying assets represented approximately 83.0% of total assets as calculated in accordance with regulatory requirements.
(12)Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. See below for more information on the Company’s unfunded commitments (all commitments are first lien, unless otherwise noted).
(13)Investment was on non-accrual status as of December 31, 2024, meaning that the Company has ceased recognizing interest income on these investments. As of December 31, 2024, debt investments on non-accrual status represented 0.0% and 0.0% of total investments on an amortized cost basis and fair value basis, respectively.
(14)Cash and Cash equivalents balance represents amounts held in cash and in the interest-bearing money market fund - Goldman Sachs Financial Square Government Fund (FGTXX). As of December 31, 2024, $76,832 was held in FGTXX and had an average one year yield of 5.06%.
(15)Portfolio company formerly known as Momentive Global.
December 31, 2024
Investments-non-controlled/non-affiliated
Commitment Type
Commitment
Expiration Date
Unfunded
Commitment
Fair
Value
First Lien Debt
ALF Finance
Delayed Draw
12/10/2029
$
29,000
$
Azurite Intermediate Holdings, Inc.
Revolver
3/19/2031
9,500
(127
)
AVSC Holding Corporation
Revolver
12/5/2029
6,283
(124
)
Best Trash LLC
Delayed Draw
7/10/2031
16,250
(88
)
Best Trash LLC
Revolver
7/10/2031
6,060
(71
)
Boasso Global
Delayed Draw
7/1/2028
1,175
Boasso Global
Delayed Draw
7/1/2028
4,038
Boasso Global
Revolver
7/1/2026
6,250
(11
)
Cadogan Tate
Delayed Draw
10/31/2031
59,500
(425
)
Cadogan Tate
Revolver
10/31/2031
18,700
(274
)
Carevet LLC
Delayed Draw
6/18/2029
19,800
(354
)
Carevet LLC
Delayed Draw
6/18/2029
33,000
Carevet LLC
Revolver
6/18/2029
6,600
(59
)
Confluent Holdings LLC
Delayed Draw
3/28/2029
4,318
Red Fox CD Acquisition Corp.
Delayed Draw
3/4/2030
7,364
(127
)
CoreWeave Compute Acquisition Co., IV, LLC
Delayed Draw
8/29/2029
26,094
DFS Holding Company
Delayed Draw
1/31/2029
3,000
(17
)
Disa Holdings Corp.
Revolver
9/9/2028
4,166
(51
)
Disa Holdings Corp.
Delayed Draw
9/9/2028
11,063
(53
)
Elessent Clean Technologies Inc.
Revolver
11/15/2029
13,158
(257
)
Faraday Buyer, LLC
Delayed Draw
10/10/2028
3,514
(19
)
FEG, Inc.
Revolver
5/10/2030
15,000
(268
)
Foundation Risk Partners
Delayed Draw
10/29/2030
4,898
Foundation Risk Partners
Revolver
10/29/2029
1,589
(4
)
Foundation Risk Partners
Revolver
10/29/2029
3,748
(8
)
Frontgrade Technologies Inc.
Revolver
1/9/2028
8,263
-
Great Day Improvements LLC
Revolver
6/13/2030
14,000
(254
)
Highgate Hotels, L.P.
Revolver
11/3/2029
12,500
-
Hotel Equities Group, LLC
Revolver
1/22/2029
10,000
(162
)
Inframark
Delayed Draw
7/31/2031
3,364
(15
)
December 31, 2024
Investments-non-controlled/non-affiliated
Commitment Type
Commitment
Expiration Date
Unfunded
Commitment
Fair
Value
K1 Speed Inc.
Delayed Draw
1/2/2029
3,643
(70
)
Legends Hospitality
Delayed Draw
8/22/2031
3,750
(34
)
Legends Hospitality
Revolver
8/22/2031
6,750
(128
)
Maxar Technologies Inc.
Revolver
5/3/2029
8,417
-
Natural Partners, Inc.
Revolver
11/29/2027
6,563
(122
)
Neptune Platform Buyer, LLC
Delayed Draw
1/19/2031
1,544
(8
)
Parfums Holding Co Inc
Revolver
6/27/2029
6,000
(54
)
ALF Finance
Delayed Draw
12/10/2029
29,000
PetVet Care Centers
Delayed Draw
11/15/2030
6,981
PetVet Care Centers
Revolver
11/15/2029
6,981
(66
)
Pharmalogic Holdings Corp
Delayed Draw
6/21/2030
25,253
(156
)
RPX Corporation
Revolver
8/2/2030
6,122
(85
)
Sandlot Baseball Borrower Co.
Delayed Draw
12/27/2028
13,800
Sky Merger Sub, LLC
Delayed Draw
5/28/2029
12,500
Sky Merger Sub, LLC
Revolver
5/28/2029
25,000
(551
)
SurveyMonkey Global Inc.
Revolver
5/31/2029
13,440
(120
)
Systems Planning and Analysis, Inc.
Delayed Draw
8/16/2027
42,286
(59
)
Systems Planning and Analysis, Inc.
Revolver
8/16/2027
5,827
(52
)
TIC Bidco LTD
Delayed Draw
6/16/2031
1,577
(9
)
Townsend
Revolver
8/1/2029
2,500
(69
)
Trillium FlowControl
Delayed Draw
12/20/2029
3,667
(27
)
Trillium FlowControl
Revolver
12/20/2029
3,000
(22
)
USA Debusk LLC
Delayed Draw
4/30/2031
5,420
(33
)
USA Debusk LLC
Revolver
4/30/2030
1,603
(21
)
Total Unfunded Commitments
$
574,819
$
(4,151
)
The accompanying notes are an integral part of these consolidated financial statements.
MSD Investment Corp.
Consolidated Schedule of Investments
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3)
Footnotes
Reference Rate and Spread (4)
Interest Rate Floor
Interest Rate (5)
Maturity Date
Par Amount / Shares (6)
Cost (7)
Fair Value
Percentage of Net Assets
Investments - non-controlled/non-affiliated
First Lien Debt
Aerospace & Defense
Chromalloy Holdings LLC
(8)
S + 7.00%
1.00%
12.37%
11/23/2028
49,500
$
47,794
$
47,873
5.11
%
Chromalloy Holdings LLC - Revolving Credit Facility
(8)(9)(12)
S + 7.00%
1.00%
12.33%
11/23/2027
-
(144
)
(152
)
(0.02
)
Frontgrade Technologies Inc.
(8)(15)
S + 6.75%
0.75%
12.10%
1/9/2030
9,779
9,592
9,557
1.02
Frontgrade Technologies Inc.
(8)(15)
S + 6.75%
0.75%
12.10%
1/9/2030
50,369
49,046
49,223
5.25
Frontgrade Technologies Inc. - Revolving Credit Facility
(8)(9)(12)(15)
S + 6.75%
0.75%
12.08%
1/9/2028
-
(162
)
(164
)
(0.02
)
Systems Planning and Analysis, Inc.
(8)
S + 6.15%
1.00%
11.33%
8/16/2027
10,713
10,562
10,595
1.13
Systems Planning and Analysis, Inc. - Delayed Draw Term Loan
(8)(12)
S + 6.15%
0.00%
11.33%
8/16/2027
5,522
5,423
5,457
0.58
Systems Planning and Analysis, Inc. - Revolving Credit Facility
(8)(9)(12)
S + 6.15%
1.00%
11.31%
8/16/2027
-
(40
)
(34
)
(0.00
)
The Nordam Group Inc.
S + 5.60%
0.00%
10.96%
4/9/2026
11,644
10,705
10,643
1.14
132,776
132,998
14.19
Automobile
McLaren Finance PLC
UK(10)(11)
N/A
N/A
7.50%
8/1/2026
1,258
1,268
1,096
0.12
Banking, Finance, Insurance & Real Estate
Accession Risk Management - Delayed Draw Term Loan
(8)(9)(12)
S + 6.00%
0.75%
11.43%
11/1/2029
8,982
8,325
8,276
0.88
Foundation Risk Partners - Delayed Draw Term Loan
(8)(9)(12)
S + 5.60%
0.75%
10.93%
10/29/2028
-
(428
)
(435
)
(0.05
)
Highgate Hotels, L.P.
(8)
S + 5.50%
1.00%
10.84%
11/5/2029
100,000
98,085
98,027
10.47
Highgate Hotels, L.P. - Revolving Credit Facility
(8)(9)(12)
S + 5.50%
1.00%
10.85%
10/26/2029
-
(243
)
(247
)
(0.03
)
105,739
105,621
11.27
Beverage, Food & Tobacco
LJ Perimeter Buyer, Inc.
(8)
S + 6.65%
1.00%
12.03%
10/31/2028
19,316
18,819
18,965
2.02
LJ Perimeter Buyer, Inc. - Delayed Draw Term Loan
(8)(9)(12)
S + 6.65%
1.00%
12.03%
10/31/2028
2,483
2,393
2,428
0.26
21,212
21,393
2.28
Capital Equipment
Circor International, Inc.
(8)
S + 6.00%
1.00%
11.40%
10/18/2030
67,241
65,911
65,809
7.02
Circor International, Inc. - Revolving Credit Facility
(8)(9)(12)
S + 6.00%
1.00%
11.35%
10/18/2029
-
(150
)
(165
)
(0.02
)
Faraday Buyer, LLC
(8)
S + 6.00%
1.00%
11.33%
10/11/2028
33,559
32,893
32,897
3.51
Faraday Buyer, LLC - Delayed Draw Term Loan
(8)(9)(12)
S + 6.00%
1.00%
11.33%
10/11/2028
-
(33
)
(34
)
(0.00
)
Trillium FlowControl
LU(8)(10)(11)
S + 5.76%
1.00%
11.11%
6/28/2026
17,730
17,613
17,102
1.82
116,234
115,609
12.33
Chemicals, Plastics & Rubber
Dubois Chemicals Group Inc.
S + 4.60%
0.00%
9.96%
9/30/2026
2,725
2,720
2,702
0.29
Hexion Holdings Corporation
S + 4.65%
0.50%
10.02%
3/15/2029
9,850
9,219
9,444
1.01
11,939
12,146
1.30
Consumer Goods: Durable
Mattress Firm, Inc.
L + 4.25%
0.75%
9.95%
9/25/2028
1,319
1,262
1,306
0.14
Parfums Holding Company, Inc.
(9)
S + 6.26%
1.50%
11.61%
6/30/2026
24,842
24,278
24,309
2.59
Victra Finance Corp.
S + 7.25%
0.75%
12.60%
3/31/2029
14,310
14,013
13,934
1.49
Victra Finance Corp. - Corporate Bond
(9)
N/A
N/A
7.75%
2/15/2026
0.01
39,644
39,645
4.23
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3)
Footnotes
Reference Rate and Spread (4)
Interest Rate Floor
Interest Rate (5)
Maturity Date
Par Amount / Shares (6)
Cost (7)
Fair Value
Percentage of Net Assets
First Lien Debt (continued)
Energy: Oil & Gas
CITGO Petroleum Corp.
N/A
N/A
6.38%
6/15/2026
2,121
2,146
2,113
0.22
Saturn Oil and Gas Inc.
CN(8)(10)(11)
C + 11.50%
1.00%
16.94%
2/28/2026
CAD 101,548
74,803
74,817
7.98
76,949
76,930
8.20
Healthcare & Pharmaceuticals
Bayer Environmental Services
S + 4.38%
0.50%
9.77%
10/4/2029
19,800
18,404
19,489
2.08
Charlotte Buyer, Inc.
S + 5.25%
0.00%
10.61%
2/11/2028
57,937
55,591
58,122
6.20
Natural Partners, Inc.
(8)
S + 4.65%
1.00%
10.04%
11/29/2027
37,765
37,224
37,239
3.97
Natural Partners, Inc. - Revolving Credit Facility
(8)(9)(12)
S + 4.65%
1.00%
9.98%
11/29/2027
-
(39
)
(39
)
(0.00
)
PetVet Care Centers
(8)
S + 6.00%
0.75%
11.36%
11/15/2030
53,523
52,466
52,465
5.60
PetVet Care Centers - Delayed Draw Term Loan
(8)(9)(12)
S + 6.00%
0.75%
11.35%
11/15/2030
-
(67
)
(68
)
(0.01
)
PetVet Care Centers - Revolving Credit Facility
(8)(9)(12)
S + 6.00%
0.75%
11.35%
11/15/2029
-
(137
)
(138
)
(0.01
)
Press Ganey Holdings - 2022 Term Loan
(9)
S + 3.85%
0.75%
9.20%
7/25/2026
4,118
3,937
4,062
0.43
Press Ganey Holdings
S + 3.61%
0.00%
8.97%
7/24/2026
9,072
8,562
8,963
0.96
Press Ganey Holdings - Incremental Term Loan
S + 3.86%
0.75%
9.22%
7/25/2026
14,870
14,282
14,647
1.56
190,223
194,742
20.78
High Tech Industries
Inmar, Inc.
S + 5.50%
1.00%
10.86%
5/1/2026
39,800
38,615
39,236
4.19
Watchguard Technologies, Inc.
S + 5.25%
0.75%
10.61%
7/2/2029
41,603
39,243
39,705
4.24
77,858
78,941
8.43
Hotel, Gaming & Leisure
Chuck E. Cheese
N/A
N/A
6.75%
5/1/2026
17,534
16,693
17,111
1.83
ClubCorp Holdings Inc.
(9)
S + 5.26%
0.00%
10.61%
9/18/2026
81,447
77,787
78,342
8.36
Sandlot Baseball Borrower Co.
(8)
S + 5.75%
1.00%
11.10%
12/27/2028
66,667
65,334
65,333
6.97
Sandlot Baseball Borrower Co. - Delayed Draw Term Loan
(8)(9)(12)
S + 5.75%
1.00%
11.08%
12/27/2028
-
-
-
TouchTunes
S + 5.00%
0.50%
10.35%
4/2/2029
37,604
37,282
37,237
3.97
Viad Corp.
(11)
S + 5.11%
0.50%
10.47%
7/30/2028
3,550
3,545
3,528
0.38
200,643
201,551
21.51
Media: Advertising, Printing & Publishing
Clear Channel Outdoor
(11)
S + 3.76%
0.00%
9.14%
8/21/2026
4,671
4,479
4,616
0.50
Emerald Exhibitions
(11)
S + 5.10%
0.00%
10.46%
5/22/2026
49,750
48,430
49,949
5.33
Sheffield United F.C.
UK(8)(9)(10)(11)
N/A
N/A
13.07%
7/22/2026
14,704
18,200
18,668
1.99
71,109
73,233
7.82
Media: Diversified & Production
Getty Images Inc.
(11)
S + 4.60%
0.00%
9.95%
2/19/2026
17,516
17,481
17,578
1.86
Candle Media Co Ltd
(8)
S + 6.10%
0.75%
11.47%
6/18/2027
43,368
42,803
42,131
4.49
Candle Media Co Ltd -Delayed Draw Term Loan
(8)
S + 6.10%
0.75%
11.47%
6/18/2027
17,169
16,964
16,679
1.78
77,248
76,388
8.13
Retail
Xponential Fitness LLC
(8)(11)
S + 6.76%
1.00%
12.14%
2/28/2025
68,273
67,265
68,273
7.28
MED ParentCo, LP
S + 4.36%
0.00%
9.72%
8/31/2026
99,739
95,446
98,606
10.52
162,711
166,879
17.80
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3)
Footnotes
Reference Rate and Spread (4)
Interest Rate Floor
Interest Rate (5)
Maturity Date
Par Amount / Shares (6)
Cost (7)
Fair Value
Percentage of Net Assets
First Lien Debt (continued)
Services: Business
AVSC Holding Corporation
S + 3.65%
1.00%
8.96%
3/1/2025
16,168
15,281
15,799
1.69
BDO USA, P.C.
(8)
S + 6.00%
2.00%
11.36%
8/31/2028
66,319
65,047
65,060
6.94
Momentive Global
(8)
S + 7.00%
1.00%
12.38%
5/31/2030
63,964
62,731
63,197
6.74
Momentive Global - Revolving Credit Facility
(8)(9)(12)
S + 7.00%
1.00%
12.35%
5/31/2029
-
(103
)
(69
)
(0.01
)
Travelport Finance (Luxembourg) S.A.R.L.
LU(10)(11)
S + 8.26%
1.00%
13.61% (6.61% PIK)
9/30/2028
52,878
52,491
51,043
5.43
Wood Mackenzie, Inc.
(8)
S + 6.75%
0.75%
12.13%
2/1/2030
36,759
35,760
36,402
3.88
Wood Mackenzie, Inc. - Revolving Credit Facility
(8)(9)(12)
S + 6.75%
0.75%
12.08%
2/1/2028
-
(73
)
(29
)
(0.00
)
231,134
231,403
24.67
Services: Consumer
CSC Serviceworks
(9)
S + 4.26%
0.75%
9.62%
3/4/2028
0.02
Equinox Holdings, Inc.
(9)
S + 3.00%
1.00%
8.61%
3/8/2024
35,976
34,994
35,111
3.74
Vision Purchaser Corp.
(8)
S + 6.40%
1.00%
11.75%
6/10/2025
28,645
28,389
27,914
2.98
Vision Purchaser Corp. - Incremental Term Loan
(8)
S + 6.40%
1.00%
11.75%
6/10/2025
2,498
2,473
2,434
0.26
66,058
65,651
7.00
Transportation: Cargo
Boasso Global
(8)
S + 6.75%
0.75%
12.11%
7/3/2028
58,930
57,326
57,415
6.12
Boasso Global - Delayed Draw Term Loan
(8)(9)(12)
S + 6.75%
0.75%
12.11%
10/3/2024
7,585
7,363
7,371
0.79
Boasso Global - Revolving Credit Facility
(8)(9)(12)
S + 6.75%
0.75%
12.08%
7/1/2026
-
(144
)
(161
)
(0.02
)
64,545
64,625
6.89
Transportation: Consumer
Virgin Atlantic
UK(8)(9)(10)(11)
S + 3.25%
0.00%
8.91%
11/17/2026
29,931
28,359
28,507
3.04
Beacon Mobility Corp.
(8)(9)
S + 8.60%
0.00%
14.08% PIK
12/31/2025
50,185
48,903
48,895
5.22
Beacon Mobility Corp. - Delayed Draw Term Loan
(8)(9)(12)
S + 8.60%
0.00%
13.98%
12/31/2025
0.08
78,054
78,195
8.34
Telecommunications
FirstLight Fiber - Initial Term Loan
S + 3.61%
0.00%
8.97%
7/23/2025
14,331
13,886
14,080
1.50
FirstLight Fiber - 2023 Incremental Term Loan
(8)
S + 4.11%
0.00%
9.47%
7/23/2025
15,500
15,367
15,490
1.65
Innovate Corp.
(11)
N/A
N/A
8.50%
2/1/2026
24,000
24,035
18,375
1.96
Ligado Networks LLC
(9)(13)
N/A
N/A
15.50% PIK
11/1/2023
12,853
11,071
2,429
0.26
Maxar Technologies Inc.
(8)
S + 7.25%
1.00%
12.60%
5/3/2030
82,006
79,697
79,777
8.51
Maxar Technologies Inc. - Revolving Credit Facility
(8)(9)(12)
S + 7.25%
1.00%
12.60%
5/3/2029
4,202
3,861
3,854
0.41
ViaSat, Inc.
(11)
S + 4.61%
0.50%
9.96%
5/30/2030
49,875
46,460
48,815
5.21
194,377
182,820
19.50
Wholesale
DFS Holdings Company, Inc.
(8)
S + 7.10%
0.75%
12.46%
1/31/2029
21,988
21,406
21,436
2.29
DFS Holdings Company, Inc. - Delayed Draw Term Loan
(8)(9)(12)
S + 7.10%
0.75%
12.46%
1/31/2029
1,611
1,538
1,541
0.16
22,944
22,977
2.45
Total First Lien Debt
1,942,665
1,942,843
207.25
%
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3)
Footnotes
Reference Rate and Spread (4)
Interest Rate Floor
Interest Rate (5)
Maturity Date
Par Amount / Shares (6)
Cost (7)
Fair Value
Percentage of Net Assets
Second Lien Debt
Chemicals, Plastics & Rubber
Hexion Holdings Corporation
(9)
S + 7.54%
0.50%
12.89%
3/15/2030
35,000
34,174
29,269
3.12
Consumer goods: Non-durable
Protective Industrial Products Inc.
(8)
S + 8.36%
1.00%
13.72%
12/30/2028
34,199
33,512
33,626
3.59
Hotel, Gaming & Leisure
Mohegan Gaming & Entertainment
(9)
N/A
N/A
8.00%
2/1/2026
22,550
22,165
21,282
2.27
Services: Business
DISA Holdings Corp.
(8)
S + 10.00%
0.75%
15.36% (Incl 2.00% PIK)
3/9/2029
14,869
14,477
14,554
1.55
DISA Holdings Corp. - Delayed Draw Term Loan
(8)(9)
S + 10.00%
0.75%
15.36% (Incl 2.00% PIK)
3/9/2029
2,788
2,717
2,729
0.29
Trace3 Inc.
(8)
L + 7.76%
0.50%
13.17%
10/8/2029
33,750
32,995
33,080
3.53
50,189
50,363
5.37
Services: Consumer
Midwest Veterinary Partners LLC
(8)
S + 7.60%
0.75%
12.96%
4/26/2029
50,000
50,011
46,886
5.00
Southern Veterinary Partners LLC
S + 7.85%
1.00%
13.21%
10/5/2028
45,000
44,157
44,794
4.78
94,168
91,680
9.78
Telecommunications
FirstLight Fiber - 2nd Lien Term Loan
(9)
S + 7.61%
0.00%
12.97%
7/23/2026
0.01
Total Second Lien Debt
234,306
226,318
24.14
%
Preferred Equity
Banking, Finance, Insurance & Real Estate
Accession Risk Management - Preferred Stock
(8)(9)
13.25% PIK
0.01
Consumer goods: Non-durable
Protective Industrial Products Inc. - Series A Preferred
(8)(9)
13.00% PIK
31,597
31,469
27,600
2.94
Retail
Xponential Fitness LLC - Series A Preferred Stock
(8)(9)(11)
6.50%
7/27/2031
0.02
Total Preferred Equity
31,846
27,892
2.97
Total Investments - non-controlled/non-affiliated
$
2,208,817
$
2,197,053
234.35
%
Cash and Cash Equivalents
Cash and Cash Equivalents
(14)
$
98,606
$
98,606
10.52
Total Cash and Cash Equivalents
98,606
98,606
10.52
Total Portfolio Investments, Cash and Cash Equivalents
$
2,307,423
$
2,295,659
244.87
%
December 31, 2023
Derivative Counterparty
Settlement Date
Amount Purchased
Amount Sold
Fair Value
% of Net Assets
Foreign Currency Forward Contracts
Macquarie
March 20, 2024
$
76,165
CAD 101,611
$
(663
)
(0.0
)%
Macquarie
March 20, 2024
$
18,870
GBP 14,904
$
(134
)
(0.0
)%
$
(797
)
(0.0
)%
(1)Security may be an obligation of one or more entities affiliated with the named portfolio company.
(2)All debt and equity investments are income producing unless otherwise noted.
(3)All investments are non-controlled/non-affiliated investments as defined by the 1940 Act. The provisions of the 1940 Act classify investments based on the level of control that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when we own 25% or less of the portfolio company’s voting securities and “controlled” when we own more than 25% of the portfolio company’s voting securities. The provisions of the 1940 Act also classify investments further based on the level of ownership that we maintain in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when we own less than 5% of a portfolio company’s voting securities and “affiliated” when we own 5% or more of a portfolio company’s voting securities.
(4)Variable rate loans to the portfolio companies are indexed to the London Interbank Offered Rate” (“LIBOR”, or “LIBO Rate”) (denoted as “L”), Canadian Dollar Offered Rate (“CDOR”) (denoted as “C”) or Secured Overnight Financing Rate (“SOFR”) (denoted as "S") and generally reset periodically. For each loan, the Company has indicated the reference rate used and provided the spread and the interest rate in effect as of December 31, 2023.
(5)For portfolio companies with multiple interest rate contracts under a single credit agreement, the interest rate shown is a weighted average current interest rate in effect at December 31, 2023.
(6)Unless noted otherwise, the principal amount (par amount) for all debt securities is denominated in U.S. dollars. Equity investments are recorded as number of shares/shares owned.
(7)Cost represents amortized cost, inclusive of any capitalized paid-in-kind income (“PIK”), for debt securities, and cost plus capitalized PIK, if any, for preferred stock.
(8)These investments were valued using unobservable inputs and are considered Level 3 investments. Fair value was determined in good faith by or under the direction of the Board (see Note 2 and Note 6), pursuant to the Company’s valuation policy.
(9)These debt investments are not pledged as collateral under any of the Company's credit facilities. For other debt investments that are pledged to the Company's, as defined below (see Note 7), credit facilities, a single investment may be divided into parts that are individually pledged as collateral to our credit facilities.
(10)The portfolio company is domiciled in a foreign country. The regulatory jurisdiction of security issuance may be a different jurisdiction than the domicile of the portfolio company. Foreign countries include Canada (denoted as “CN”), Luxembourg (denoted as “LU”), Spain (denoted as “ES”) and the United Kingdom (denoted as “UK”).
(11)The investment is not a qualifying asset under Section 55(a) of the 1940 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, 2023, qualifying assets represented approximately 82.6% of total assets as calculated in accordance with regulatory requirements.
(12)Position or portion thereof is an unfunded loan commitment, and no interest is being earned on the unfunded portion, although the investment may be subject to unused commitment fees. Negative cost and fair value results from unamortized fees, which are capitalized to the investment cost. See below for more information on the Company’s unfunded commitments (all commitments are first lien, unless otherwise noted).
(13)Investment was on non-accrual status as of December 31, 2023, meaning that the Company has ceased recognizing interest income on these investments. As of December 31, 2023, debt investments on non-accrual status represented 0.5% and 0.1% of total investments on an amortized cost basis and fair value basis, respectively
(14)Cash and Cash equivalents balance represents amounts held in cash and in the interest-bearing money market fund - Goldman Sachs Financial Square Government Fund (FGTXX). As of December 31, 2023, $69,571 was held in FGTXX and had an average one year yield of 4.94%.
(15)Portfolio company formerly known as (fka) Management Consulting Research, LLC.
December 31, 2023
Investments-non-controlled/non-affiliated
Commitment Type
Commitment
Expiration Date
Unfunded
Commitment
Fair
Value
First Lien Debt
Accession Risk Management
Delayed Draw
11/1/2029
$
40,719
$
(578
)
Beacon Mobility Corp.
Delayed Draw
12/31/2025
(15
)
Boasso Global
Delayed Draw
10/3/2024
1,750
(19
)
Boasso Global
Revolver
7/1/2026
6,250
(161
)
Chromalloy Holdings LLC
Revolver
11/23/2027
4,615
(152
)
Circor International, Inc.
Revolver
10/18/2029
7,759
(165
)
DFS Holding Company
Delayed Draw
1/31/2029
3,000
(30
)
Faraday Buyer, LLC
Delayed Draw
10/11/2028
3,514
(34
)
Foundation Risk Partners
Delayed Draw
10/29/2028
45,000
(435
)
Frontgrade Technologies Inc.
Revolver
1/9/2028
7,211
(164
)
Highgate Hotels, L.P.
Revolver
10/26/2029
12,500
(247
)
LJ Perimeter Buyer, Inc
Delayed Draw
10/31/2028
3,042
(10
)
Maxar Technologies Inc.
Revolver
5/3/2029
8,587
(233
)
Momentive Global
Revolver
5/31/2029
5,714
(69
)
Natural Partners, Inc.
Revolver
11/29/2027
2,813
(39
)
PetVet Care Centers
Delayed Draw
11/15/2030
6,981
(68
)
PetVet Care Centers
Revolver
11/15/2029
6,981
(138
)
Sandlot Baseball Borrower Co.
Delayed Draw
12/27/2028
33,333
-
Systems Planning and Analysis, Inc.
Delayed Draw
8/16/2027
1,165
(4
)
Systems Planning and Analysis, Inc.
Revolver
8/16/2027
3,136
(34
)
Wood Mackenzie, Inc.
Revolver
2/1/2028
2,963
(29
)
Total Unfunded Commitments
$
207,625
$
(2,624
)
The accompanying notes are an integral part of these consolidated financial statements.
MSD Investment Corp.
Notes to Consolidated Financial Statements (Unaudited)
(in thousands, except share/per share data, percentages and as otherwise noted)
Note 1. Organization
MSD Investment Corp. (together with its consolidated subsidiaries, the “Company”) was originally established as a Delaware limited liability company on February 18, 2021, converted to a Maryland limited liability company named MSD Investment, LLC on October 22, 2021 and converted into a Maryland corporation (the “Corporate Conversion”) effective January 1, 2022, pursuant to Articles of Conversion filed on December 28, 2021. In connection with the Corporate Conversion the Company changed its name from “MSD Investment, LLC” to “MSD Investment Corp.” As a result of the Corporate Conversion, the issued and outstanding equity interests of MSD Investment, LLC were converted into a corresponding number of shares of common stock, par value $0.001 per share, of the Company (the “Shares,” and each a “Share”), and each holder of equity interests of MSD Investment, LLC became a shareholder of the Company (collectively the “Shareholders”). The Company is structured as an externally managed, non-diversified closed-end investment company. On December 29, 2021, the Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”), as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
On January 1, 2023, MSD Partners, L.P., a Delaware limited partnership (“MSD”) completed a previously announced business combination with BDT & Company Holdings, L.P. (the “Transaction”), and its subsidiaries, which includes BDT Capital Partners, LLC (“BDT Capital”), an SEC-registered investment adviser, and BDT & MSD Partners, LLC, an SEC registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”). Upon the closing of the Transaction, BDT & Company Holdings, L.P. was renamed BDT & MSD Holdings, L.P. (“BDT”) and BDT, and its subsidiaries, became affiliates of the Adviser (as defined below) and the Company. BDT, together with BDT Capital, MSD and their affiliated entities, are collectively referred to as “BDT & MSD.”
The Company’s investment objective is to invest in a broad range of portfolio companies, primarily through senior secured loans and notes where we believe the probability of losses are limited and the opportunity to generate attractive risk adjusted returns is maximized. The Adviser (as defined below) expects to execute this strategy by continuing its long history of leveraging its network to source and diligence what it believes to be attractive opportunities across a broad range of industries. The strategy will be executed by a team of experienced investment professionals who have more than a 20-year history of successfully deploying capital in both liquid and illiquid investments.
On November 24, 2021, the Company entered into an investment advisory agreement (the “Original Advisory Agreement”) with MSD (in its capacity as the Company’s investment adviser, the “Adviser”), under which the Adviser provided certain investment advisory and management services to the Company. Additionally, the Company previously entered into an administrative services agreement (the “Original Administration Agreement”) with MSD (in its capacity as the Company’s administrator, the “Administrator”) under which the Administrator provided certain administrative and other services necessary for the Company to operate.
Effective January 1, 2023, the Company entered into a new investment advisory agreement (the “Advisory Agreement”), by and between the Company and the Adviser, and a new administrative agreement (the “Administration Agreement” and together with the Advisory Agreement, the “New Agreements”), by and between the Company and the Administrator. The terms of the New Agreements are substantially identical to those of the Original Advisory Agreement and Original Administrative Agreement, except that the reimbursement required to be made to the Administrator by the Company pursuant to the Administration Agreement will be capped such that the amounts will not exceed 0.15% of total gross assets of the Company in any one calendar year.
MSD BDC SPV I, LLC (“SPV I”) is a Delaware limited liability company formed on June 14, 2021 and commenced operations on December 21, 2021, the date the first investment transaction closed. MSD BDC SPV II, LLC (“SPV II”) is a Delaware limited liability company formed on January 4, 2023 and commenced operations on March 31, 2023. MSD BDC CLO I, LLC (“CLO I” and together with SPV I, and SPV II, the “SPVs”) is a Delaware limited liability company formed on August 18, 2023 and commenced operations on November 15, 2023. The SPVs’ investment objectives are the same as the Company’s. The SPVs are wholly owned subsidiaries of the Company and are consolidated in these consolidated financial statements, in accordance with the Company’s consolidation policy discussed in Note 2 Significant Accounting Policies.
The Company may from time to time conduct a private offering (each a “Private Offering”) of its Shares (i) to “accredited investors,” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “1933 Act”), and (ii) in the case of Shares sold outside the United States, to persons that are not “U.S. persons,” as defined in Regulation S under the 1933 Act, in reliance on exemptions from the registration requirements of the 1933 Act. At each closing of the Private Offering, each investor makes a capital commitment (“Capital Commitments”) to purchase Shares pursuant to a subscription agreement entered into with the Company. Investors are required to fund drawdowns to purchase the Company’s Shares up to the amount of their Capital Commitments on an as-needed basis each time the Company delivers a notice to investors.
The first closing date of a Private Offering (the “Initial Closing Date”) took place on December 21, 2021. Additional closings are expected to occur from time to time as determined by the Company (each, a “Subsequent Closing”), and the final such closing (the “Final Closing”) will occur no later than the fifth anniversary of the Initial Closing Date, subject to a one-year extension at the discretion of the Board of Directors of the Company (the “Board”) (the “Commitment Period”). The proceeds received at the Initial Closing Date were used to acquire the initial portfolio of the Company from several funds managed by the Adviser or its affiliates prior to the Corporate Conversion. Following the Initial Closing Date, proceeds from the sale of Shares in Subsequent Closings were used to acquire investments in accordance with the Company’s investment guidelines and for other permitted purposes.
On November 29, 2023, the Company issued 250 shares of its 12.0% Series A Cumulative Preferred Stock (the “Series A Preferred Stock”) for an aggregate offering price of $0.75 million. Each individual investor in the offering was entitled to purchase only one share of Series A Preferred Stock. Each holder of Series A Preferred Shares is entitled to a liquidation preference of $3,000.00 per share (the “Liquidation Value”), plus additional amounts as set forth in the Articles Supplementary to the Company’s Articles of Incorporation Relating to the 12.0% Series A Cumulative Preferred Stock. With respect to distributions, including the payment of dividends and distribution of the Company’s assets upon dissolution, liquidation, or winding up, the Series A Preferred Stock will be senior to all other classes and series of the Company’s common shares, whether such class or series is now existing or is created in the future, to
the extent of the aggregate Liquidation Value and all accrued but unpaid dividends and any applicable redemption premium on the Series A Preferred Stock. Holders of shares of the Series A Preferred Stock will not, however, participate in any appreciation in the value of the Company.
Note 2. Significant Accounting Policies
Basis of Presentation
Management has determined that the Company meets the definition of an investment company and adheres to 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”). Accounting principles generally accepted in the United States (“U.S. GAAP”) for an investment company requires investments to be recorded at fair value.
The accompanying consolidated financial statements and related financial information have been prepared in accordance with U.S. GAAP and pursuant to the requirements for reporting on Form 10-K and Regulation S-X under the 1933 Act.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the reported amounts of income and expenses during the reporting period and (iii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ materially from those estimates under different assumptions and conditions.
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 consolidates the results of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid investments, such as money market funds, with original maturities of 90 days or less. Cash and cash equivalents are carried at cost, which approximates fair value. The Company deposits its cash and cash equivalents with financial institutions and, at times, these deposits may exceed the Federal Deposit Insurance Corporation insured limit.
Restricted Cash
Restricted cash consists of cash collateral that had been pledged to cover obligations of the Company according to its derivative contracts and demand deposits held at Goldman Sachs International, in addition to cash funded to escrow for prefunding deals. Management believes the credit risk related to its demand deposits is minimal.
Investments
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received from a sale or paydown and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
Valuation of Investments
The Company measures the value of its investments in accordance with ASC Topic 820, Fair Value Measurement and Disclosures (“ASC 820”). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable and willing and able to transact. In accordance with ASC 820, the Company considers its principal market to be the market that has the greatest volume and level of activity.
ASC 820 defines hierarchical levels of fair value that prioritize and rank the level of observability of inputs used in determination of fair value. These levels are summarized below:
•Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. Publicly listed equities and debt securities, publicly listed derivatives and money market/short-term investment funds are generally included in Level 1.
•Level 2 - Valuation inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date. In certain cases, debt and equity securities are valued on the basis of prices from orderly transactions for similar investments in active markets between market participants and provided by reputable dealers or independent pricing services. Investments generally included in this category are less liquid and restricted securities listed in active markets, securities traded in markets that are not active, government and agency securities, and certain over-the-counter derivatives where the fair value is based on observable inputs.
•Level 3 - Valuation inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant judgment or estimation. Investments generally 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.
In certain cases, the inputs used to measure fair value may fall within different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Depending on the relative liquidity in the markets for certain investments, the Company may transfer investments to Level 3 if it determines that observable quoted prices, obtained directly or indirectly, are severely limited, or not available, or otherwise not reliable. Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and the consideration of factors specific to the investment.
Under procedures established by the Board, the Company intends to value investments for which market quotations are readily available at such market quotations. Assets listed on an exchange will be valued at their last sales prices as reported to the consolidated quotation service at 4:00 p.m. Eastern Time on the date of determination. If no such sales of such securities occurred, such securities will be valued at the bid price as reported by an independent, third-party pricing service on the date of determination. Debt and equity securities that are not publicly traded or whose market prices are not readily available will be valued at fair value as determined by the Adviser as the Company's valuation designee (in such capacity, the “Valuation Designee”), subject to the overall supervision of the Board. Such determination of fair values may involve subjective judgments and estimates, although the Valuation Designee will also engage independent valuation providers to review the valuation of each investment that constitutes a material portion of the Company’s portfolio and that does not have a readily available market quotation at least once annually. With respect to unquoted securities, the Valuation Designee, together with any independent valuation advisers, and subject to the oversight of the Board, will fair value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. The types of factors that may be considered in determining the fair values of investments include, but are not limited to, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings. The Company intends to retain one or more independent providers of financial advisory services to assist the Valuation Designee and the Board by performing certain third-party valuation services. The Company may appoint additional or different third-party valuation firms in the future.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs with respect to a fair-valued portfolio company or comparable company, the Valuation Designee will use the pricing indicated by the external event to corroborate and/or assist the Company in the valuation of such portfolio company. Because the Company expects that there will not be readily available market quotations for many of the investments in its portfolio, the Company expects to value many of its investments at fair value as determined in good faith by the Valuation Designee using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market quotation, the fair value of the Company’s investments may differ significantly from the values that would have been used had readily available market quotations existed for such investments, and the differences could be material.
On a quarterly basis, with respect to investments for which market quotations are not readily available, the Valuation Designee will undertake a multi-step valuation process, as described below:
•Securities for which no market prices are readily available or reliable will be reviewed as part of the valuation process and preliminarily fair valued based on our estimate, or an independent third party’s estimate, of the fair value as of the date of determination, and provided to the Adviser’s valuation committee;
•Preliminary valuation conclusions are documented and discussed with the Adviser’s valuation committee;
•Agreed upon valuation recommendations are presented to the audit committee of the Board (the “Audit Committee”);
•At least once annually, the valuation for each investment that constitutes a material portion of the Company’s portfolio and that does not have a readily available market quotation will be reviewed by an independent valuation firm; and
•The Valuation Designee will provide the Board with the information relating to the fair value determination pursuant to the Company’s valuation policy in connection with each quarterly Board meeting, will comply with the periodic board reporting requirements set forth in the Company’s valuation policy, and will provide the Board with its determination of the fair value of each investment in good faith.
The Company utilizes several valuation techniques that use unobservable pricing inputs and assumptions in determining the fair value of its Level 3 investments. The valuation techniques, as well as the key unobservable inputs that have a significant impact on the Company’s investments classified and valued as Level 3 in the valuation hierarchy, are described in Note 6. Fair Value Measurements. The unobservable inputs and assumptions may differ by asset and in the application of the Company's valuation methodologies. The reported fair value estimates could vary materially if the Company had chosen to incorporate different unobservable inputs and assumptions.
All values assigned to investments by the procedures established by the Board will be binding on all Company investors. When pricing of the Company’s Shares is necessary outside of the normal quarterly process, the Adviser will, among other things, review whether, to its knowledge, significant events have occurred since the last quarterly valuation which might affect the fair value of any of the Company's portfolio investments.
The determination of fair value involves subjective judgments and estimates. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market quotation, the fair value of investments may differ materially from the values that would have been determined had a readily available market quotation existed for such investments. Further, such investments are generally less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment that does not have a readily available market quotation in a forced or liquidation sale, the Company could realize significantly less value than the value recorded by the Company.
Securities and Exchange Commission (“SEC”) Disclosure Update and Simplification
The SEC adopted Rule 2a-5 under the 1940 Act (“Rule 2a-5”) providing a framework for fund valuation practices. Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 permits (but does not require) boards, subject to board oversight and certain other conditions, to designate certain parties to perform fair value determinations. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must determine the fair value of a security. Rule 31a-4 under the 1940 Act (“Rule 31a-4”) provides the recordkeeping requirements associated with fair value determinations. On August 3, 2023, the Board elected to designate the Adviser as the
Company’s Valuation Designee, which became effective for the quarter ended September 30, 2023. The Company has adopted certain revisions to its valuation policies and procedures in order to comply with the applicable requirements of Rule 2a-5 and Rule 31a-4.
Receivables/Payables From Investments Sold/Purchased
Receivables/payables from investments sold/purchased consist of amounts receivable or payable by the Company for transactions that have not settled at the reporting date.
Foreign Currency Transactions
Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars 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 U.S. dollars based upon currency exchange rates prevailing on the transaction dates.
The Company includes net changes in fair values on investments held resulting from foreign exchange rate fluctuations in translation of assets and liabilities in foreign currencies on the Consolidated Statements of Operations, if any. Foreign security 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 more volatile than those of comparable U.S. companies or U.S. government securities.
Financial and Derivative Instruments
We invest in derivative instruments, including foreign currency forward contracts and interest rate swaps. Foreign currency forward contracts are recognized at fair value in the consolidated financial statements. Foreign currency forward contracts are not designated as hedging instruments, and as a result, changes in fair value through net change in unrealized appreciation (depreciation) on foreign currency forward contracts are presented in the Consolidated Statements of Operations. Realized gains and losses that occur upon the cash settlement of the foreign currency forward contracts are included in net realized gains (losses) on foreign currency forward contracts on the Consolidated Statements of Operations. The Company uses interest rate swaps as derivative instruments to hedge the Company’s fixed rate debt, and therefore the periodic payment will be recognized as a component of interest expense in the Consolidated Statements of Operations. The change in fair value for the effective hedge will also be recognized as a component of interest expense in the Consolidated Statements of Operations, which is offset within interest expense by an equal, but opposite, fair value change for the hedged risk on our hedged Notes.
Revenue Recognition
Interest Income
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums are recorded as interest income in the current period.
The Company has investments in its portfolio that contain PIK provisions. PIK represents interest that is accrued and recorded at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statement of Operations. 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 income is generally reversed through interest income. To maintain the Company’s status as a RIC after the Corporate Conversion, this non-cash source of income must be paid out to shareholders in the form of dividends, even though the Company has not yet collected cash.
If the portfolio company's valuation indicates the value of the PIK security is not sufficient to cover the contractual PIK interest, the Company will not accrue additional PIK interest income and will record an allowance for any accrued PIK interest receivable as a reduction of interest income in the period the Company determines it is not collectible.
Debt investments are generally placed on non-accrual status when interest payments are at least 90 days past due or there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
Dividend Income
Dividend income on preferred equity securities 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 securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.
Other Income
The Company may receive various fees in the ordinary course of business such as structuring, consent, waiver, amendment, syndication fees as well as fees for managerial assistance rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered.
Organization Expenses and Offering Expenses
Costs associated with the organization of the Company were expensed on the Company's consolidated statement of operations as incurred. These expenses consist primarily of legal fees and other costs of forming and organizing the Company.
Costs associated with the offering of the Company’s Shares, and any additional expenses for other offerings, are capitalized and included in prepaid expenses and other assets on the consolidated statement of assets and liabilities and amortized over a twelve-month period beginning with the commencement of operations or the point in time when the cost was incurred if after the commencement of operations. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s Private Offering of its Shares.
Deferred Financing Costs and Debt Issuance Costs
Deferred financing and debt issuance costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. These expenses are deferred and amortized into interest expense over the life of the related debt instrument using the straight-line method. Debt issuance costs are presented in the consolidated statement of assets and liabilities as a direct deduction of the debt liability to which the costs pertain.
Income Taxes
The Company has elected to be regulated as a BDC under the 1940 Act. The Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under the Code. So long as the Company maintains its tax treatment as a RIC, it generally will not be subject to U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.
To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its “investment company taxable income” for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.
The Company is generally subject to a 4% nondeductible federal excise tax if it does not distribute to its shareholders in a timely manner in each taxable year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (iii) any income realized, but not distributed, in prior years.
The Company follows ASC 740, Income Taxes (“ASC 740”). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the Company to evaluate tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
The Company’s tax returns are subject to tax examination by major taxing authorities for a period of three years from when they are filed. The Company is additionally not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. As a result, no income tax liability or expense has been recorded on the accompanying consolidated financial statements as of both December 31, 2024 and December 31, 2023. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statement of operations. During the year ended December 31, 2024, the Company did not incur any interest or penalties.
Prior to the Corporate Conversion, the Company was treated as a partnership for U.S. federal income tax purposes and incurred no U.S. federal, state, city, or foreign income tax liability on income earned during that period. Instead, each partner reported his or her share of the Company's income, capital gain/(loss) and credit on his or her own tax return. Consequently, no provision for income taxes had been recorded in the consolidated financial statements.
Distributions
To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its Shareholders. Distributions to Shareholders are recorded on the record date. All distributions will be paid at the discretion of the Board and will depend on the Company's earnings, financial condition, maintenance of the Company's tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time.
Segment Reporting
In accordance with ASC Topic 280, the Company has determined that it has a single operating and reporting segment with an investment objective to generate both net investment income and, to a lesser extent, capital appreciation through debt and preferred equity investments. The CODM, which comprises the Company’s chief executive officer and chief financial officer, assesses the performance and makes operating decisions of the Company on a consolidated basis, primarily based on the Company’s net increase in shareholders' equity resulting from operations. In addition to numerous other factors and metrics, the CODM utilizes net investment income as a key metric in determining the amount of dividends to be distributed to the Company's shareholders. As the Company's operations comprise a single reporting segment, the segment assets are reflected on the accompanying consolidated balance sheet as “total assets,” and the significant segment expenses are listed on the accompanying consolidated statement of operations.
Recent Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update 2023-07, (“ASU 2023-07”), Improvements to Reportable Segment Disclosures (Topic 280), which updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of a segment's profit or loss. The ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Adoption of the
ASU should be applied retrospectively to all prior periods presented in the financial statements. Early adoption is also permitted. The Company has evaluated and will continue to evaluate the adoption of ASU 2023-07 and determined it has no material impact on its consolidated financial information at this time.
In December 2023, the FASB issued Accounting Standards Update No. 2023-09, (“ASU 2023-09”), Improvements to Income Tax Disclosures (Topic 740), which requires enhanced disclosures in connection with an entity's effective tax rate reconciliation and additional disclosures about income taxes paid. The ASU 2023-09 is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is also permitted for annual financial statements that have not yet been issued or made available for issuance. The Company has evaluated and will continue to evaluate the adoption of ASU 2023-09 and determined it has no material impact on its consolidated financial information at this time.
In December 2024, the FASB issued Accounting Standards Update No. 2024-04, "Debt with Conversion and Other Options (“ASU 2024-04”): Induced Conversions of Convertible Debt Instruments”, which clarifies the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as induced conversions rather than as debt extinguishments. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years, though early adoption is permitted. The Company has evaluated and will continue to evaluate the adoption of ASU 2024-04 and determined it has no material impact on its consolidated financial statements at this time
Note 3. Agreements and Related Party Transactions
Initial Portfolio Acquisition
Commencing on the Initial Closing Date and concluding prior to the Company's election to be regulated as a BDC, the Company completed its purchase of a portfolio of investments (the “Initial Portfolio”) pursuant to agreements entered into with several funds managed by the Adviser (the “Initial Portfolio Acquisition”). Subsequent to the Initial Portfolio Acquisition the Company elected to be regulated as a BDC.
Investment Advisory Agreement
On November 24, 2021, the Company entered into the Original Advisory Agreement with the Adviser. Effective January 1, 2023, the Company entered into the Advisory Agreement. The terms of the Advisory Agreement are substantially identical to those of the Original Advisory Agreement. Pursuant to the Advisory Agreement the Adviser is responsible for managing the investment and reinvestment of the assets of the Company, subject to the supervision of the Board, in accordance with the investment objective, policies and restrictions that are set forth in the Company’s registration statement on Form 10. The Adviser is also responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis. For its services, the Adviser is entitled to receive a base management fee and an incentive fee as set forth in the Advisory Agreement.
The Advisory Agreement may be terminated at any time, without the payment of any penalty upon 60 days' written notice, by the vote of a majority of the Board, or by a majority of the holders of our outstanding voting securities, in accordance with the requirements of the 1940 Act, or by the Adviser. Additionally, the Advisory Agreement will automatically terminate in event of an assignment as defined in the 1940 Act. Unless earlier terminated, the Advisory Agreement will remain in effect for a period of two years from January 1, 2023 and will remain in effect year to year thereafter if approved annually (i) by a majority of the Board who are not “interested persons” as defined in section 2(a)(19) of the 1940 Act (each an “Independent Director”) and (ii) the Board or the holders of a majority of the Company's outstanding voting securities.
From time to time, the Adviser may pay amounts owed by the Company to third-party providers of goods and services, and the Company will subsequently reimburse the Adviser for such amounts paid on its behalf. Amounts payable to the Adviser are settled in the normal course of business without formal payment terms.
The Company pays the Adviser a fee for its services under the Advisory Agreement consisting of two components: a management fee (the “Management Fee”) and an incentive fee (the “Incentive Fee”). The cost of both the Management Fee and the Incentive Fee will ultimately be borne by the Shareholders.
Management Fee
The Management Fee is payable quarterly in arrears and shall be calculated as follows:
•Prior to an initial public offering of the Company’s common stock and/or listing on a nationally recognized stock exchange (an “Exchange Listing”), the Management Fee shall be calculated at a rate of 0.1875% per quarter (0.75% per annum) of the Company’s average gross asset value, excluding cash and cash equivalents, at the end of the Company's two most recently completed calendar quarters.
•Following an Exchange Listing, the Management Fee will be calculated at a rate of 0.3125% per quarter (1.25% per annum) of the Company's average gross asset value, excluding cash and cash equivalents, at the end of the Company's two most recently completed calendar quarters (or for the first quarter following an Exchange Listing, the average gross assets as of the date of the Exchange Listing and the end of such calendar quarter).
For purposes of the Advisory Agreement, gross assets means the Company’s total assets determined on a consolidated basis in accordance with U.S. GAAP, including assets purchased with borrowed amounts. For avoidance of a doubt total assets does not include any undrawn Capital Commitments. For the first calendar quarter in which the Company had operations, gross assets were measured as the average of gross assets at the Initial Drawdown Date and at the end of such first calendar quarter. The Management Fee will be appropriately adjusted for any share issuances or repurchases during the applicable period. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the management fee will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.
Incentive Fees
The incentive fee consists of two components that are determined independently of each other, with the result that one component may be payable even if the other is not. One component is based on income (the “Income-Based Fee”) and the other component is based on capital gains (the “Capital Gains Fee”), each as described below:
The Company pays the Income-Based Fee with respect to the pre-incentive fee net investment income in each calendar quarter as follows:
•No income-based incentive fee if the Company’s pre-incentive fee net investment income, expressed as a return on the value of our net assets at the end of the immediately preceding calendar quarter, does not exceed the hurdle rate of 1.5%;
•100% of the Company’s pre-incentive fee net investment income, if any, that exceeds the hurdle rate but is less than or equal to 1.765% (7.06% annualized) of the value of the Company’s net assets at the beginning of each applicable calendar quarter. This “catch-up” portion is meant to provide the Adviser with approximately 15% of the Company’s pre-incentive fee net investment income as if a hurdle rate did not apply if the “catch-up” is achieved; and
•15% of the Company’s pre-incentive fee net investment income, if any, that exceeds the rate of return of 1.765% (7.06% annualized).
These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter.
The Capital Gains Fee will be determined and payable in arrears as of the end of each calendar year in an amount equal to 15% of realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees as calculated in accordance with U.S. GAAP. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain.
Administration Agreement
On November 24, 2021, the Company entered into the Original Administration Agreement with the Administrator. Effective January 1, 2023, the Company entered into the Administration Agreement. Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of the Company’s other service providers), preparing reports to Shareholders and reports filed with the SEC, preparing materials and coordinating meetings of the Board, managing the payment of expenses and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. The Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies. The terms of the Administration Agreement are substantially similar to the Original Administration Agreement, except that the reimbursements required to be made to the Administrator by the Company will be capped such that the amounts will not exceed an amount of 0.15% of the total gross assets of the Company in any one calendar year. Under the Administration Agreement, the Administrator furnishes the Company with office facilities and equipment and provides clerical, bookkeeping, recordkeeping and other administrative services at such facilities.
The Administration Agreement may be terminated at any time, without the payment of any penalty upon 60 days' written notice, by a vote of the outstanding voting securities of the Company, by the vote of a majority of the Board, or by the Administrator. Unless earlier terminated, the Administration Agreement will remain in effect for a period of two years from January 1, 2023 and will remain in effect year to year thereafter if approved annually (i) by a majority of the Independent Directors and (ii) the Board or the holders of a majority of the Company's outstanding voting securities
For providing these services, the Company will reimburse the Administrator for its costs, expenses and allocable portion of overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) the Company’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, information technology, operations and other non-investment professionals at the Administrator that perform duties for the Company; and (iii) any internal audit group personnel of MSD or any of its affiliates, subject to the limitations described in the Administration Agreement.
Co-Investment Transactions Exemptive Relief
The Company was granted an SEC exemptive order which grants the Company exemptive relief permitting the Company subject to the satisfaction of specific conditions and requirements, to co-invest in privately negotiated investment transactions with certain affiliates of the Company and the Adviser.
License Agreement
The Company has entered into a license agreement (the “License Agreement”), pursuant to which the Adviser has granted the Company a non-exclusive license to use the name “MSD.” Under the License Agreement, the Company has a right to use the MSD name for so long as the Adviser or one of its affiliates remains the Company’s investment adviser. Other than with respect to this limited license, the Company will have no legal right to the “MSD” name or logo.
The following table presents the related party fees, expenses and transactions for the years ended December 31, 2024, 2023 and 2022:
Related Party
Source Agreement & Description
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Consolidated statement of operations:
Adviser
Advisory Agreement - management fees
$
25,213
$
11,535
$
6,327
Adviser
Advisory Agreement - income based incentive fee
33,244
16,950
6,900
Adviser
Advisory Agreement - board of directors' fees
Adviser
Advisory Agreement - capital gains incentive fee
5,359
-
(256
)
Administrator
Administration Agreement - administration expense
3,850
1,862
1,571
Note 4. Investments
The composition of the Company’s investment portfolio at amortized cost and fair value as of December 31, 2024 and December 31, 2023 was as follows:
December 31, 2024
December 31, 2023
Amortized Cost
Fair Value
% of Total Investments at Fair Value
Amortized Cost
Fair Value
% of Total Investments at Fair Value
First lien debt
$
4,380,981
$
4,375,355
96.61
%
$
1,942,665
$
1,942,843
88.43
%
Second lien debt
89,589
89,485
1.98
234,306
226,318
10.30
Subordinated debt
0.02
-
-
0.00
Equity and Other Investments
63,397
63,234
1.39
31,846
27,892
1.27
Total investments
$
4,534,957
$
4,529,064
100.00
%
$
2,208,817
$
2,197,053
100.00
%
The industry composition of investments at fair value as of December 31, 2024 and December 31, 2023 was as follows:
December 31, 2024
December 31, 2023
Aerospace & Defense
4.72
%
6.06
%
Automotive
0.24
0.05
Banking, Finance, Insurance & Real Estate
6.82
4.81
Beverage, Food & Tobacco
0.46
0.97
Capital Equipment
3.23
5.26
Chemicals, Plastics & Rubber
1.50
1.88
Construction & Building
7.77
-
Consumer Goods: Durable
1.98
1.80
Consumer Goods: Non-durable
6.90
2.79
Containers, Packaging & Glass
1.72
-
Energy: Oil & Gas
0.05
3.50
Environmental Industries
0.40
-
Healthcare & Pharmaceuticals
6.53
8.87
High Tech Industries
4.66
3.59
Hotel, Gaming & Leisure
10.73
10.14
Media: Advertising, Printing & Publishing
2.60
3.33
Media: Broadcasting & Subscription
0.49
-
Media: Diversified & Production
1.68
3.48
Retail
1.92
7.60
Services: Business
18.38
12.82
Services: Consumer
8.84
7.16
Sovereign & Public Finance
1.11
-
Telecommunications
4.02
8.33
Transportation: Cargo
1.46
2.94
Transportation: Consumer
1.29
3.56
Wholesale
0.50
1.06
Total
100.00
%
100.00
%
The geographic composition of investments at cost and fair value as of December 31, 2024 and December 31, 2023 was as follows:
December 31, 2024
Amortized Cost
Fair Value
% of Total Investments at Fair Value
Fair Value as % of Net Assets
United States
$
4,204,937
$
4,209,632
92.95
%
175.26
%
Luxembourg
73,272
69,901
1.54
2.91
United Kingdom
256,748
249,531
5.51
10.39
Total
$
4,534,957
$
4,529,064
100.00
%
188.56
%
December 31, 2023
Amortized Cost
Fair Value
% of Total Investments at Fair Value
Fair Value as % of Net Assets
United States
$
2,016,083
$
2,005,820
91.30
%
213.95
%
Canada
74,803
74,817
3.40
7.98
Luxembourg
70,104
68,145
3.10
7.27
United Kingdom
47,827
48,271
2.20
5.15
Total
$
2,208,817
$
2,197,053
100.00
%
234.35
%
As of both December 31, 2024 and December 31, 2023, one investment in the portfolio was on non-accrual status.
As of December 31, 2024, on a fair value basis, approximately 97.4% of our performing debt investments bore interest at a floating rate and approximately 2.6% of our performing debt investments bore interest at a fixed rate.
As of December 31, 2023, on a fair value basis, approximately 96.3% of our performing debt investments bore interest at a floating rate and approximately 3.7% of our performing debt investments bore interest at a fixed rate.
Note 5. Derivative Instruments
The Company may enter into foreign currency forward contracts from time to time to facilitate the settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts; we attempt to limit counterparty risk by only dealing with well-known counterparties and those that we believe have the financial resources to honor their obligations. The foreign currency forward contracts open at the end of the period are generally indicative of the volume of activity during the period.
The following tables present the open foreign currency forward contracts as of December 31, 2024 and December 31, 2023:
December 31, 2024
Foreign Currency
Settlement Date
Statement of Assets and Liabilities Location
Counterparty
Amount Transacted
Notional Value at Settlement
Notional Value at Period End
Fair Value
GBP
March 19, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
GBP 20,029
$
25,407
$
25,068
$
GBP
July 14, 2028
Unrealized appreciation on foreign currency forward contracts
Macquarie
GBP 3,578
$
4,655
$
4,479
$
GBP
July 15, 2027
Unrealized appreciation on foreign currency forward contracts
Macquarie
GBP 2,557
$
3,341
$
3,195
$
GBP
July 31, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
GBP 80,000
$
105,726
$
100,128
$
5,598
GBP
July 31, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
GBP 790
$
1,024
$
$
GBP
July 31, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
GBP 988
$
1,251
$
1,235
$
CAD
March 31, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
CAD 1,845
$
1,354
$
1,287
$
CAD
March 31, 2026
Unrealized appreciation on foreign currency forward contracts
Macquarie
CAD 1,718
$
1,268
$
1,216
$
CAD
June 30, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
CAD 1,823
$
1,340
$
1,276
$
CAD
June 30, 2026
Unrealized appreciation on foreign currency forward contracts
Macquarie
CAD 76,721
$
56,704
$
54,480
$
2,224
CAD
September 29, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
CAD 1,786
$
1,315
$
1,255
$
CAD
December 31, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
CAD 1,719
$
1,268
$
1,213
$
EUR
March 19, 2025
Unrealized appreciation on foreign currency forward contracts
Macquarie
EUR 37,240
$
39,318
$
38,707
$
Total
$
243,971
$
234,527
$
9,441
December 31, 2023
Foreign Currency
Settlement Date
Statement of Assets and Liabilities Location
Counterparty
Amount Transacted
Notional Value at Settlement
Notional Value at Period End
Fair Value
CAD
March 20, 2024
Unrealized depreciation on foreign currency forward contracts
Macquarie
CAD 101,611
$
76,165
$
76,828
$
(663
)
GBP
March 20, 2024
Unrealized depreciation on foreign currency forward contracts
Macquarie
GBP 14,904
18,870
19,004
(134
)
Total
$
95,035
$
95,832
$
(797
)
The following table presents the net realized and unrealized gains and losses on derivative instruments recorded for the years ended December 31, 2024, 2023 and 2022:
Statement of Operations Location
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Net realized gains (losses)
Foreign currency forward contracts
Net realized gains (losses) on foreign currency forward contracts
$
3,137
$
(2,076
)
$
1,653
Net change in unrealized appreciation (depreciation)
Foreign currency forward contracts
Net change in unrealized appreciation (depreciation) on foreign currency forward contracts
10,238
(461
)
(336
)
Net realized and unrealized gains on foreign currency forward contracts
$
13,375
$
(2,537
)
$
1,317
For derivatives traded under an International Swaps and Derivatives Association Master Agreement ("ISDA Master Agreement"), the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Company or the counterparty. Cash collateral that has been pledged, if any, to cover obligations of the Company and cash collateral received from the counterparty, if any, is reported on the consolidated statements of assets and liabilities as collateral deposits (received) for foreign currency forward contracts. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold before a transfer is required. To the extent amounts due to the Company from a counterparty are not fully collateralized, the Company bears the risk of loss from counterparty non-performance.
The following table presents the derivative assets and liabilities by counterparty, net of amounts available for offset under a master netting agreement or similar arrangement, and net of related collateral received for assets or pledged for liabilities as of December 31, 2024 and December 31, 2023:
As of
Counterparty
Gross Amounts of Recognized Derivative Assets
Gross Amounts Offset in the Statement of Assets and Liabilities
Net Amounts of Assets Presented in the Statement of Financial Position
Collateral Received (1)
Net position of Derivative Assets and Collateral Received
December 31, 2024
Macquarie
$
9,441
$
-
$
9,441
$
-
$
9,441
As of
Counterparty
Gross Derivative Assets in Consolidated Statement of Assets and Liabilities
Gross Derivative Liabilities in Consolidated Statement of Assets and Liabilities
Collateral Pledged (1)
Net position of Derivative Assets, Liabilities and Pledged Collateral
December 31, 2023
Macquarie
$
-
$
(797
)
$
-
$
(797
)
(1)Lesser of the amount pledged and the amount needed to offset the liability.
The Company may also enter into interest rate swap transactions from time to time to hedge fixed rate debt obligations to align with our predominantly floating rate portfolio. In connection with the offering of the Series F Notes, the Company entered into an interest rate swap to align the interest rates of its liabilities with the Company’s investment portfolio, which predominately consists of floating rate loans. The notional amount of the interest rate swap was $165 million maturing on May 20, 2030, which aligns with the Series F Notes. The Company shall received fixed rate interest semi-annually at 7.11%, and pay variable rate interest semi-annually based on 3-month SOFR plus 3.117%. The swap adjusted interest expense is included as a component of interest expense on the Company’s Consolidated Statements of Operations. As of December 31, 2024, the interest rate swap had a fair value of $(0.9) million, which is offset within interest expense by an equal, but opposite, fair value change for the hedged risk on the Series F Notes. For the years ended December 31, 2024 and December 31, 2023, the Company recognized no net change in realized or unrealized gains or losses on interest rate swaps not designated as hedging instruments in the Consolidated Statements of Operations.
Note 6. Fair Value Measurements
The following tables present the fair value hierarchy of financial instruments, as of December 31, 2024 and December 31, 2023, according to the fair value hierarchy as described in Note 2. Significant Accounting Policies:
December 31, 2024
Level 1
Level 2
Level 3
Total
First lien debt
$
-
$
720,868
$
3,654,487
$
4,375,355
Second lien debt
-
47,466
42,019
89,485
Subordinated debt
-
-
Equity and Other Investments
-
-
63,234
63,234
Cash and cash equivalents
109,302
-
-
109,302
Total Portfolio Investments, Cash and Cash Equivalents
$
109,302
$
768,334
$
3,760,730
$
4,638,366
Percentage of total
2.36
%
16.56
%
81.08
%
100.00
%
Interest rate swaps
$
-
$
(859
)
$
-
$
(859
)
Foreign currency forward contracts
$
-
$
9,441
$
-
$
9,441
December 31, 2023
Level 1
Level 2
Level 3
Total
First lien debt
$
-
$
742,678
$
1,200,165
$
1,942,843
Second lien debt
-
95,443
130,875
226,318
Preferred equity
-
-
27,892
27,892
Cash and cash equivalents
98,606
-
-
98,606
Total Portfolio Investments, Cash and Cash Equivalents
$
98,606
$
838,121
$
1,358,932
$
2,295,659
Percentage of total
4.30
%
36.50
%
59.20
%
100.00
%
Foreign currency forward contracts
$
-
$
(797
)
$
-
$
(797
)
The following tables present changes in the fair value of financial instruments for which Level 3 inputs were used to determine the fair value for the years ended December 31, 2024 and December 31, 2023:
For the Year Ended December 31, 2024
First Lien Debt
Second Lien Debt
Subordinated Debt
Equity and Other Investments
Total Investments
Fair value, beginning of year
$
1,200,165
$
130,876
$
-
$
27,892
$
1,358,933
Purchase of investments (including PIK)
2,925,154
31,501
2,957,982
Proceeds from principal repayments and sales of investments
(438,236
)
(88,699
)
-
-
(526,935
)
Amortization of premium/accretion of discount, net
9,013
-
9,395
Net realized gain (loss) on investments
5,786
1,537
-
-
7,323
Net change in unrealized appreciation (depreciation) on investments
2,435
(272
)
-
3,791
5,954
Transfers out of Level 3 (1)
(52,465
)
(46,886
)
-
-
(99,351
)
Transfers to Level 3 (2)
2,635
44,794
-
-
47,429
Fair value, end of period
$
3,654,487
$
42,019
$
$
63,234
$
3,760,730
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated company investments still held at December 31, 2024
$
3,789
$
$
-
$
3,790
$
8,058
(1)Transfers are recorded at the beginning of the applicable period at their fair value. For the year ended December 31, 2024, four investment was transferred from Level 3 to Level 2, as valuation coverage on level 3 investments increased to more than one independent pricing service.
(2)Transfers are recorded at the beginning of the applicable period at their fair value. For the year ended December 31, 2024, two investments were transferred from Level 2 to Level 3, as valuation coverage decreased to less than two independent pricing services.
For the Year Ended December 31, 2023
First Lien Debt
Second Lien Debt
Preferred Equity
Total Investments
Fair value, beginning of year
$
494,159
$
195,687
$
22,267
$
712,113
Purchase of investments (including PIK)
994,735
3,554
998,560
Proceeds from principal repayments and sales of investments
(233,133
)
-
(214
)
(233,347
)
Amortization of premium/accretion of discount, net
4,003
(13
)
4,188
Net realized gain (loss) on investments
1,644
-
(1
)
1,643
Net change in unrealized appreciation (depreciation) on investments
10,633
2,970
2,299
15,902
Transfers out of Level 3 (1)
(71,876
)
(68,250
)
-
(140,126
)
Fair value, end of period
$
1,200,165
$
130,876
$
27,892
$
1,358,933
Net change in unrealized depreciation on non-controlled/non-affiliated company investments still held at December 31, 2023
$
9,768
$
2,970
$
2,299
$
15,037
(1)Transfers are done at the value of the investment at the beginning of the period. For the year ended December 31, 2023, five investments were transferred from Level 3 to Level 2, as valuation coverage increased to two or more independent pricing services. For the year ended December 31, 2023, there were no investments transferred from Level 2 to Level 3, as valuation coverage on level 2 investments did not decrease below two independent pricing services.
The Company generally employs the Income Based Approach (as described below) to estimate the fair value of the investment. Additionally, the Company may employ the Market Based Approach (as described below) to assess the total enterprise value of the portfolio company or any applicable collateral, in order to evaluate coverage of the Company’s debt investment.
Income Based Approach: The Company may use a discounted cash flow analysis to estimate the fair value of the investment, specifically the yield method. Projected cash flows represent the relevant investment’s contractual interest, fee and principal payments plus the assumption of full principal recovery at the investment’s expected maturity date. These cash flows are discounted at a rate that is calibrated to the initial transaction and monitored over time to adjust for changes in observed market spreads and yields since the issuance of the investment as well as changes in company specific factors. Significant increases or decreases in the discount rate would result in a decrease or increase in the fair value measurement.
Market Based Approach: The Company may estimate the total enterprise value of each portfolio company by utilizing cash flow (typically EBITDA or revenue, or the relevant industry metric) multiples of publicly traded comparable companies and comparable transactions. The Company considers numerous factors when selecting the appropriate companies whose trading multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, and relevant risk factors, as well as size, profitability and growth expectations. The Company may apply an average of various relevant comparable company multiples to the portfolio company’s latest twelve month EBITDA, revenue or other applicable metric to calculate the enterprise value of the portfolio company. The Company may also consider projected multiples in the assessment if applicable.
The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 financial instruments as of December 31, 2024 and December 31, 2023, respectively. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair value.
December 31, 2024
Range
Fair Value
Valuation Technique
Unobservable Input (1)
Low
High
Weighted Average (2)
First lien debt
$
3,396,459
Market Yield Analysis
Market Yield Discount Rates
7.72
%
16.69
%
10.62
%
242,563
Recent Transaction
Transaction Price
98.00
99.25
98.18
3,639,022
Second lien debt
42,019
Market Yield Analysis
Market Yield Discount Rates
10.45
%
13.82
%
11.95
%
Subordinated debt
Recent Transaction
Transaction Price
99.00
99.00
99.00
Preferred equity
63,155
Market Yield Analysis
Market Yield Discount Rates
9.33
%
9.33
%
15.54
%
Black-Scholes
Volatility
34.20
%
34.20
%
34.20
%
Warrants
Black-Scholes
Volatility
29.13
%
29.13
%
29.13
%
Total
$
3,745,265
December 31, 2023
Range
Fair Value
Valuation Technique
Unobservable Input (1)
Low
High
Weighted Average (2)
First lien debt
$
1,126,991
Market Yield Analysis
Market Yield Discount Rates
9.31
%
25.00
%
12.11
%
73,174
Recent Transaction
Transaction Price
98.00
98.58
98.07
1,200,165
Second lien debt
130,876
Market Yield Analysis
Market Yield Discount Rates
12.01
%
14.97
%
13.40
%
130,876
Preferred equity
27,892
Market Yield Analysis
Market Yield Discount Rates
9.42
%
19.78
%
17.01
%
Black-Scholes
Volatility
34.90
%
34.90
%
34.90
%
Total
$
1,358,933
(1)The Company generally uses prices provided by an independent pricing service, or directly from an independent broker, which are indicative prices on or near the valuation date as the primary basis for the fair valuation determinations for quoted senior secured bonds and loans. Since these prices are non-binding, they may not be indicative of fair value. Each quoted price is evaluated by the Adviser in conjunction with additional information compiled by it, including financial performance, recent business developments and various other factors. Investments with fair values determined in this manner were not included in the table above. As of December 31, 2024 and December 31, 2023, the Company had investments of this nature measured at fair value totaling $15.5 million and zero, respectively.
(2)Weighted averages are calculated based on fair value of investments.
Financial Instruments Disclosed, But Not Carried at Fair Value
Debt
The fair value of the Company’s variable interest Credit Facilities, which would be categorized as Level 3 within the fair value hierarchy, as of both December 31, 2024 and December 31, 2023, respectively, approximates their carrying value. The fair value of the Company's Series A Notes, Series C Notes, and Series F Notes (see Note 7. Borrowings) is based on vendor pricing received by the Company, which is considered a Level 3 input.
The following table presents the fair value of the Company’s Series A Notes, Series C Notes, and Series F Notes as of December 31, 2024:
December 31, 2024
Outstandng Principal
Fair Value
Series A Notes
$
69,000
$
68,914
Series C Notes
116,000
115,420
Series F Notes
165,000
164,175
Total
$
350,000
$
348,509
Other
The carrying amounts of the Company’s assets and liabilities, other than investments at fair value and debt, approximate fair value. These financial instruments are categorized as Level 3 within the hierarchy.
Note 7. Borrowings
In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing.
The Company’s outstanding debt obligations as of December 31, 2024 and December 31, 2023 were as follows:
December 31, 2024
Aggregate
Principal
Committed
Outstanding
Principal
Carrying
Value (1)
Unused
Portion (2)
Maturity Date
SPV I facility
$
550,000
$
503,000
$
496,667
$
47,000
4/8/2029
SPV II facility
595,000
537,000
531,322
58,000
8/15/2028
Collateralized loan obligations
390,000
390,000
386,697
-
10/15/2035
Revolving credit facility
450,000
150,000
144,890
300,000
11/19/2029
Loan repurchase obligations
52,043
52,043
52,043
-
2/21/2025
Series A Notes
69,000
69,000
68,128
-
8/7/2027
Series B Notes
75,000
75,000
74,052
-
8/7/2027
Series C Notes
116,000
116,000
114,444
-
8/7/2029
Series D Notes
75,000
75,000
73,994
-
8/7/2029
Series E Notes
50,000
50,000
49,356
-
5/20/2028
Series F Notes
165,000
165,000
161,978
-
5/20/2030
Series G Notes
50,000
50,000
49,344
-
5/20/2030
Total
$
2,637,043
$
2,232,043
$
2,202,915
$
405,000
December 31, 2023
Aggregate
Principal
Committed
Outstanding
Principal
Carrying
Value (1)
Unused
Portion (2)
Maturity Date
SPV I facility
$
485,000
$
378,000
$
374,700
$
107,000
12/21/2026
SPV II facility
445,000
295,000
289,349
150,000
8/15/2028
Collateralized loan obligations
390,000
390,000
386,393
-
11/15/2035
Subscription facility
200,000
35,000
34,319
165,000
12/18/2024
Loan repurchase obligations
50,025
50,025
50,025
-
Various (3)
Total
$
1,570,025
$
1,148,025
$
1,134,786
$
422,000
(1)Carrying value is equal to outstanding principal amount net of unamortized financing costs, in addition to the fair value of any interest rate swap designated as a fair value hedge.
(2)The unused portion is the amount upon which commitment fees are based, if any.
(3)Loan repurchase obligations entered into with Macquarie have a term of 90 days, with an option for repayment as early as 45 days. As of December 31, 2024, the remaining contractual maturity was 52 days. As of December 31, 2023, the remaining contractual maturities were between 32-43 days.
The components of interest expense for the years ended December 31, 2024, 2023 and 2022 were as follows:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Stated interest expense
141,050
$
62,243
$
21,119
Unused/undrawn fees
Administration fees
1,392
1,222
1,026
Amortization of deferred financing costs
4,650
2,117
1,541
Total interest expense
$
147,803
$
66,206
$
24,152
Average borrowings
$
1,774,784
$
804,401
$
482,333
Weighted average interest rate (1)
8.07
%
7.97
%
4.69
%
Amortization of financing costs
0.26
%
0.26
%
0.32
%
Total borrowing costs
8.33
%
8.23
%
5.01
%
(1)Calculated as the amount of the sum of stated interest expense, unused/undrawn fees, and administration fees all divided by the average borrowings during the reporting period. This number represents an annualized amount.
Description of the Company's Credit Facilities
SPV I Facility
On December 21, 2021, SPV I, the Company’s wholly-owned subsidiary, entered into a senior secured revolving credit facility with Deutsche Bank AG, New York Branch (“DB”), which was subsequently amended on November 21, 2022 and December 16, 2022 (the “SPV I Facility”). DB serves as facility agent, U.S. Bank National Association, serves as collateral agent and collateral custodian and the Company serves as servicer under the SPV I Facility.
As of the amendment on November 21, 2022 advances under the SPV I Facility bear interest at a per annum rate equal to the three-month SOFR in effect, plus the applicable margin of 2.41% per annum, inclusive of a credit spread adjustment (“CSA”) of 0.26%, with a SOFR floor of 0.25%. SPV I pays a commitment fee of 0.25% per annum (or 0.50% per annum if borrowings are less than 75% of the commitment amount) on the average daily unused amount of the financing commitments until the third anniversary of the SPV I Facility. Additionally, SPV I pays DB an administrative agent fee of 0.25% of the total commitment amount for serving as facility agent.
Prior to the amendment on November 21, 2022, Advances under the SPV I Facility bore interest at a per annum rate equal to the three-month LIBOR in effect, plus the applicable margin of 2.15% per annum with a LIBOR floor of 0.25%. The commitment fee and the administrative agent fee were unchanged.
In connection with the amendment on December 16, 2022, the maximum commitment amount of the SPV I Facility increased from $400 million to $485 million. Subsequently, in connection with the amendment on April 8, 2024, the maximum commitment amount of the SPV I facility increased from $485 million to $550 million. Additionally, the period during which SPV I may make borrowings under the SPV I Facility was extended from December 31, 2024 to April 8, 2027, and the scheduled maturity date was extended from December 21, 2026 to April 8, 2029. Proceeds from borrowings under the SPV I Facility are used to fund portfolio investments by SPV I.
As of both December 31, 2024 and December 31, 2023, respectively, the Company was in compliance with all covenants associated with the SPV I Facility.
SPV II Facility
On August 15, 2023, SPV II, entered into a Loan and Security Agreement (together with the exhibits and schedules thereto, and as amended from time to time, the “Loan and Security Agreement”) with Citizens Bank N.A as lender and administrative agent, the Company as collateral manager, the other lenders party thereto, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian (the “SPV II Facility”).
Advances under the SPV II Facility bear interest at a per annum rate equal to SOFR in effect, plus an applicable margin of 2.75% per annum with a SOFR floor of 0.00%. SPV II pays a commitment fee of 0.25% per annum (or 0.50% per annum if borrowings are less than 75% of the commitment amount) on the average daily unused amount of the financing commitments until the third anniversary of the SPV II Facility.
In connection with the September 8, 2023 amendment, the maximum commitment amount of the SPV II Facility increased from $370 million to $445 million. Subsequently, in connection with the March 21, 2024, and April 18, 2024 amendments, the maximum commitment amount of the SPV II Facility increased from $445 million, to $495 million and $595 million, respectively. Proceeds from borrowings under the SPV II Facility may be used to fund portfolio investments by SPV II. The period during which SPV II may make borrowings under the SPV II Facility expires on August 15, 2026 and the SPV II Facility is scheduled to mature on August 15, 2028.
As of both December 31, 2024 and December 31, 2023, respectively, the Company was in compliance with all covenants associated with the SPV II Facility.
Subscription Facility
On December 21, 2021, the Company entered into a senior secured revolving credit facility with Bank of America, N.A. (“BAML”) (as amended from time to time, the “Subscription Facility”). BAML serves as administrative agent and lender under the Subscription Facility.
The Subscription Facility provided for secured borrowings of up to $200 million. The maximum principal amount was subject to availability under the Subscription Facility, which was based on certain of the Company’s unfunded investor equity capital commitments, and restrictions imposed on borrowings under the 1940 Act. The Subscription Facility provided for the issuance of letters of credit on behalf of the Company in an aggregate face amount not to exceed $40 million. Proceeds from the borrowings under the Subscription Facility were used for general corporate purposes of the Company and its subsidiaries in the ordinary course of business. The Subscription Facility’s maturity date was extended from December 21, 2023 to December 18, 2024 in connection with the December 21, 2023 amendment.
As of the amendment on December 21, 2023 advances under the Subscription Facility bore interest at a per annum rate equal to the one-month SOFR in effect, plus the applicable margin of 2.50% per annum. The Company paid a commitment fee of 0.35% per annum on the average daily unused amount of the financing commitments.
Prior to the amendment on December 31, 2023, advances under the Subscription Facility bore interest at a per annum rate equal to the daily Bloomberg Short-Term Bank Yield Index (“BSBY”) rate in effect, plus the applicable margin of 2.00% per annum. The Company paid a commitment fee of 0.25% per annum on the average daily unused amount of the financing commitments.
The Subscription Facility was terminated effective December 18, 2024.
Repurchase Obligations
In order to finance certain investment transactions, the Company may, from time to time, enter into repurchase agreements with Macquarie Bank Limited (“Macquarie”), whereby the Company sells to Macquarie an investment that it holds and concurrently enters into an agreement to repurchase the same investment at an agreed-upon price at a future date, not to exceed 90-days from the date it was sold (the “Macquarie Transaction”).
In accordance with ASC Topic 860, Transfers and Servicing, these Macquarie Transactions meet the criteria for secured borrowings. Accordingly, the investment financed by the Macquarie Transaction remains on the Company’s Statements of Assets and Liabilities as an asset, and the Company records a liability to reflect its repurchase obligation to Macquarie (the “Repurchase Obligation”). The Repurchase Obligation is secured by the respective investment that is the subject of the repurchase agreement.
As of December 31, 2024, the Company had outstanding Repurchase Obligations of $52.0 million associated with repurchase agreements that were entered into on November 25. Such Repurchase Obligations are collateralized by a portion of the Company’s term loan holdings in Parfums Holdings Co. Interest under these Repurchase Obligations is calculated at the inception of each repurchase agreement, as the 3 month SOFR rate in effect, plus the applicable margin of 3.50%. As of December 31, 2024, the remaining contractual maturity of the sole repurchase agreement was 54 days.
As of December 31, 2023, the Company had outstanding Repurchase Obligations of $50.0 million associated with repurchase agreements that were entered into on November 3, and 14, 2023. Such Repurchase Obligations are collateralized by a portion of the Company’s term loan holdings in Highgate Hotels, L.P. and PetVet Care Centers. Interest under these Repurchase Obligations is calculated at the inception of each repurchase agreement, as the 3 month SOFR rate in effect, plus the applicable margin of 3.50%. As of December 31, 2023, the remaining contractual maturities of the repurchase agreements were between 32-43 days.
2023 Debt Securitization
On November 15, 2023 (the “Closing Date”), the Company completed an approximate $600 million term debt securitization (the “2023 Debt Securitization”). Term debt securitization is also known as a collateralized loan obligation and is a form of secured financing incurred by the Company.
The notes offered in the 2023 Debt Securitization (the “Notes”) were issued by MSD BDC CLO I, LLC (the “Issuer”), a wholly-owned, consolidated subsidiary of the Company pursuant to an Indenture, dated the Closing Date, between the Issuer and U.S. Bank Trust Company, National Association, as trustee (the “Indenture”). The 2023 Notes consist of $336 million of Class A Notes, which bear interest at a rate per annum equal to SOFR in effect, plus an applicable margin of 2.70%; $54 million of Class B Notes, which bear interest at SOFR plus an applicable margin of 3.65%; $36 million of Class C Notes, which bear interest at SOFR plus an applicable margin of 4.00%; and approximately $163.6 million of Preferred Shares, which do not bear interest. The Company directly retained all of the Class C Notes and all of the Preferred Shares of the 2023 Debt Securitization at par in exchange for the Company’s sale and contribution to the Issuer of the initial closing date portfolio. Both the Class C Notes and Preferred Shares are eliminated in consolidation.
The Notes are backed by a diversified portfolio of senior secured and second lien loans (the “Collateral Obligations”). The initial portfolio will consist of Collateral Obligations acquired by the Issuer on the Closing Date from the Company pursuant to a Master Transfer Agreement, dated as of the Closing Date, among the Company, as seller, and the Issuer, as purchaser (the "Master Transfer Agreement"). Certain of the Collateral Obligations transferred to the Issuer pursuant to the Master Transfer Agreement were acquired by the Company from SPV I pursuant to the Master Participation Agreement, dated as of the Closing Date, among the Company, as purchaser and the SPV I Facility, as seller. The Notes mature on October 15, 2035.
The Notes are the secured obligation of the Issuer. The Notes have not been, and will not be, registered under the 1933 Act, or any state “blue sky” laws and may not be offered or sold in the United States absent registration with the SEC or applicable exemption from registration.
The Adviser serves as collateral manager to the Issuer under a collateral management agreement (the “Collateral Management Agreement”). However, for so long as the Company holds any Preferred Shares the Collateral Management Fees, which, for the avoidance of doubt, shall include any Base Management Fee, Subordinated Management Fee, and Incentive Management Fee (as each such term is defined in the Collateral Management Agreement), shall be $0.
Unsecured Notes
On August 7, 2024, the Company issued and sold $69 million in aggregate principal amount of 7.00% Series A Senior Notes due 2027 (the “Series A Notes”), $75 million in aggregate principal amount of Series B Floating Rate Senior Notes due 2027, which bear interest at SOFR plus an applicable margin of 3.05%, (the “Series B Notes”), $116 million in aggregate principal amount of 7.11% Series C Senior Notes due 2029 (the “Series C Notes”), and $75 million in aggregate principal amount of Series D Floating Rate Senior Notes due 2029, which bear interest at SOFR plus an applicable margin of 3.35% (the “Series D Notes” and, together with the Series A Notes, the Series B Notes, and the Series C Notes, the “Initial Notes”) to certain investors in an offering exempt from registration under the 1933 Act. The Initial Notes were issued and sold pursuant to a Note Purchase Agreement, dated August 7, 2024, by and among the Company and the purchasers named therein (the “Note Purchase Agreement”).
Interest on the Series A Notes and the Series C Notes shall be payable semi-annually on February 7 and August 7, commencing on February 7, 2025, and interest on the Series B Notes and Series D Notes shall be payable quarterly on February 7, May 7, August 7, and November 7. The Series A Notes and the Series B Notes shall be redeemable in whole or in part at the option of the Company at any time or from time to time prior to August 7, 2027, at a redemption price of 100% of the outstanding principal amount of the Initial Notes to be redeemed plus accrued and unpaid interest payments otherwise payable thereon and the Make-Whole Amount (as defined in the Note Purchase Agreement), and thereafter at par, upon not less than 10 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof. The Series C Notes and the Series D Notes shall be redeemable in whole or in part at the option of the Company at any time or from time to time prior to August 7, 2029, at a redemption price of 100% of the outstanding principal amount of the Initial Notes to be redeemed plus accrued and unpaid interest payments otherwise payable thereon and the Make-Whole Amount (as defined in the Note Purchase Agreement), and thereafter at par, upon not less than 10 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof. The Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
On November 20, 2024, the Company issued and sold $50,000,000 in aggregate principal amount of Series E Floating Rate Senior Notes due May 2028, which bear interest at SOFR plus an applicable margin of 3.00%, (the “Series E Notes”), $165,000,000 in aggregate principal amount of 7.11% Series F Senior Notes due May 2030 (the “Series F Notes”), and $50,000,000 in aggregate principal amount of Series G Floating Rate Senior Notes due May 2030, which bear interest at SOFR plus an applicable margin of 3.35%, (the “Series G Notes”, and, together with the Initial Notes, the Series E Notes, and the Series F Notes, the “Notes”) to certain investors in an offering exempt from registration under the Securities Act of 1933, as amended. The Notes were issued and sold pursuant to a Note Purchase Agreement, dated November 20, 2024, by and among the Company and the purchasers named therein (the “Note Purchase Agreement II”).
Interest on the Series F Notes shall be payable semi-annually on February 7 and August 7, commencing on February 7, 2025, and interest on the Series E Notes and Series G Notes shall be payable quarterly on February 7, May 7, August 7, and November 7, commencing on February 7, 2025. The Series E Notes shall be redeemable in whole or in part at the option of the Company at any time or from time to time prior to May 20, 2028, at a redemption price of 100% of the outstanding principal amount of the Notes to be redeemed plus accrued and unpaid interest payments otherwise payable thereon and the Make-Whole Amount (as defined in the Note Purchase Agreement), and thereafter at par, upon not less than 10 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof. The Series F Notes and the Series G Notes shall be redeemable in whole or in part at the option of the Company at any time or from time to time prior to May 20, 2030, at a redemption price of 100% of the outstanding principal amount of the Notes to be redeemed plus accrued and unpaid interest payments otherwise payable thereon and the Make-Whole Amount (as defined in the Note Purchase Agreement), and thereafter at par, upon not less than 10 days nor more than 60 days written notice by mail prior to the date fixed for redemption thereof. The Notes are general unsecured obligations of the Company that rank pari passu with all outstanding and future unsecured unsubordinated indebtedness issued by the Company.
In connection with the offering of the Series F Notes, the Company entered into an interest rate swap to align the interest rates of its liabilities with the Company’s investment portfolio, which predominately consists of floating rate loans. The notional amount of the interest rate swap was $165 million maturing on May 20, 2030, which aligns with the Series F Notes. The Company shall received fixed rate interest semi-annually at 7.11%, and pay variable rate interest semi-annually based on 3-month SOFR plus 3.117%. The swap adjusted interest expense is included as a component of interest expense on the Company’s Consolidated Statements of Operations. As of December 31, 2024, the effective hedge interest rate swap had a fair value of $(0.9) million, which is offset within interest expense by an equal, but opposite, fair value change for the hedged risk on the Series F Notes.
The Note Purchase Agreement contains customary terms and conditions for senior unsecured notes issued in a private placement, including, without limitation, affirmative and negative covenants such as: (i) information reporting, (ii) maintenance of the Company’s status as a BDC within the meaning of the Investment Company Act of 1940, as amended, (iii) a minimum consolidated net worth of $1,130,000,000, (iv) a minimum asset coverage ratio of 1.50 to 1.00, and (v) maintenance of a Debt Rating (as defined in the Note Purchase Agreement) for each series of Notes from an acceptable rating agency.
The Note Purchase Agreement also contains customary events of default with customary cure and notice periods, including, without limitation, nonpayment, incorrect representation in any material respect, breach of covenant, certain cross-defaults or cross-acceleration under other indebtedness of the Company, certain judgments and orders and certain events of bankruptcy.
Revolving Credit Facility
On December 20, 2024, the Company entered into a Senior Secured Credit Agreement (together with the exhibits and schedules thereto, the “Credit Agreement”) with JPMorgan Chase Bank, N.A., as administrative agent, and the other lenders party thereto (the “Revolving Credit Facility”).
Borrowings under the Revolving Credit Facility bear interest at a per annum rate equal to the SOFR in effect, plus an applicable margin of 1.75% per annum if the Borrowing Base (as defined in the Credit Agreement) is greater than or equal to 1.6x the Combined Debt Amount (as defined in the Credit Agreement), or SOFR plus an applicable margin of 1.875% per annum if the Borrowing Base is less than 1.6x the Combined Debt Amount. There is an additional
0.1% credit spread adjustment regardless of the Combined Debt Amount. The Company will also pay a commitment fee of 0.375% per annum on the daily unused amount of the financing commitments until the fourth anniversary of the Revolving Credit Facility. The maximum commitment amount of the Revolving Credit Facility is $450 million. Proceeds from borrowings under the Revolving Credit Facility may be used to fund portfolio investments by the Company. The period during which the Company may make borrowings under the Revolving Credit Facility expires on December 20, 2028, and the Revolving Credit Facility is scheduled to mature on November 19, 2029.
Note 8. Commitments and Contingencies
Portfolio Company Commitments
The amounts associated with unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s consolidated statements of assets and liabilities. Since these commitments and the associated amounts may expire without being drawn upon, the total commitment amount does not necessarily represent a future cash requirement. As of December 31, 2024 and December 31, 2023, the Company’s unfunded commitments consisted of the following:
December 31, 2024
Investments-non-controlled/non-affiliated
Commitment Type
Commitment
Expiration Date
Unfunded
Commitment
Fair
Value
First Lien Debt
ALF Finance
Delayed Draw
12/10/2029
$
29,000
$
Azurite Intermediate Holdings, Inc.
Revolver
3/19/2031
9,500
(127
)
AVSC Holding Corporation
Revolver
12/5/2029
6,283
(124
)
Best Trash LLC
Delayed Draw
7/10/2031
16,250
(88
)
Best Trash LLC
Revolver
7/10/2031
6,060
(71
)
Boasso Global
Delayed Draw
7/1/2028
1,175
Boasso Global
Delayed Draw
7/1/2028
4,038
Boasso Global
Revolver
7/1/2026
6,250
(11
)
Cadogan Tate
Delayed Draw
10/31/2031
59,500
(425
)
Cadogan Tate
Revolver
10/31/2031
18,700
(274
)
Carevet LLC
Delayed Draw
6/18/2029
19,800
(354
)
Carevet LLC
Delayed Draw
6/18/2029
33,000
Carevet LLC
Revolver
6/18/2029
6,600
(59
)
Confluent Holdings LLC
Delayed Draw
3/28/2029
4,318
Red Fox CD Acquisition Corp.
Delayed Draw
3/4/2030
7,364
(127
)
CoreWeave Compute Acquisition Co., IV, LLC
Delayed Draw
8/29/2029
26,094
DFS Holding Company
Delayed Draw
1/31/2029
3,000
(17
)
Disa Holdings Corp.
Revolver
9/9/2028
4,166
(51
)
Disa Holdings Corp.
Delayed Draw
9/9/2028
11,063
(53
)
Elessent Clean Technologies Inc.
Revolver
11/15/2029
13,158
(257
)
Faraday Buyer, LLC
Delayed Draw
10/10/2028
3,514
(19
)
FEG, Inc.
Revolver
5/10/2030
15,000
(268
)
Foundation Risk Partners
Delayed Draw
10/29/2030
4,898
Foundation Risk Partners
Revolver
10/29/2029
1,589
(4
)
Foundation Risk Partners
Revolver
10/29/2029
3,748
(8
)
Frontgrade Technologies Inc.
Revolver
1/9/2028
8,263
-
Great Day Improvements LLC
Revolver
6/13/2030
14,000
(254
)
Highgate Hotels, L.P.
Revolver
11/3/2029
12,500
-
Hotel Equities Group, LLC
Revolver
1/22/2029
10,000
(162
)
Inframark
Delayed Draw
7/31/2031
3,364
(15
)
K1 Speed Inc.
Delayed Draw
1/2/2029
3,643
(70
)
Legends Hospitality
Delayed Draw
8/22/2031
3,750
(34
)
Legends Hospitality
Revolver
8/22/2031
6,750
(128
)
Maxar Technologies Inc.
Revolver
5/3/2029
8,417
-
Natural Partners, Inc.
Revolver
11/29/2027
6,563
(122
)
Neptune Platform Buyer, LLC
Delayed Draw
1/19/2031
1,544
(8
)
Parfums Holding Co Inc
Revolver
6/27/2029
6,000
(54
)
PetVet Care Centers
Delayed Draw
11/15/2030
6,981
PetVet Care Centers
Revolver
11/15/2029
6,981
(66
)
Pharmalogic Holdings Corp
Delayed Draw
6/21/2030
25,253
(156
)
RPX Corporation
Revolver
8/2/2030
6,122
(85
)
Sandlot Baseball Borrower Co.
Delayed Draw
12/27/2028
13,800
Sky Merger Sub, LLC
Delayed Draw
5/28/2029
12,500
Sky Merger Sub, LLC
Revolver
5/28/2029
25,000
(551
)
SurveyMonkey Global Inc.
Revolver
5/31/2029
13,440
(120
)
Systems Planning and Analysis, Inc.
Delayed Draw
8/16/2027
42,286
(59
)
Systems Planning and Analysis, Inc.
Revolver
8/16/2027
5,827
(52
)
TIC Bidco LTD
Delayed Draw
6/16/2031
1,577
(9
)
Townsend
Revolver
8/1/2029
2,500
(69
)
Trillium FlowControl
Delayed Draw
12/20/2029
3,667
(27
)
Trillium FlowControl
Revolver
12/20/2029
3,000
(22
)
USA Debusk LLC
Delayed Draw
4/30/2031
5,420
(33
)
USA Debusk LLC
Revolver
4/30/2030
1,603
(21
)
Total Unfunded Commitments
$
574,819
$
(4,151
)
December 31, 2023
Investments-non-controlled/non-affiliated
Commitment Type
Commitment
Expiration Date
Unfunded
Commitment
Fair
Value
First Lien Debt
Accession Risk Management
Delayed Draw
11/1/2029
$
40,719
$
(578
)
Beacon Mobility Corp.
Delayed Draw
12/31/2025
(15
)
Boasso Global
Delayed Draw
10/3/2024
1,750
(19
)
Boasso Global
Revolver
7/1/2026
6,250
(161
)
Chromalloy Holdings LLC
Revolver
11/23/2027
4,615
(152
)
Circor International, Inc.
Revolver
10/18/2029
7,759
(165
)
DFS Holding Company
Delayed Draw
1/31/2029
3,000
(30
)
Faraday Buyer, LLC
Delayed Draw
10/11/2028
3,514
(34
)
Foundation Risk Partners
Delayed Draw
10/29/2028
45,000
(435
)
Frontgrade Technologies Inc.
Revolver
1/9/2028
7,211
(164
)
Highgate Hotels, L.P.
Revolver
10/26/2029
12,500
(247
)
LJ Perimeter Buyer, Inc
Delayed Draw
10/31/2028
3,042
(10
)
Maxar Technologies Inc.
Revolver
5/3/2029
8,587
(233
)
Momentive Global
Revolver
5/31/2029
5,714
(69
)
Natural Partners, Inc.
Revolver
11/29/2027
2,813
(39
)
PetVet Care Centers
Delayed Draw
11/15/2030
6,981
(68
)
PetVet Care Centers
Revolver
11/15/2029
6,981
(138
)
Sandlot Baseball Borrower Co.
Delayed Draw
12/27/2028
33,333
-
Systems Planning and Analysis, Inc.
Delayed Draw
8/16/2027
1,165
(4
)
Systems Planning and Analysis, Inc.
Revolver
8/16/2027
3,136
(34
)
Wood Mackenzie, Inc.
Revolver
2/1/2028
2,963
(29
)
Total Unfunded Commitments
$
207,625
$
(2,624
)
Other Commitments and Contingencies
From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. At both December 31, 2024 and December 31, 2023, management was not aware of any pending or threatened material litigation.
Note 9. Net Assets
Subscriptions and Drawdowns
The Company has the authority to issue up to 200,000,250 shares of stock, of which 200,000,000 shares are classified as common stock, par value $0.001 per share, and 250 shares are classified as preferred stock, par value $0.001 per share, which have been previously designated the “12.0% Series A Cumulative Non-Voting Preferred Stock”. Through its Private Offerings the Company will from time to time enter into subscription agreements (the “Subscription Agreements”) with investors. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase the Company’s Shares up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a drawdown notice. As of December 31, 2024, the Company had received Capital Commitments totaling approximately $2.6 billion ($456.8 million remaining undrawn).
The following table summarizes the total shares issued and proceeds received related to the Company’s capital drawdowns delivered pursuant to the Subscription Agreements as of December 31, 2024:
Share Issuance Date
Number of
Shares Issued
Aggregate
Offering Proceeds
December 21, 2021
12,000,000
$
299,988
June 23, 2022
2,509,410
$
60,000
September 21, 2022
2,787,307
$
65,000
December 29, 2022
2,991,256
$
65,000
March 8, 2023
2,601,909
$
60,000
April 21, 2023
4,446,421
$
100,000
August 8, 2023
3,225,807
$
75,000
December 29, 2023
4,310,345
$
100,000
March 27, 2024
9,449,812
$
225,000
June 5, 2024
16,366,612
$
400,000
July 10, 2024
4,163,197
$
100,000
September 27, 2024
14,553,015
$
350,000
October 31, 2024
10,300,783
$
250,000
Total
89,705,874
$
2,149,988
Distributions
The Company declared the following distributions for the years ended December 31, 2024 and December 31, 2023:
Regular
Special
Per Share
Date Declared
Record Date
Payment Date
Distribution
Distribution
Amount
Total Amount
For Calendar Year 2024
March 6, 2024
March 15, 2024
March 28, 2024
$
0.65
$
-
$
0.65
$
26,182
May 8, 2024
June 14, 2024
June 27, 2024
$
0.65
$
0.08
$
0.73
$
48,879
August 12, 2024
September 13, 2024
September 27, 2024
$
0.65
$
0.02
$
0.67
$
48,486
November 4, 2024
December 13, 2024
December 27, 2024
$
0.65
$
0.02
$
0.67
$
65,929
December 20, 2024
December 20, 2024
December 27, 2024
$
-
$
0.28
$
0.28
$
27,552
$
3.00
$
217,028
For Calendar Year 2023
March 13, 2023
March 29, 2023
April 17, 2023
$
0.65
$
-
$
0.65
$
16,073
June 21, 2023
June 21, 2023
June 28, 2023
$
0.65
$
-
$
0.65
$
19,378
August 3, 2023
August 4, 2023
September 28, 2023
$
-
$
0.03
$
0.03
$
August 3, 2023
September 15, 2023
September 28, 2023
$
0.65
$
-
$
0.65
$
21,965
November 3, 2023
December 15, 2023
December 28, 2023
$
0.65
$
0.11
$
0.76
$
26,312
December 20, 2023
December 20, 2023
December 28, 2023
$
-
$
0.35
$
0.35
$
12,117
$
3.09
$
96,762
Dividend Reinvestment
The Company has adopted a dividend reinvestment plan (“DRP”), pursuant to which it reinvests all cash dividends declared by the Board on behalf of its Shareholders who elected not to receive their dividends in cash. Shareholders who have opted into the Company’s DRP will have their cash distributions automatically reinvested in additional Shares as described below, rather than receiving the cash dividend or other distribution. A participating Shareholder will receive an amount of Shares equal to the amount of the distribution on that participant’s Shares divided by the most recent net asset value (“NAV”) per Share that is available on the date such distribution was paid. Shareholders who receive distributions in the form of Shares will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, since their cash distributions will be reinvested, those Shareholders will not receive cash with which to pay any applicable taxes. The Company intends to use newly issued Shares to implement the plan. Shares issued under the DRP will not reduce outstanding Capital Commitments.
The following table summarizes the DRP Shares issued to shareholders who have “opted in” to the DRP during the year ended December 31, 2024 and the value of such Shares as of the payment dates:
Payment Date
DRP Shares Value
DRP Shares Issued
April 15, 2022
$
7,200
286,055
July 15, 2022
$
9,321
373,593
October 17, 2022
$
8,646
377,076
December 30, 2022
$
18,056
801,437
April 17, 2023
$
13,892
637,800
June 28, 2023
$
16,789
754,571
September 28, 2023
$
18,945
828,460
December 28, 2023
$
31,456
1,347,765
March 28, 2024
$
20,039
861,529
June 27, 2024
$
29,653
1,246,983
September 27, 2024
$
28,260
1,179,974
December 27, 2024
$
53,204
2,210,389
$
255,461
10,905,632
Note 10. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per Share during the years ended December 31, 2024, 2023 and 2022:
For the Year Ended December 31, 2024
For the Year Ended December 31, 2023
For the Year Ended December 31, 2022
Net increase in net assets resulting from operations
$
225,308
$
135,676
$
(8,408
)
Weighted average shares outstanding
66,018,618
29,738,420
14,575,572
Earnings per share
$
3.41
$
4.56
$
(0.58
)
Note 11. Taxable/Distributable Income
The tax character of distributions for the years ended December 31, 2024 and December 31, 2023 were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Ordinary income (including net short-term capital gains)
$
203,192
$
94,428
$
44,965
Capital gains
13,926
2,342
-
Return of capital
-
-
Total taxable distributions
$
217,118
$
96,770
$
44,967
The components of Accumulated Earnings (Losses) on a tax basis for the years ended December 31, 2024 and December 31, 2023 were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Undistributed ordinary income - net
$
10,941
$
-
$
-
Undistributed long-term capital gains
2,336
-
-
Total undistributed earnings
13,277
-
-
Capital loss carryforward
-
-
-
Unrealized earnings (losses) - net
(3,452
)
(13,859
)
(51,283
)
Timing differences
(3,880
)
(1,484
)
(2,193
)
Total accumulated earnings (losses) - net
$
(7,332
)
$
(15,343
)
$
(53,476
)
For the years ended December 31, 2024 and December 31, 2023 the Company made the following reclassifications of permanent book to tax basis differences:
December 31, 2024
December 31, 2023
December 31, 2022
Paid-in capital in excess of par value
$
$
$
2,099
Net distributable earnings (accumulated losses)
$
(179
)
$
(773
)
$
(2,099
)
The following table reconciles net decrease in net assets resulting from operations to total taxable income and gains available for distributions for the years ended December 31, 2024 and December 31, 2023:
December 31, 2024
December 31, 2023
December 31, 2022
Net increase (decrease) in net assets resulting from operations
$
225,308
$
135,676
$
(8,408
)
Net change in unrealized appreciation (depreciation)
(16,107
)
(37,095
)
51,283
Unearned performance-based incentive fee on unrealized gains
5,359
-
(256
)
Basis adjustment for corporate conversion
(256
)
(795
)
(249
)
Post October loss deferral
(1,461
)
(1,043
)
2,533
Other book-tax differences
17,552
Total taxable / distributable income
$
230,395
$
96,770
$
44,967
The Company’s aggregate unrealized appreciation and depreciation on investments based on cost for U.S. federal income tax purposes for the years ended December 31, 2024 and December 31, 2023 were as follows:
December 31, 2024
December 31, 2023
December 31, 2022
Tax cost
$
4,542,474
$
2,209,358
$
1,031,935
Gross unrealized appreciation
19,858
19,035
2,320
Gross unrealized depreciation
(33,268
)
(31,340
)
(52,517
)
Investments at Fair Value
$
4,529,064
$
2,197,053
$
981,738
The difference between GAAP-basis tax basis unrealized gains (losses) on our investments is attributable primarily to tax basis significant modifications and a step-up in the cost basis of our investments that happened during the corporate conversion. The net tax unrealized appreciation (depreciation) on investments is $(13.4) million and $(12.3) million as of December 31, 2024, and December 31, 2023, respectively.
Tax Information (unaudited)
During the year ended December 31, 2024, the Company designated approximately 81.66% of its distributions from net investment income as interest related dividends pursuant to Section 871(k) of the Code.
During the year ended December 31, 2024, the Company designated 86.53% 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 $13.9 million, as capital gain dividends paid during the year ended December 31, 2024.
During the year ended December 31, 2024, the Company designated $12.4 million as short-term capital gain dividends pursuant to Section 871(k) of the Internal Revenue Code.
Note 12. Financial Highlights
The following are the financial highlights for the years ended December 31, 2024, 2023 and 2022:
Year Ended December 31, 2024
Year Ended December 31, 2023
Year Ended December 31, 2022
Period Ended December 31, 2021 (1)
Per Share Data:
Net assets, beginning of period
$
23.26
$
21.78
$
25.17
$
-
Net investment income (2)
2.77
3.23
2.70
0.02
Net realized gain (loss) (2)
0.40
0.08
0.24
0.01
Net change in unrealized appreciation (depreciation) (3)
0.45
1.28
(3.52
)
0.14
Net increase in net assets resulting from operations
3.62
4.59
(0.58
)
0.17
Distributions declared from net investment income (4)
(3.00
)
(3.09
)
(2.88
)
-
Other (3)
-
-
-
25.00
Issuance of shares in connection with our DRP program
(0.01
)
(0.02
)
0.07
-
Total increase (decrease) in net assets
0.61
1.48
(3.39
)
25.17
Net assets, end of period
$
23.87
$
23.26
$
21.78
$
25.17
Shares outstanding, end of period
100,611,506
40,279,212
22,126,135
12,000,000
Total return based on NAV (5)
16.16
%
22.10
%
(2.46
)%
0.68
%
Ratios:
Expenses to average net assets (6)
13.38
%
14.47
%
11.28
%
11.74
%
Net investment income to average net assets (6)
11.03
%
13.83
%
10.77
%
6.71
%
Portfolio turnover rate (7)
35.81
%
25.93
%
32.49
%
0.36
%
Supplemental Data:
Net assets, end of period
$
2,401,934
$
937,586
$
481,846
$
301,998
Total capital commitments, end of period
$
2,606,788
$
1,444,678
$
1,052,600
$
800,000
Ratios of total contributed capital to total committed capital, end of period
82.48
%
57.11
%
46.55
%
37.50
%
Average debt outstanding
$
1,774,784
$
804,401
$
482,333
$
410,000
Asset coverage ratio (8)
207.6
%
181.7
%
189.7
%
173.7
%
(1)The Company was initially capitalized and commenced operations on December 21, 2021.
(2)The per share data was derived by using the weighted average shares outstanding during the period.
(3)For the year ended December 31, 2024 the amount shown does not correspond with the aggregate amount for the period as it includes the effect of the timing of capital transactions.
(4)The per share data was derived using the actual shares outstanding at the date of the relevant transaction (See Note 9).
(5)Total return (not annualized) is calculated as the change in net assets per share during the period, plus distributions per share (assuming distributions are reinvested in accordance with the Company's distribution reinvestment plan), divided by the net assets per share at the beginning of the period.
(6)Amounts are annualized except for non-recurring income and expenses (other income, organization and offering expenses and incentive fees on capital gains).
(7)Portfolio turnover rate is calculated using the lesser of the year-to-date sales or year-to-date purchases over the average of the invested assets at fair value for the period reported.
(8)In accordance with the 1940 Act, with certain, limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing.
Note 13. Subsequent Events
The Company’s management evaluated subsequent events through the date of March 19, 2025, the date that the consolidated financial statements were issued. There have been no subsequent events, except as disclosed below, that occurred during such period that would require disclosure in this Form 10-K or would be required to be recognized in the consolidated financial statements as of and for the twelve months ended December 31, 2024.
On January 15, 2025, BDT & MSD announced that Greg Olafson has been appointed President, Co-Head of Global Credit & Co-Chief Investment Officer. He will join as a member of the senior leadership of the firm in the second half of 2025. In his new role, he will oversee BDT & MSD's Private Credit strategies alongside Rob Platek, Co-Head of Global Credit, who will transition to the role of Chairman of Global Credit at the end of the year. As it relates to the Company, Mr. Platek will remain in his role as Chief Executive Officer, President and Chairman of the Board.
In connection with the Company’s private offering (the “Private Offering”) of its Shares, the Company delivered a private placement memorandum to shareholders in which it provided that the term of the Company would commence on the date which the Company first accepted capital commitments, which occurred on December 21, 2021 (the “Initial Closing Date”), and end upon the fifth anniversary of the Initial Closing Date, subject to a one-year extension (the “Term”). The Company also provided that, on or before the conclusion of the Term, the Board of Directors of the Company would seek a liquidity event or determine to remain a privately offered business development company indefinitely. On March 4, 2025, upon the recommendation of the Company’s management, the Board determined that it would be in the best interest of the Company and its shareholders to remain a privately offered business development company.
Subsequent to December 31, 2024, the Company invested in the senior secured loans of Solvias AG, and Learnosity.

---

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.
a)Evaluation of Disclosure Controls and Procedures
In accordance with Rules 13a-15(b) and 15d-15(b) of the Exchange Act, we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Annual Report on Form 10-K and determined that our disclosure controls and procedures are effective as of the end of the period covered by the Annual Report on Form 10-K.
b)Management’s Report on Internal Controls 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). The Company’s internal control over financial reporting is a process designed under the supervision of its Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer) and effected by the Company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of its consolidated financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.
The Company’s internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of the Company’s assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on its consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, 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.
Management (with the participation of our Chief Executive Officer and Chief Financial Officer) conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2024 based on the framework established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management concluded that the Company’s internal control over financial reporting as of December 31, 2024 was effective.
This annual report does not include an attestation report of the Company’s registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.
c)Changes in Internal Control Over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the year ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

---

ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
a)None.
b)For the fiscal quarter ended December 31, 2024, neither the Company nor any director or officer has entered into or terminated any (i) contract, instruction or written plan for the purchase or sale of securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) under the Exchange Act or (ii) any non-Rule 10b5-1 trading arrangement.
We have adopted insider trading policies and procedures governing the purchase, sale, and disposition of our securities by our officers and directors that are reasonably designed to promote compliance with insider trading laws, rules and regulations.

---

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
Information in response to this item is incorporated by reference to our Proxy Statement relating to our 2025 annual meeting of stockholders (the “Proxy Statement”). The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.

---

ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.

---

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.

---

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.

---

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services.
Information in response to this item is incorporated by reference from our Proxy Statement relating to our 2025 annual meeting of stockholders. The Proxy Statement will be filed with the SEC within 120 days after the end of the fiscal year covered by this Form 10-K pursuant to Regulation 14A under the Exchange Act.
Part IV.

---

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Consolidated Financial Statement Schedules.
Exhibit
Number
Description of Exhibits
3.1
Articles of Incorporation effective as of January 1, 2022 (incorporated by reference to Exhibit 3.4 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
3.2
Amended and Restated By Laws (incorporated by reference to Exhibit 3.5 to the Registration Statement on Form 10 (File No. 000-56375) filed on March 3, 2022)
3.3
Articles Supplementary for 12.0% Series A Cumulative Preferred Stock (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on December 4, 2023)
3.4
Articles of Amendment, dated November 6, 2024 (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed on November 6, 2024)
4.1
Description of Securities (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed on March 25, 2024)
10.1
Investment Advisory Agreement between the Company and the Adviser dated November 24, 2021 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
10.2
Investment Advisory Agreement between the Company and the Adviser effective January 1, 2023 (incorporated by reference to Exhibit 10.2 to the Annual Report on Form 10-K filed March 23, 2023)
10.3
Administration Agreement Advisory Agreement between the Company and the Adviser dated November 24, 2021 (incorporated by reference to Exhibit 10.2 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
10.4
Administration Agreement Advisory Agreement between the Company and the Adviser effective January 1, 2023 (incorporated by reference to Exhibit 10.4 to the Annual Report on Form 10-K filed on March 23, 2023)
10.5
Distribution Reinvestment Plan (incorporated by reference to Exhibit 10.4 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
10.6
Custody Agreement between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 10.3 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
10.7
First Amendment to the Custody Agreement between the Company and U.S. Bank National Association (incorporated by reference to Exhibit 10.7 to the Annual Report on Form 10-K filed on March 23, 2023)
10.8
Transfer Agent Servicing Agreement between the Company and U.S. Bancorp Fund Services, LLC (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
10.9
Loan Financing and Servicing Agreement by and among MSD BDC SPV I, LLC as borrower, the Company as equity-holder and servicer, each of the lenders from time to time party thereto, Deutsche Bank AG, New York Branch as facility agent and U.S. Bank National Association as collateral agent and collateral custodian. (incorporated by reference to Exhibit 10.6 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
10.10
Amendment No.1 to the Loan Financing and Servicing Agreement by and among MSD BDC SPV I, LLC as borrower, the Company as equity-holder and servicer, each of the lenders from time to time party thereto, Deutsche Bank AG, New York Branch as facility agent and U.S. Bank National Association as collateral agent and collateral custodian (incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K filed on March 23, 2023)
10.11
Amendment No. 2 to the Loan Financing and Servicing Agreement by and among MSD BDC SPV I, LLC as borrower, the Company as equity-holder and servicer, each of the lenders from time to time party thereto, Deutsche Bank AG, New York Branch as facility agent and U.S. Bank National Association as collateral agent and collateral custodian (incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K filed on March 23, 2023)
10.12
Revolving Credit Agreement by and among the Company as borrower, MSD Portfolio, L.P. - Investments as Guarantor and Bank of America, N.A. as the administrative agent, the sole lead arranger, the sole bookrunner, the structuring agent, the letter of credit issuer and a lender (incorporated by reference to Exhibit 10.7 to the Registration Statement on Form 10 (File No. 000-56375) filed on February 8, 2022)
10.13
First Amendment to the Revolving Credit Agreement by and among the Company as borrower, MSD Portfolio, L.P. - Investments as Guarantor and Bank of America, N.A. as the administrative agent, the sole lead arranger, the sole bookrunner, the structuring agent, the letter of credit issuer and a lender (incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K filed on March 25, 2024)
10.14
Loan and Security Agreement by and among MSD BDC SPV II, LLC as borrower, Citizens Bank N.A as lender and administrative agent, MSD Investment Corp. as collateral manager, the other lenders party thereto, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian. (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on August 21, 2023).
10.15
Amendment No. 1 to Loan and Security Agreement by and among MSD BDC SPV II, LLC as borrower, Citizens Bank N.A as lender and administrative agent, MSD Investment Corp. as collateral manager, the other lenders party thereto, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian (incorporated by reference to Exhibit 10.14 to the Quarterly Report on Form 10-Q filed on November 9, 2023).
10.16
Indenture, dated as of November 15, 2023, by and between MSD BDC CLO I, LLC and U.S. Bank Trust Company, National Association. (incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K filed on March 25, 2024)
10.17
Collateral Management Agreement, dated November 15, 2023, by and between MSD BDC CLO I, LLC and MSD Partners, L.P. (incorporated by reference to Exhibit 10.17 to the Annual Report on Form 10-K filed on March 25, 2024)
10.18
Master Transfer Agreement, dated as of November 15, 2023, by and between MSD Investment Corp., as seller, and MSD BDC CLO I, LLC, as purchaser. (incorporated by reference to Exhibit 10.18 to the Annual Report on Form 10-K filed on March 25, 2024)
10.19
Amendment No. 2 to the Loan and Security Agreement by and among MSD BDC SPV II, LLC, as borrower, Citizens Bank, N.A. as a required lender, a lender, and administrative agent, MSD Investment Corp. as collateral manager, Everbank, N.A. as a lender, Texas Capital Bank as a lender, Western Alliance Bank as a lender, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian (incorporated by reference to Exhibit 10.19 of the Quarterly Report on Form 10-Q filed on May 10, 2024)
10.20
Amendment No. 4 to the Loan Financing and Servicing Agreement by and among MSD BDC SPV I, LLC, as borrower, the several banks and other financial institutions or entities that are party thereto from time to time, as lenders, Deutsche Bank AG, New York Branch as facility agent, U.S. Bank Trust Company National Association as collateral agent and U.S. Bank National Association as collateral custodian (incorporated by reference to Exhibit 10.20 of the Quarterly Report on Form 10-Q filed on May 10, 2024)
10.21
Amendment No. 3 to the Loan and Security Agreement by and among MSD BDC SPV II, LLC, as borrower, Citizens Bank, N.A. as a required lender, a lender, and administrative agent, MSD Investment Corp. as collateral manager, Everbank, N.A. as a lender, Texas Capital Bank as a lender, Western Alliance Bank as a lender, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian (incorporated by reference to Exhibit 10.21 of the Quarterly Report on Form 10-Q filed on May 10, 2024)
10.22
Note Purchase Agreement, dated August 7, 2024, by and between MSD Investment Corp. and the purchasers party thereto (incorporated by reference to Exhibit 10.22 of the Quarterly Report on Form 10-Q filed on August 14, 2024)
10.23
Note Purchase Agreement, dated November 20, 2024, by and between MSD Investment Corp. and the purchasers party thereto (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on November 22, 2024)
10.24
Senior Secured Credit Agreement by and among MSD Investment Corp., as borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on December 26, 2024)
14.1
Code of Ethics (incorporated by reference to Exhibit 14.1 to the Annual Report on Form 10-K filed on March 25, 2024)
21.1
Subsidiaries of the Registrant*
31.1
Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2
Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1
Certification of Principal 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 Principal 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
101.SCH
Inline XBRL Taxonomy Extension Schema
Inline XBRL Taxonomy Extension Calculation Linkbase
Inline XBRL Taxonomy Extension Definition Linkbase
Inline XBRL Taxonomy Extension Label Linkbase
Inline XBRL Taxonomy Extension Presentation Linkbase
Cover page formatted as Inline XBRL and contained in Exhibit 101
* Filed herewith.