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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 814-00891
PENNANTPARK FLOATING RATE CAPITAL LTD.
(Exact name of registrant as specified in its charter)
MARYLAND
27-3794690
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1691 Michigan Avenue
Miami Beach, Florida
33139
(Address of principal executive offices)
(Zip Code)
(786) 297-9500
(Registrant’s Telephone Number, Including Area Code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share
PFLT
The New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☑
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of February 10, 2025 was 87,955,896.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2024
TABLE OF CONTENTS
PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Assets and Liabilities as of December 31, 2024 (unaudited) and September 30, 2024
4
Consolidated Statements of Operations for the three months ended December 31, 2024 and 2023 (unaudited)
5
Consolidated Statements of Changes in Net Assets for the three months ended December 31, 2024 and 2023 (unaudited)
6
Consolidated Statements of Cash Flows for the three months ended December 31, 2024 and 2023 (unaudited)
7
Consolidated Schedules of Investments as of December 31, 2024 (unaudited) and September 30, 2024
8
Notes to Consolidated Financial Statements (unaudited)
24
Report of Independent Registered Public Accounting Firm (PCAOB ID 49)
47
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
49
Item 3. Quantitative and Qualitative Disclosures About Market Risk
66
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
67
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
68
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
69
SIGNATURES
70
2
PART I—CONSOLIDATED FINANCIAL INFORMATION
We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule 13a-13 as promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In this Report, except where the context suggests otherwise, the terms “Company,” “we,” “our” or “us” refers to PennantPark Floating Rate Capital Ltd. and its wholly-owned consolidated subsidiaries; “Funding I” refers to PennantPark Floating Rate Funding I, LLC; “Taxable Subsidiary” refers to collectively our consolidated subsidiaries PFLT Investment Holdings II, LLC and PFLT Investment Holdings, LLC; “PSSL” refers to PennantPark Senior Secured Loan Fund I LLC, an unconsolidated joint venture; “PTSF” refers to PennantPark-TSO Senior Loan Fund, LP, an unconsolidated limited partnership; “PennantPark Investment Advisers” or “Investment Adviser” refer to PennantPark Investment Advisers, LLC; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; “2023 Notes” refers to our 4.3% Series A notes due 2023; “2026 Notes” refers to our 4.25% Notes due 2026; “1940 Act” refers to the Investment Company Act of 1940, as amended; “SBCAA” refers to the Small Business Credit Availability Act; “Code” refers to the Internal Revenue Code of 1986, as amended; “RIC” refers to a regulated investment company under the Code; “BDC” refers to a business development company under the 1940 Act; “Credit Facility” refers to our multi-currency senior secured revolving credit facility, as amended from time to time, with Truist Bank and other lenders, or the “Lenders,” entered into on August 12, 2021; “Securitization Issuer” refers to PennantPark CLO I, Ltd.; “Securitization Issuers” refers to the Securitization Issuer and PennantPark CLO I, LLC; “Debt Securitization” refers to the $301.4 million term debt securitization completed by the Securitization Issuers; “2031 Asset-Backed Debt” refers to (i) the issuance of the Class A-1 Senior Secured Floating Rate Notes due 2031, the Class A-2 Senior Secured Fixed Rate Notes due 2031, the Class B-1 Senior Secured Floating Rate Notes due 2031, the Class B-2 Senior Secured Fixed Rate Notes due 2031, the Class C-1 Secured Deferrable Floating Rate Notes due 2031, the Class C-2 Notes Secured Deferrable Fixed Rate Notes due 2031, and the Class D Secured Deferrable Floating Notes due 2031 and (ii) the borrowing of the Class A‑1 Senior Secured Floating Rate Notes due 2031 by the Securitization Issuers in connection with the Debt Securitization; and “Depositor” refers to PennantPark CLO I Depositor, LLC. 2036 Securitization Issuer refers to PennantPark CLO VIII, LLC; “2036-Debt Securitization” refers to the $350.6 million term debt securitization completed by the "2036 Securitization Issuers"; “2036 Asset-Backed Debt” refers to the issuance of the AAA(sf) Class A-1 Notes, AAA(sf) Class A-2 Notes, AA(sf) Class B Notes, A(sf) Class C Notes, BBB-(sf) Class D Notes, and the borrowing issuance of AAA(sf) Class A-1 floating rate loans. (the "Class A-1 Loans" with the 2036-Secured Notes.); “2036-R Securitization Issuers” refers to Securitization Issuer and PennantPark CLO I LLC; “2036-R Indenture” refers to that certain indenture, dated September 19, 2019, by and among the 2036-R Securitization Issuers and U.S. Bank Trust Company, National Association, as amended by the second supplemental indenture, dated June 25, 2024; “2036-R Asset-Backed Debt” refers to the issuance by the 2036-R Securitization Issuers of the following classes of notes pursuant the 2036-R Indenture (i) $203 million of A-1-R Notes, which bear interest at the three-month secured overnight financing rate (“SOFR”) plus 1.75%, (ii) $10.5 million of A-2-R Notes, which bear interest at three-month SOFR plus 1.90%, (iii) $12 million of Class B-R Notes, which bear interest at three-month SOFR plus 2.05%, (iv) $28 million of C-R Notes, which bear interest at three-month SOFR plus 2.75% and (v) $21 million of D-R Notes, which bear interest at three-month SOFR plus 4.30% (collectively, the “Secured Notes”), (B) the issuance by a 2036-R Securitization Issuer of $64 million of subordinated notes pursuant to the 2036-R Indenture (the “Subordinated Notes”) and (C) the borrowing by the Securitization Issuer of $12.5 million of Class B-R Loans, which bear interest at three-month SOFR plus 2.05% (the “Class B-R Loans”). References to our portfolio, our investments, our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility, and our business include investments we make through our subsidiaries.
3
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)
December 31, 2024
September 30, 2024
(unaudited)
Assets
Investments at fair value
Non-controlled, non-affiliated investments (amortized cost— $1,894,793 and $1,622,669, respectively)
$
1,907,349
1,632,269
Controlled, affiliated investments (amortized cost— $339,500 and $372,271, respectively)
286,561
351,235
Total investments (amortized cost— $2,234,293 and $1,994,940, respectively)
2,193,910
1,983,504
Cash and cash equivalents (cost— $102,273 and $112,046, respectively)
102,262
112,050
Interest receivable
13,024
12,167
Receivables from investments sold
29,090
—
Distributions receivable
577
635
Due from affiliates
312
291
Prepaid expenses and other assets
5,026
198
Total assets
2,344,201
2,108,845
Liabilities
Credit Facility payable, at fair value (cost— $608,855 and $443,855, respectively)
608,791
443,880
2026 Notes payable, net (par—$185,000)
184,026
183,832
2036 Asset-Backed Debt, net (par—$287,000)
284,222
284,086
2036-R Asset-Backed Debt, net (par— $266,000)
265,268
265,235
Payable for investments purchased
471
20,363
Interest payable on debt
13,318
14,645
Distributions payable
8,698
7,834
Base management fee payable
5,264
4,588
Incentive fee payable
7,492
3,189
Accounts payable and accrued expenses
2,920
2,187
Deferred tax liability
1,080
1,712
Total liabilities
1,381,550
1,231,551
Commitments and contingencies (See Note 12)
Net assets
Common stock, 84,855,896 and 77,579,896 shares issued and outstanding, respectively Par value $0.001 per share and 200,000,000 shares authorized
85
78
Paid-in capital in excess of par value
1,058,949
976,744
Accumulated deficit
(96,383
)
(99,528
Total net assets
962,651
877,294
Total liabilities and net assets
Net asset value per share
11.34
11.31
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended December 31,
2024
2023
Investment income:
From non-controlled, non-affiliated investments:
Interest
47,463
23,768
Dividend
508
Other income
1,480
1,763
From controlled, affiliated investments:
12,808
8,434
4,375
3,500
306
Total investment income
67,009
37,973
Expenses:
Interest and expenses on debt
22,361
8,942
Performance-based incentive fee
4,863
Base management fee
2,951
General and administrative expenses
1,200
988
Administrative services expenses
500
626
Expenses before provision for taxes and financing costs
36,817
18,370
Provision for taxes on net investment income
225
154
Total expenses
37,042
18,524
Net investment income
29,967
19,449
Realized and unrealized gain (loss) on investments and debt:
Net realized gain (loss) on:
Non-controlled, non-affiliated investments
1,181
(3,089
Non-controlled and controlled, affiliated investments
25,493
Provision for taxes on realized gain on investments
(73
Net realized gain (loss) on investments
26,601
Net change in unrealized appreciation (depreciation) on:
2,943
5,228
Controlled and non-controlled, affiliated investments
(31,904
943
Provision for taxes on unrealized appreciation (depreciation) on investments
632
Debt appreciation (depreciation)
90
(62
Net change in unrealized appreciation (depreciation) on investments and debt
(28,239
6,109
Net realized and unrealized gain (loss) from investments and debt
(1,638
3,020
Net increase (decrease) in net assets resulting from operations
28,329
22,469
Net increase (decrease) in net assets resulting from operations per common share (See Note 7)
0.35
0.38
Net investment income per common share
0.37
0.33
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except share issue data)
Net increase (decrease) in net assets from operations:
26,674
Net change in unrealized appreciation (depreciation) on investments
(28,961
6,171
Net change in provision for taxes on realized and unrealized appreciation (depreciation) on investments
559
Net change in unrealized appreciation (depreciation) on debt
Distributions to stockholders:
Distribution of net investment income
(25,181
(18,061
Total distributions to stockholders
Capital transactions
Public offering
82,708
Offering costs
(499
Net increase in net assets resulting from capital transactions
82,209
Net increase (decrease) in net assets
85,357
4,408
Net assets:
Beginning of period
653,605
End of period
658,013
Capital share activity:
Shares issued from public offering
7,276,000
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
Net change in unrealized (appreciation) depreciation on investments
28,961
(6,171
(90
62
Net realized (gain) loss on investments
(26,674
3,089
Net accretion of discount and amortization of premium
(5,687
(1,026
Purchases of investments
(606,916
(302,598
Payment-in-kind interest
(1,378
(867
Proceeds from dispositions of investments
401,300
103,803
Amortization of deferred financing costs
362
352
(Increase) decrease in:
(857
(1,213
Distribution receivable
58
57
Receivable for investments sold
(29,090
(4,828
874
Due from affiliate
(21
(142
Increase (decrease) in:
(19,892
673
(1,327
(2,095
676
192
4,303
235
(632
Due to affiliates
(74
Account payable and accrued expenses
733
459
Net cash provided by (used in) operating activities
(232,670
(181,921
Cash flows from financing activities:
Proceeds from public offering
(496
Distributions paid to stockholders
(24,317
Repayment of 2023 notes payable
(76,219
Borrowings under Credit Facility
165,001
251,455
Net cash provided by (used in) financing activities
222,896
157,175
Net increase (decrease) in cash and cash equivalents
(9,774
(24,746
Effect of exchange rate changes on cash
(14
17
Cash and cash equivalents, beginning of period
100,555
Cash and cash equivalents, end of period
75,826
Supplemental disclosures:
Interest paid
23,326
10,685
Taxes paid
160
Non-cash exchanges and conversions
5,067
CONSOLIDATED SCHEDULE OF INVESTMENTS
(in thousands, except share data)
Issuer Name
Maturity
Industry
Current Coupon
Basis Point Spread Above Index (1)
Par / Shares
Cost
Fair Value (2)
Investments in Non-Controlled, Non-Affiliated Portfolio Companies - 198.1% (3), (4)
First Lien Secured Debt - 179.3%
A1 Garage Merger Sub, LLC
12/22/2028
Commercial Services & Supplies
9.11
%
3M SOFR+475
1,575
1,557
A1 Garage Merger Sub, LLC - Unfunded Term Loan (8)
453
A1 Garage Merger Sub, LLC (Revolver) (6), (8)
748
ACP Avenu Buyer, LLC
10/02/2029
IT Services
9.84
3M SOFR+525
14,086
13,877
13,698
ACP Avenu Buyer, LLC - Unfunded Term Loan (8)
04/02/2025
5,621
(77
ACP Avenu Buyer, LLC - Funded Revolver
847
824
ACP Avenu Buyer, LLC (Revolver) (6), (8)
2,960
(81
ACP Falcon Buyer, LLC (Revolver) (6), (8)
08/01/2029
Professional Services
3,096
Ad.net Acquisition, LLC
05/06/2026
Media
10.59
3M SOFR+626
4,825
4,799
Ad.net Acquisition, LLC - Funded Revolver
818
Ad.net Acquisition, LLC (Revolver) (6), (8)
426
Aechelon Technology, Inc.
08/16/2029
Aerospace and Defense
11.86
3M SOFR+750
13,860
13,728
Aechelon Technology, Inc. - Unfunded Revolver (8)
3,104
AFC Dell Holding Corp.
04/09/2027
Distributors
10.04
3M SOFR+550
27,427
27,359
AFC Dell Holding Corp. - Unfunded Term Loan (8)
7,460
Amsive Holding Corporation (f/k/a Vision Purchaser Corporation)
06/10/2025
10.75
3M SOFR+650
13,777
13,746
13,639
Anteriad, LLC (f/k/a MeritDirect, LLC)
06/30/2026
10.23
3M SOFR+590
12,809
12,666
Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan
2,070
2,057
Anteriad, LLC (f/k/a MeritDirect, LLC) (Revolver) (6)
10.19
3M SOFR+585
820
Anteriad, LLC (f/k/a MeritDirect, LLC) - (Revolver) (8)
2,050
Applied Technical Services, LLC
12/29/2026
12,565
12,470
12,411
Applied Technical Services, LLC - Unfunded Term Loan (8)
07/17/2025
3,990
(10
Applied Technical Services, LLC (Revolver)
12.75
2,031
2,006
Applied Technical Services, LLC (Revolver) (6), (8)
262
(3
Arcfield Acquisition Corp. (Revolver)
10/28/2031
9.17
1M SOFR+500
19,540
19,517
19,491
Arcfield Acquisition Corp. (Revolver) (6), (8)
2,874
(7
Archer Lewis, LLC
08/28/2029
Healthcare Technology
10.08
3M SOFR+575
20,281
20,087
20,078
Archer Lewis, LLC - Unfunded Term Loan A (8)
08/28/2025
4,648
Archer Lewis, LLC - Unfunded Term Loan B (8)
08/28/2026
21,267
Archer Lewis, LLC - Unfunded Revolver (8)
3,252
(33
ARGANO, LLC
09/13/2029
Business Services
10.15
25,704
25,452
25,447
ARGANO, LLC - Unfunded Term Loan (8)
03/13/2025
8,907
ARGANO, LLC – Unfunded Revolver (8)
1,421
Azureon, LLC
06/26/2029
Diversified Consumer Services
10.20
11,609
11,460
11,354
Azureon, LLC - Unfunded Term Loan (8)
06/26/2026
10,359
(124
Azureon, LLC - Unfunded Revolver (8)
2,580
(57
Beacon Behavioral Support Service, LLC
06/21/2029
Healthcare Providers and Services
9.83
32,530
32,133
32,042
(PIK 15.00%)
Beacon Behavioral Support Service, LLC - Unfunded Term Loan (8)
12/21/2025
12,415
Beacon Behavioral Support Service, LLC - Unfunded Revolver (8)
2,104
(32
Best Practice Associates, LLC
11/08/2029
11.08
3M SOFR+675
64,278
63,324
63,314
Best Practice Associates, LLC - Unfunded Revolver (8)
5,732
(86
Beta Plus Technologies, Inc.
07/01/2029
Internet Software and Services
1M SOFR+575
19,756
19,183
19,212
Big Top Holdings, LLC
02/28/2030
Construction & Engineering
10.11
29,602
29,120
Big Top Holdings, LLC - (Revolver) (8)
4,479
BioDerm, Inc. (Revolver)
01/31/2028
Healthcare Equipment and Supplies
11.03
1M SOFR+650
964
952
BioDerm, Inc. (Revolver) (6), (8)
107
(1
Blackhawk Industrial Distribution, Inc.
09/17/2026
9.73
3M SOFR+540
8,199
8,146
8,057
Blackhawk Industrial Distribution, Inc. - Unfunded Term Loan (8)
1,893
Blackhawk Industrial Distribution, Inc. (Revolver) (6)
11.04
3M SOFR+640
679
668
Blackhawk Industrial Distribution, Inc. (8)
3,203
(55
BLC Holding Company, Inc.
11/20/2030
9.28
25,027
24,845
24,839
BLC Holding Company, Inc. - Unfunded Term Loan (8)
11/20/2026
14,293
BLC Holding Company, Inc. - Unfunded Revolver (8)
4,398
CONSOLIDATED SCHEDULE OF INVESTMENTS-(Continued)
DECEMBER 31, 2024
Boss Industries, LLC
12/27/2030
Independent Power and Renewable Electricity Producers
9.33
3M SOFR+500
23,100
22,928
22,927
Boss Industries, LLC - Funded Revolver
549
Boss Industries, LLC - Unfunded Revolver (8)
2,195
BlueHalo Financing Holdings, LLC
10/31/2025
10.33
3M SOFR+600
9,170
9,135
9,124
Burgess Point Purchaser Corporation
07/25/2029
Auto Components
9.68
3M SOFR+535
14,924
14,209
13,217
By Light Professional IT Services, LLC
05/16/2025
High Tech Industries
3M SOFR+698
46,448
46,378
By Light Professional IT Services, LLC (Revolver) (6), (8)
5,831
Carisk Buyer, Inc.
12/01/2029
9.58
7,453
7,370
7,341
Carisk Buyer, Inc. - Unfunded Term Loan (8)
7,868
(47
Carisk Buyer, Inc. (Revolver) (6), (8)
1,750
(26
Carnegie Dartlet, LLC
02/07/2030
9.86
29,775
29,350
29,328
Carnegie Dartlet, LLC - Unfunded Term Loan (8)
02/07/2026
16,214
Carnegie Dartlet, LLC - Funded Revolver
324
319
Carnegie Dartlet, LLC - (Revolver) (8)
5,080
(76
Cartessa Aesthetics, LLC
06/14/2028
12,911
12,782
Cartessa Aesthetics, LLC (Revolver) (6)
511
Cartessa Aesthetics, LLC (Revolver) (6), (8)
927
Case Works, LLC
10/01/2029
9.59
18,772
18,612
18,622
Case Works, LLC - Unfunded Term Loan (8)
10/01/2025
1,854
1
Case Works - Funded Revolver
9.65
1,643
1,630
Case Works - Unfunded Revolver (8)
2,465
(20
CF512, Inc.
08/20/2026
10.69
3M SOFR+619
5,728
5,701
5,642
CF512, Inc.(Revolver) (6), (8)
955
CJX Borrower, LLC
07/13/2027
10.39
3M SOFR+576
4,515
4,469
CJX Borrower , LLC - Unfunded Term Loan (8)
666
CJX Borrower, LLC - Funded Revolver
331
CJX Borrower , LLC - Unfunded Revolver (8)
904
Compex Legal Services, Inc.
02/09/2026
9.95
3M SOFR+545
8,810
8,793
Compex Legal Services, Inc. (Revolver)
02/07/2025
10.14
3M SOFR+555
703
Compex Legal Services, Inc. (Revolver) (6), (8)
Confluent Health, LLC
11/30/2028
9.36
6,948
6,762
6,600
Crane 1 Services, Inc.
08/16/2027
10.22
3M SOFR+586
4,264
4,217
4,232
Crane 1 Services, Inc. (Revolver) (6), (8)
502
(4
C5MI Holdco, LLC
07/31/2030
28,928
28,511
28,494
C5MI Holdco, LLC. - Funded Revolver
1,515
1,493
C5MI Holdco, LLC. - Unfunded Revolver (8)
7,577
(114
DRI Holding Inc.
12/21/2028
9.71
6,107
5,936
5,924
Dr. Squatch, LLC
08/31/2027
Personal Products
16,828
16,677
Dr. Squatch, LLC (Revolver) (6), (8)
3,353
DRS Holdings III, Inc.
11/03/2025
Chemicals, Plastics and Rubber
10.71
3M SOFR+635
15,435
15,384
15,373
DRS Holdings III, Inc. (Revolver) (6), (8)
1,426
(6
Duggal Acquisition, LLC
09/30/2030
Marketing Services
9.08
10,295
10,194
10,192
Duggal Acquisition, LLC - Unfunded Term Loan (8)
09/30/2026
4,470
DUGGAL Acquisition, LLC - Funded Revolver
1,121
1,110
Duggal Acquisition, LLC - Unfunded Revolver (8)
4,484
(45
Dynata, LLC - First-Out Term Loan
10/16/2028
9.79
3M SOFR+526
1,851
1,728
Dynata, LLC - Last-Out Term Loan
10/15/2028
10.29
11,486
10,653
Emergency Care Partners, LLC
10/18/2027
10.13
13,736
13,638
13,633
Emergency Care Partners, LLC - Unfunded Term Loan (8)
04/18/2026
6,172
(46
Emergency Care Partners, LLC - Unfunded Revolver (8)
1,810
EDS Buyer, LLC
01/10/2029
Electronic Equipment, Instruments, and Components
10,646
10,524
10,566
EDS Buyer, LLC. (Revolver) (6), (8)
2,298
(17
9
Efficient Collaborative Retail Marketing Company, LLC
06/15/2025
Media: Diversified and Production
12.09
3M SOFR+776
8,207
8,228
6,566
(PIK 1.50%)
ETE Intermediate II, LLC - Funded Revolver
05/25/2029
10.83
1,436
ETE Intermediate II, LLC - Unfunded Revolver (8)
994
Events Buyer, LLC
12/17/2029
Event Services
10.10
11,380
11,268
11,266
Events Buyer, LLC- Unfunded Term Loan A (8)
06/17/2025
10,358
Events Buyer, LLC- Unfunded Term Loan B (8)
12/17/2026
9,865
Events Buyer, LLC - Unfunded Revolver (8)
2,466
Eval Home Health Solutions Intermediate, LLC
05/10/2030
Healthcare, Education and Childcare
14,455
14,242
14,311
Eval Home Health Solutions Intermediate, LLC - Unfunded Revolver (8)
2,640
Exigo Intermediate II, LLC (Revolver) (8)
03/15/2027
Software
689
Fairbanks Morse Defense
06/23/2028
9.05
3M SOFR+450
992
997
Five Star Buyer, Inc.
02/23/2028
Hotels, Restaurants and Leisure
11.44
3M SOFR+710
4,437
4,377
4,403
Five Star Buyer, Inc. (Revolver) (8)
741
Gauge ETE Blocker, LLC - Promissory Note
05/19/2029
12.56
215
GGG MIDCO, LLC
09/27/2030
25,456
GGG MIDCO, LLC - Unfunded Term Loan (8)
03/27/2026
14,460
GGG MIDCO, LLC – Unfunded Revolver (8)
1,311
(13
Global Holdings InterCo LLC
03/16/2026
Diversified Financial Services
9.98
3M SOFR+560
4,882
4,832
4,686
Graffiti Buyer, Inc.
08/10/2027
Trading Companies & Distributors
10.12
1,347
1,338
1,327
Graffiti Buyer, Inc. - Unfunded Term Loan (8)
984
Graffiti Buyer, Inc. (Revolver)
548
539
Graffiti Buyer, Inc. (Revolver) (6), (8)
317
(5
Hancock Roofing and Construction L.L.C.
12/31/2026
Insurance
9.93
3,993
3,952
Hancock Roofing and Construction L.L.C. (Revolver) (6)
9.96
680
Hancock Roofing and Construction L.L.C. (Revolver) (6), (8)
Harris & Co. LLC
08/09/2030
28,062
27,825
Harris & Co. LLC. - Unfunded Term Loan A (8)
02/09/2025
23,273
204
Harris & Co. LLC. - Unfunded Term Loan B (8)
50,296
440
Harris & Co. LLC - Funded Revolver
Harris & Co. LLC - Unfunded Revolver (8)
6,290
HEC Purchaser Corp.
06/17/2029
9.75
9,627
9,518
9,588
Hills Distribution Inc.
10.49
17,219
17,016
17,047
Hills Distribution Inc. - Unfunded Term Loan (8)
11/07/2025
1,514
HW Holdco, LLC
05/10/2026
1M SOFR+590
10,410
10,380
HW Holdco, LLC (Revolver) (6), (8)
1,452
IG Investments Holdings, LLC (6)
09/22/2028
9.57
4,487
4,434
4,454
IG Investments Holdings, LLC (Revolver) (6), (8)
722
Imagine Acquisitionco, LLC - Funded Revolver
11/16/2027
9.55
3M SOFR+510
60
59
Imagine Acquisitionco, LLC (Revolver) (8)
1,133
Infinity Home Services Holdco, Inc.
12/28/2028
9,404
9,331
9,401
Infinity Home Services Holdco, Inc. (CAD)
1,717
1,238
1,194
Infinity Home Services Holdco, Inc. - 3rd Amendment Unfunded Term Loan (8)
10/30/2026
12,618
Infinity Home Services Holdco, Inc. - Funded Revolver
12.00
161
Infinity Home Services Holdco, Inc. - Unfunded Revolver (8)
1,130
Inovex Information Systems Incorporated
12/17/2030
9.63
16,205
16,084
16,083
Inovex Information Systems Incorporated - Unfunded Term Loan (8)
2,800
Inovex Information Systems Incorporated - Funded Revolver
9.61
980
Inovex Information Systems Incorporated - Unfunded Revolver (8)
2,520
Infolinks Media Buyco, LLC
11/01/2026
5,331
5,283
Integrative Nutrition, LLC
01/31/2025
Consumer Services
11.45
3M SOFR+715
15,723
15,695
11,793
ITI Holdings, Inc. (Revolver)
03/03/2028
473
ITI Holdings, Inc. (Revolver) (6), (8)
191
Inventus Power, Inc.
06/30/2025
11.97
3M SOFR+761
4,925
4,894
10
Inventus Power, Inc. - Unfunded Revolver (8)
1,729
Keel Platform, LLC
01/19/2031
Metals and Mining
11,515
11,362
11,400
Keel Platform, LLC - Unfunded Term Loan (8)
2,402
Kinetic Purchaser, LLC
11/10/2027
10.48
3M SOFR+615
13,971
13,813
Kinetic Purchaser, LLC - Funded Revolver
11/10/2026
3M SOFR+610
Kinetic Purchaser, LLC (Revolver) (6), (8)
Lash OpCo, LLC
02/18/2027
12.94
3M SOFR+785
10,927
10,840
10,763
(PIK 5.10%)
Lash OpCo, LLC (Revolver) (6)
08/16/2026
1M SOFR+785
2,870
2,827
Lash OpCo, LLC (Revolver) (6), (8)
335
LAV Gear Holdings, Inc.
Capital Equipment
10.93
1M SOFR+640
13,229
13,226
12,580
(PIK 10.98%)
LAV Gear Holdings, Inc. (Revolver) (6)
1,721
1,636
Ledge Lounger, Inc.
11/09/2026
Leisure Products
11.98
3M SOFR+765
3,674
3,662
3,490
(PIK 1.00%)
Ledge Lounger, Inc. (Revolver)
461
438
Ledge Lounger, Inc. (Revolver) (6), (8)
197
Lightspeed Buyer Inc.
02/03/2026
9.40
1M SOFR+485
26,650
26,493
26,383
Lightspeed Buyer Inc. - Unfunded Term Loan (8)
06/02/2025
2,326
(23
Lightspeed Buyer Inc. (Revolver) (6), (8)
2,499
(25
LJ Avalon Holdings, LLC
02/01/2030
9.76
2,802
2,768
LJ Avalon Holdings, LLC - Unfunded Term Loan (8)
10/01/2024
1,892
LJ Avalon Holdings, LLC (Revolver) (6), (8)
01/31/2030
Loving Tan Intermediate II, Inc.
05/31/2028
44,947
44,323
44,609
Loving Tan Intermediate II, Inc. - Unfunded Term Loan (8)
07/12/2025
23,464
Loving Tan Intermediate II, Inc. (Revolver)
1,780
1,766
Loving Tan Intermediate II, Inc. - Unfunded Revolver (8)
3,559
(27
LSF9 Atlantis Holdings, LLC
06/30/2029
Specialty Retail
9,809
9,919
Lucky Bucks, LLC - First-out Term Loan
10/02/2028
12.10
258
Lucky Bucks, LLC - Last-out Term Loan
517
MAG DS Corp.
04/01/2027
1M SOFR+560
7,269
7,012
6,797
Marketplace Events Acquisition, LLC
12/19/2030
9.60
70,000
69,308
69,300
Marketplace Events Acquisition, LLC - Unfunded Term Loan (8)
06/19/2026
12,192
Marketplace Events Acquisition, LLC - Unfunded Revolver (8)
6,096
MBS Holdings, Inc. - Funded Revolver
04/16/2027
10.25
139
MBS Holdings, Inc. (Revolver) (6), (8)
1,019
MDI Buyer, Inc.
07/25/2028
Commodity Chemicals
2,015
1,984
1,997
MDI Buyer, Inc. (Revolver)
12.50
608
602
MDI Buyer, Inc. (Revolver) (6), (8)
165
Meadowlark Acquirer, LLC
12/10/2027
3M SOFR+565
1,953
1,935
1,904
Meadowlark Acquirer, LLC (Revolver) (8)
1,693
(42
Medina Health, LLC
10/20/2028
10.58
3M SOFR+625
17,775
17,523
Medina Health, LLC (Revolver) (8)
5,187
Megawatt Acquisitionco, Inc.
03/01/2030
6,858
6,071
Megawatt Acquisitionco, Inc. - Funded Revolver
926
809
Megawatt Acquisitionco, Inc. - (Revolver) (8)
2,324
(293
Mission Critical Electronics, Inc.
03/31/2025
3,092
3,087
Mission Critical Electronics, Inc. (Revolver) (6), (8)
1,325
MOREGroup Holdings, Inc.
01/16/2030
31,760
31,347
MOREGroup Holdings, Inc. - Unfunded Term Loan (8)
01/16/2026
11,056
111
11
MOREGroup Holdings, Inc. - (Revolver) (8)
6,634
Municipal Emergency Services, Inc.
10/01/2027
11.00
3M SOFR+350
3,292
3,261
Municipal Emergency Services, Inc. - Unfunded Term Loan (8)
09/28/2027
909
Municipal Emergency Services, Inc. - Funded Revolver
9.48
3M SOFR+515
189
Municipal Emergency Services, Inc. (Revolver) (6), (8)
757
NBH Group LLC (Revolver) (6), (8)
08/19/2026
1,677
NFS - CFP Holdings LLC
09/13/2030
21,247
21,096
21,087
NFS - CFP Holdings LLC - Unfunded Term Loan (8)
09/23/2026
13,370
NFS - CFP Holdings LLC - Unfunded Revolver (8)
5,014
(38
NORA Acquisition, LLC
08/31/2029
10.68
19,750
19,421
NORA Acquisition, LLC (Revolver) (6), (8)
5,479
Omnia Exterior Solutions, LLC
12/29/2029
23,662
23,472
23,485
Omnia Exterior Solutions, LLC - Unfunded Term Loan (8)
12,802
16
Omnia Exterior Solutions, LLC (Revolver) (6), (8)
4,200
One Stop Mailing, LLC
05/07/2027
Air Freight and Logistics
10.72
3M SOFR+636
8,403
8,317
ORL Acquisition, Inc. (6)
09/03/2027
Consumer Finance
13.73
3M SOFR+940
4,784
4,739
4,162
(PIK 7.50%)
ORL Acquisition, Inc. (Revolver) (6), (8)
(28
OSP Embedded Purchaser, LLC
12/15/2029
40,642
40,210
39,992
OSP Embedded Purchaser, LLC (Revolver) (8)
2,932
Output Services Group, Inc. - First-out Term Loan
12.86
3M SOFR+843
521
Output Services Group, Inc. - Last-out Term Loan
05/30/2028
11.11
3M SOFR+668
1,058
Owl Acquisition, LLC
02/04/2028
3,893
3,817
3,844
Pacific Purchaser, LLC
09/30/2028
10.53
4,950
4,871
4,905
Pacific Purchaser, LLC - Unfunded Term Loan (8)
3,598
22
Pacific Purchaser, LLC - (Revolver) (8)
1,799
(16
PAR Excellence Holdings, Inc.
09/03/2030
9.47
12,500
12,383
12,375
PAR Excellence Holdings, Inc. - Unfunded Revolver (8)
4,692
PCS Midco, Inc.
9,023
PCS Midco, Inc. - Unfunded Term Loan (8)
03/01/2026
2,249
PCS Midco, Inc. - Revolver
310
PCS Midco, Inc. - (Revolver) (8)
1,461
PH Beauty Holdings III, Inc.
09/28/2025
Consumer Products
10.17
3M SOFR+543
7,396
7,385
7,329
PL Acquisitionco, LLC
11/09/2027
Textiles, Apparel and Luxury Goods
15.49
3M SOFR+1210
5,880
5,822
4,292
(PIK 7.00%)
PL Acquisitionco, LLC - (Revolver) (8)
1,145
(309
PlayPower, Inc.
08/28/2030
1M SOFR+525
26,269
26,076
PlayPower, Inc. - Unfunded Revolver (8)
3,981
Project Granite Buyer,Inc.
12/31/2030
18,500
18,315
Project Granite Buyer, Inc. - Unfunded Term Loan (8)
2,846
Project Granite Buyer,Inc. - Unfunded Revolver (8)
1,708
Pragmatic Institute, LLC (Revolver) (10)
07/06/2028
1,658
1,605
696
Quantic Electronics, LLC
11/19/2026
10.43
6,562
6,517
Quantic Electronics, LLC - Funded Revolver
357
Quantic Electronics, LLC (Revolver) (6), (8)
313
Rancho Health MSO, Inc.
06/20/2029
9.77
1,862
1,852
1,848
Rancho Health MSO, Inc. - Unfunded Term Loan (8)
5,469
(15
Rancho Health MSO, Inc. (Revolver) (6)
1,403
1,392
Rancho Health MSO, Inc. (Revolver) (6), (8)
1,897
Recteq, LLC
01/29/2026
11.48
1,444
1,429
Recteq, LLC (Revolver) (6), (8)
1,296
Riverpoint Medical, LLC
06/20/2025
9,803
9,784
Riverpoint Medical, LLC (Revolver) (6)
182
Riverpoint Medical, LLC (Revolver) (6), (8)
727
RRA Corporate, LLC
08/15/2029
14,165
14,025
14,094
RRA Corporate, LLC - Unfunded Term Loan 1 (8)
02/15/2029
11,506
12
RRA Corporate, LLC - Unfunded Term Loan 2 (8)
08/15/2026
21,719
109
RRA Corporate, LLC - Funded Revolver
1,746
1,738
RRA Corporate, LLC - Unfunded Revolver (8)
4,970
RTIC Subsidiary Holdings, LLC
05/03/2029
41,890
41,294
41,156
RTIC Subsidiary Holdings, LLC - Unfunded Revolver (8)
9,417
(165
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.)
06/15/2029
1,138
1,123
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) - Unfunded Term Loan (8)
1,146
(11
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) - Funded Revolver
86
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) (Revolver) (6), (8)
774
(12
Sabel Systems Technology Solutions, LLC
10/31/2030
Government Services
10.60
26,850
26,583
26,582
Sabel Systems Technology Solutions, LLC - Unfunded Revolver (8)
3,634
(36
Safe Haven Defense US LLC
05/23/2029
Building Products
13,526
13,335
Safe Haven Defense US LLC - Unfunded Revolver (8)
Sales Benchmark Index LLC
07/07/2026
3M SOFR+620
2,527
2,519
Sales Benchmark Index LLC (Revolver) (6), (8)
1,077
Schlesinger Global, Inc.
07/14/2025
12.96
3M SOFR+860
15,453
15,426
14,719
(PIK 5.85%)
Schlesinger Global, Inc. (Revolver)
1,602
1,526
Schlesinger Global, Inc. (Revolver) (6), (8)
401
(19
Seacoast Service Partners, LLC
12/20/2029
9.35
7,833
7,766
7,765
Seacoast Service Partners, LLC - Unfunded Term Loan (8)
12/20/2026
8,492
Seacoast Service Partners, LLC - Unfunded Revolver (8)
2,123
Seaway Buyer, LLC
06/13/2029
1,896
1,876
1,820
Sigma Defense Systems, LLC
12/18/2027
11.23
3M SOFR+690
20,615
20,379
20,512
Sigma Defense Systems, LLC (Revolver) (6), (8)
3,311
Smartronix, LLC
11/23/2028
10.35
1M SOFR+610
13,486
13,298
Smartronix, LLC - (Revolver) (8)
11/23/2027
1,791
Smile Brands Inc.
10/12/2027
Healthcare and Pharmaceuticals
1M SOFR+450
2,181
Smile Brands Inc. (Revolver)
1M SOFR+550
1,542
1,364
Smile Brands Inc. (Revolver) (6), (8)
Smile Brands Inc. LC (Revolver) (6), (8)
100
Solutionreach, Inc.
13.75
4,657
4,642
Solutionreach, Inc. - Funded Revolver
07/15/2025
11.50
833
Spendmend Holdings LLC
03/01/2028
9.67
2,631
2,609
Spendmend Holdings LLC - Unfunded Term Loan (8)
03/03/2025
1,109
11/25/2026
Spendmend Holdings LLC (Revolver) (8)
891
Summit Behavioral Healthcare, LLC
11/24/2028
8.76
1M SOFR+425
1,985
1,971
1,588
SV-Aero Holdings, LLC - Term Loan
11/01/2030
9.78
15,567
15,489
15,411
SV-Aero Holdings, LLC - Unfunded Term Loan (8)
10/31/2026
7,259
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC)
20,409
20,199
20,429
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) (8)
12,537
System Planning and Analysis, Inc. - (Revolver) (8)
8,364
S101 Holdings, Inc.
10.24
12,408
12,284
12,346
S101 Holdings, Inc. - Unfunded Term Loan 2 (8)
01/16/2025
3,365
TCG 3.0 Jogger Acquisitionco, Inc.
01/26/2029
6,845
6,878
TCG 3.0 Jogger Acquisitionco, Inc. - Funded Revolver
13.00
243
240
TCG 3.0 Jogger Acquisitionco, Inc. - (Revolver) (8)
2,184
(22
Team Services Group, LLC
12/20/2027
9.82
15,412
15,178
15,438
The Bluebird Group LLC
07/28/2026
11.05
3M SOFR+665
8,549
8,472
The Bluebird Group LLC (Revolver) (6), (8)
862
13
The Vertex Companies, LLC (6)
08/30/2027
8,957
8,878
8,832
The Vertex Companies, LLC - Unfunded Term Loan (8)
11/04/2026
9,122
(59
The Vertex Companies, LLC (Revolver) (6), (8)
5,472
TPC US Parent, LLC
11/24/2025
Food Products
11,858
TransGo, LLC
12/29/2028
11,601
11,450
TransGo, LLC (Revolver) (6), (8)
4,440
TWS Acquisition Corporation
06/16/2025
10.80
2,343
2,340
TWS Acquisition Corporation (Revolver) (6), (8)
2,628
Tyto Athene, LLC
04/01/2028
9.49
1M SOFR+490
11,928
11,829
11,761
US Fertility Enterprises, LLC - Unfunded Term Loan (8)
10/07/2026
54
Urology Management Holdings, Inc.
06/15/2027
3,597
3,580
3,579
Urology Management Holdings, Inc. - Unfunded Term Loan (8)
09/03/2026
2,400
VRS Buyer, Inc.
11/22/2030
Road and Rail
9.26
14,454
14,347
14,346
VRS Buyer, Inc. - Unfunded Term Loan (8)
11/22/2026
7,644
VRS Buyer, Inc. - Unfunded Revolver (8)
3,822
Walker Edison Furniture, LLC - Term Loan (10)
03/01/2029
Wholesale
5,999
5,359
Walker Edison Furniture Company, LLC - Unfunded Term Loan (8), (10)
(500
Walker Edison Furniture Company, LLC - Funded Junior Revolver (10)
1,667
1,128
Watchtower Intermediate, LLC
9,032
8,914
Watchtower Intermediate, LLC - Unfunded Term Loan (8)
12/01/2025
2,100
Watchtower Intermediate, LLC (Revolver) (8)
6,300
Wrench Group, LLC
10/30/2028
8.59
3M SOFR+426
3,474
3,467
3,326
Zips Car Wash, LLC
Automobiles
12.46
3M SOFR+740
13,670
13,666
12,132
(PIK 12.46%)
Total First Lien Secured Debt
1,746,097
1,726,126
Subordinate Debt - 0.4%
Beacon Behavioral Holdings LLC
06/21/2030
15.00
1,082
1,068
1,066
ORL Holdco, Inc. - Convertible Notes
03/08/2028
18.00
ORL Holdco, Inc. - Unfunded Convertible Notes (8)
OSP Embedded Aggregator, LP - Convertible Note
05/08/2030
609
Schlesinger Global, LLC - Promissory Note
01/08/2026
12.31
3M SOFR+700
136
StoicLane, Inc. - Convertible Notes
08/15/2027
1,571
StoicLane, Inc. - Unfunded Convertible Notes (8)
46
Total Subordinate Debt
3,144
3,435
Preferred Equity - 2.0% (5)
Accounting Platform Blocker, Inc -. Preferred Equity
1,075,900
1,076
1,087
Ad.net Holdings, Inc.
6,720
672
868
AFC Acquisitions, Inc. (Preferred) (7)
854
1,314
1,601
Anteriad Holdings, LP (f/k/a MeritDirect Holdings, LP) (6), (7)
2,018
2,108
BioDerm Holdings, LP - Preferred Equity
1,313
Cartessa Aesthetics, LLC (Preferred) (7)
1,437,500
1,438
2,720
Connatix Parent, LLC - Preferred Equity
5,311
C5MI Holdco, LLC. - Preferred Equity (7)
228,900
223
EvAL Home Health Solutions, LLC - Preferred Equity (7)
876,386
1,455
Gauge Schlesinger Coinvest LLC (Preferred Equity)
64
30
Hancock Claims Consultants Investors, LLC (Preferred Equity) (7)
116,588
76
187
Imagine Topco, LP
8.00
1,236,027
1,236
1,503
Magnolia Topco LP - Class A Preferred Equity (7)
32
Magnolia Topco LP - Class B Preferred Equity (7)
31
20
Megawatt Acquisition Partners, LLC - Preferred A Equity
9,360
936
456
NXOF Holdings, Inc. (Tyto Athene, LLC) (6)
2,690
ORL Holdco, Inc. (6)
133
PL Acquisitionco, LLC (Preferred Equity) (7)
122
RTIC Parent Holdings, LLC - Class A Preferred Equity (7)
RTIC Parent Holdings, LLC - Class C Preferred Equity (7)
18,450
1,215
1,837
RTIC Parent Holdings, LLC - Class D Preferred Equity (7)
19,584
196
229
SP L2 Holdings LLC - Preferred Equity
135,240
33
SP L2 Holdings LLC - Unfunded Preferred Equity (8)
77,280
TPC Holding Company, LP (6)
409
647
TWD Parent Holdings, LLC (The Vertex Companies, LLC) (6)
37
35
48
UniTek Global Services, Inc. - Super Senior Preferred Equity (6)
Telecommunications
20.00
343,861
344
UniTek Global Services, Inc. - Senior Preferred Equity (6)
19.00
448,851
449
UniTek Global Services, Inc. (6)
13.50
1,047,317
670
Total Preferred Equity
17,443
19,062
Common Equity/Warrants - 16.5% (5)
A1 Garage Equity, LLC (7)
647,943
648
944
ACP Big Top Holdings, L.P. - Common Equity
3,000,500
3,001
3,745
Ad.net Holdings, Inc. (6)
7,467
75
14
Aechelon InvestCo, LP - Common Equity
29,917
2,992
5,892
Aechelon InvestCo, LP - Unfunded (8)
33,433
Aftermarket Drivetrain Products Holdings, LLC
2,632
3,701
AG Investco LP (6), (7)
805,164
805
252
AG Investco LP (6), (8)
194,836
(134
Altamira Intermediate Company II, Inc. (6)
1,649
Athletico Holdings, LLC (7)
4,678
5,000
3,368
Azureon Holdings, LLC - Common Equity (7)
1,130,707
1,131
1,047
BioDerm Holdings, LP
Burgess Point Holdings, LP
112
114
118
By Light Investco LP (6), (7)
22,789
687
21,231
Carisk Parent, L.P.
239,680
236
Carnegie HoldCo, LLC - Common Equity (7)
2,719,600
2,646
2,665
Connatix Parent, LLC (6)
38,278
421
Consello Pacific Aggregator, LLC (7)
1,025,476
973
831
Crane 1 Acquisition Parent Holdings, L.P. (6)
130
120
C5MI Holdco, LLC. - Common Equity (7)
1,659,050
1,659
Delta InvestCo LP (Sigma Defense Systems, LLC) (6), (7)
804,615
763
1,359
Delta InvestCo LP (Sigma Defense Systems, LLC) (6), (8)
200,255
DUGGAL EQUITY, LP – Common Equity
686
718
eCommission Holding Corporation (6), (9)
Banking, Finance, Insurance & Real Estate
226
619
EDS Topco, LP
1,125,000
1,125
1,569
Events TopCo, LP
381,300
381
Exigo, LLC
541,667
542
646
FedHC InvestCo LP (6), (7)
22,671
810
2,648
FedHC InvestCo LP (6), (8)
3,721
Five Star Parent Holdings, LLC
655,714
656
546
Gauge ETE Blocker, LLC
374,444
374
Gauge Lash Coinvest LLC (6)
1,840,021
1,393
4,783
Gauge Loving Tan, LP
2,914,701
2,915
2,968
Gauge Schlesinger Coinvest LLC (6)
465
476
218
GCP Boss Holdco, LLC - Common Equity
2,194,800
GCOM InvestCo LP (6)
19,184
3,342
4,590
GGG Topco, LLC – Common Equity (7)
2,759,800
2,760
2,770
GMP Hills, L.P.
4,430,843
4,431
4,387
Hancock Claims Consultants Investors, LLC (6), (7)
450,000
448
414
HPA SPQ Aggregator LP
750,399
750
786
HV Watterson Holdings, LLC
100,000
Icon Partners V C, L.P.
1,885,663
1,886
1,844
Icon Partners V C, L.P. (6), (8)
614,337
IIN Group Holdings, LLC (7)
1,000
Imagine Topco, LP (Common)
IHS Parent Holdngs, L.P.
1,218,045
1,218
1,937
Ironclad Holdco, LLC (Applied Technical Services, LLC) (6)
6,355
ITC Infusion Co-invest, LP (7)
116,032
1,195
2,424
1,734,775
1,735
1,744
KL Stockton Co-Invest LP (Any Hour Services) (6), (7)
Energy Equipment and Services
382,353
385
781
Lightspeed Investment Holdco LLC (6)
585,587
586
2,107
LJ Avalon, LP
1,638,043
1,638
2,342
Lucky Bucks, LLC
73,870
2,062
Marketplace Events Holdings, LP
4,099,000
4,099
Magnolia Topco LP - Class A Common Equity (7)
46,974
Magnolia Topco LP - Class B Common Equity (7)
30,926
MDI Aggregator, LP
10,761
1,078
1,175
Meadowlark Title, LLC (7)
819,231
806
Megawatt Acquisition Partners, LLC - Common A Equity
1,040
104
Municipal Emergency Services, Inc. (6)
1,973,370
2,005
3,611
NEPRT Parent Holdings, LLC (Recteq, LLC) (6), (7)
1,494
New Insight Holdings, Inc. - Common Equity
158,348
2,771
3,036
New Medina Health, LLC (7)
2,672,646
2,673
3,727
1,337,017
1,337
NORA Parent Holdings, LLC (7)
2,544
2,525
2,037
North Haven Saints Equity Holdings, LP (7)
223,602
224
250
37,561
496
OceanSound Discovery Equity, LP (Holdco Sands Intermediate, LLC) (6), (7)
173,638
1,736
1,806
OES Co-Invest, LP - Class A Common Equity
1,560
1,574
1,989
OHCP V BC COI, L.P.
1,166,407
1,166
758
OHCP V BC COI, L.P. (8)
83,593
(29
1,474
15
OSP Embedded Aggregator, LP
2,234
Output Services Group, Inc.
80,170
642
835
PAR Excellence Holdings, Inc. - Common Equity
1,902
2,569
PCS Parent, LP - Common Equity
423,247
423
466
PennantPark-TSO Senior Loan Fund, LP (6), (9)
Financial Services
11,167,847
11,168
8,919
Pink Lily Holdco, LLC (7)
1735
Pragmatic Institute, LLC
610,583
611
-
Project Granite Holdings, LLC - Common Equity
1,139
Quad (U.S.) Co-Invest, L.P.
266,864
267
358
QuantiTech InvestCo LP (6), (7)
700
172
QuantiTech InvestCo LP (6), (8)
QuantiTech InvestCo II LP (6), (7)
40
RFMG Parent, LP (Rancho Health MSO, Inc.) (6)
1,050,000
1,050
1,258
Safe Haven Defense MidCo, LLC - Common Equity (7)
596
711
SBI Holdings Investments LLC (Sales Benchmark Index LLC) (6)
64,634
735
Sabel InvestCo, LP - Common Equity (7)
87,524
2,271
Sabel InvestCo, LP - Common Equity Unfunded (8)
131,286
Seaway Topco, LP
296
141
Seacoast Service Partners, LLC - Equity Co-Invest
372
439
SP L2 Holdings, LLC (Ledge Lounger, Inc.)
360,103
360
SSC Dominion Holdings, LLC - Class B (US Dominion, Inc.) (6)
1,495
StellPen Holdings, LLC (CF512, Inc.) (6)
161,538
162
SV Aero Holdings, LLC (7)
61
535
1,328
TAC LifePort Holdings, LLC (6), (7)
533,833
1,046
TCG 3.0 Jogger Co-Invest, LP
9,108
1,760
1,209
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC) (7)
222,570
102
302
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC) (8)
143,036
21,527
749
Tinicum Space Coast Co-Invest, LLC - Common Equity (7)
4,702
4,609
UniTek Global Services, Inc.(C)
213,739
UniVista Insurance (6), (7)
400
328
760
Urology Partners Co., L.P.
694,444
694
1,035
Walker Edison Holdco LLC
36,458
3,393
Watchtower Holdings, LLC (7)
12,419
1,242
1,369
WCP IvyRehab Coinvestment, LP (7)
208
222
WCP IvyRehab QP CF Feeder, LP (7)
3,754
3,784
4,007
WCP Ivyrehab QP CF Feeder, LP. - Unfunded (7)
246
UniTek Global Services, Inc.(W)
23,889
Kentucky Racing Holdco, LLC (Warrants) (7)
87,345
995
Total Common Equity/Warrants
128,109
158,726
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies
1,894,793
Investments in Controlled, Affiliated Portfolio Companies - 29.8% (3), (4)
First Lien Secured Debt - 24.7%
PennantPark Senior Secured Loan Fund I LLC (6), (9)
05/06/2029
12.61
3M SOFR+800
237,650
Equity Interests - 5.1%
101,850
48,911
Total Equity Interests
Total Investments in Controlled, Affiliated Portfolio Companies
339,500
Total Investments - 227.9%(11)
2,234,293
Cash and Cash Equivalents - 10.6%
Money Market - BlackRock Federal FD Institutional 30
4.43
26,711
Non-Money Market Cash
75,562
75,551
Total Cash and Cash Equivalents
102,273
Total Investments and Cash Equivalents - 238.5%
2,336,566
2,296,172
Liabilities in Excess of Other Assets - (138.5)%
(1,333,521
Net Assets - 100%
—————
SEPTEMBER 30, 2024
Investments in Non-Controlled, Non-Affiliated Portfolio Companies - 186.1% (3), (4)
First Lien Secured Debt - 167.8%
10.95%
1,579
1,559
A1 Garage Merger Sub, LLC - Unfunded Term Loan (9)
A1 Garage Merger Sub, LLC (Revolver) (7), (9)
10.58%
14,121
13,905
13,662
ACP Avenu Buyer, LLC - Unfunded Term Loan (9)
(105
9.85%
819
ACP Avenu Buyer, LLC (Revolver) (7), (9)
(96
ACP Falcon Buyer, LLC (Revolver) (7), (9)
05/07/2026
10.93%
4,838
4,808
498
Ad.net Acquisition, LLC (Revolver) (7), (9)
747
12.35%
14,000
13,862
13,719
Aechelon Technology, Inc. - Unfunded Revolver (9)
Aeronix, Inc.
12/18/2028
32,753
32,332
Aeronix, Inc. - (Revolver) (9)
6,099
10.49%
28,420
28,209
AFC Dell Holding Corp. - Unfunded Term Loan (9)
(75
10.75%
13,765
13,675
10.50%
13,005
12,845
2,098
2,085
2,097
Anteriad, LLC (f/k/a MeritDirect, LLC) - (Revolver) (9)
2,869
12,597
12,486
Applied Technical Services, LLC - Unfunded Term Loan (9)
12.75%
1,441
1,420
Applied Technical Services, LLC (Revolver) (7),(9)
852
08/03/2029
11.56%
1M SOFR+625
5,951
5,869
5,921
Arcfield Acquisition Corp. (Revolver) (7),(9)
08/04/2028
1,379
10.83%
21,700
21,485
21,266
Archer Lewis, LLC - Unfunded Term Loan A (9)
13,280
(133
Archer Lewis, LLC - Unfunded Term Loan B (9)
(213
Archer Lewis, LLC - Unfunded Revolver (9)
(65
10.85%
35,768
35,411
35,409
ARGANO, LLC - Unfunded Term Loan (9)
ARGANO, LLC – Unfunded Revolver (9)
10.10%
25,067
24,725
24,691
Beacon Behavioral Support Service, LLC - Unfunded Term Loan (9)
7,565
Beacon Behavioral Support Service, LLC - Unfunded Revolver (9)
2,434
(37
10.35%
19,806
11.10%
30,873
30,358
Big Top Holdings, LLC - (Revolver) (9)
11.70%
589
582
BioDerm, Inc. (Revolver) (7), (9)
482
10.90%
8,206
8,143
8,064
Blackhawk Industrial Distribution, Inc. - Unfunded Term Loan (9)
Blackhawk Industrial Distribution, Inc. (Revolver) (7)
11.04%
859
Blackhawk Industrial Distribution, Inc. (9)
3,009
(51
10.60%
6,462
6,422
6,332
Broder Bros., Co.
12/04/2025
10.97%
3M SOFR+611
3,218
10.20%
14,962
14,219
14,075
12.18%
46,992
46,893
By Light Professional IT Services, LLC (Revolver) (7), (9)
5,473
5,397
5,390
Carisk Buyer, Inc. - Unfunded Term Loan (9)
4,813
(24
Carisk Buyer, Inc. (Revolver) (7), (9)
29,850
29,410
29,402
Carnegie Dartlet, LLC - Unfunded Term Loan (9)
Carnegie Dartlet, LLC - (Revolver) (9)
5,405
12,944
12,943
Cartessa Aesthetics, LLC (Revolver) (7)
Cartessa Aesthetics, LLC (Revolver) (7), (9)
11.21%
5,919
5,888
5,830
CF512, Inc.(Revolver) (7), (9)
10.88%
8,833
8,814
10.80%
Compex Legal Services, Inc. (Revolver) (7), (9)
6,965
6,771
Connatix Buyer, Inc. (7)
10.53%
3M SOFR+561
3,775
3,734
Connatix Buyer, Inc. - Funded Revolver
281
Connatix Buyer, Inc. (9)
953
10.71%
2,314
2,284
2,297
Crane 1 Services, Inc. (Revolver) (7), (9)
44,000
43,349
43,120
C5MI Holdco, LLC - Funded Revolver
606
594
CONSOLIDATED SCHEDULE OF INVESTMENTS - (Continued)
C5MI Holdco, LLC - Unfunded Revolver (9)
8,487
(170
6,123
5,943
5,908
9.95%
16,870
16,709
Dr. Squatch, LLC (Revolver) (7), (9)
11.20%
15,559
15,501
DRS Holdings III, Inc. (Revolver) (7), (9)
9.60%
15,321
15,168
Duggal Acquisition, LLC - Unfunded Term Loan (9)
Duggal Acquisition, LLC - Unfunded Revolver (9)
5,605
07/15/2028
10.38%
1,856
1,725
1,853
11,514
10,601
ECL Entertainment, LLC
08/31/2030
8.85%
1M SOFR+400
6,209
6,147
6,223
10,673
10,544
10,513
EDS Buyer, LLC. (Revolver) (7), (9)
(34
12.37%
8,195
8,216
6,310
Eisner Advisory Group, LLC
02/23/2031
9.25%
3M SOFR+400
6,880
6,961
ETE Intermediate II, LLC - Unfunded Revolver (9)
14,492
14,275
Eval Home Health Solutions Intermediate, LLC - UnFunded Revolver (9)
Exigo Intermediate II, LLC (Revolver) (9)
9.74%
990
996
12.21%
4,372
Five Star Buyer, Inc. (Revolver) (9)
12.56%
9.64%
19,243
19,051
19,050
GGG MIDCO, LLC - Unfunded Term Loan (9)
30,986
GGG MIDCO, LLC – Unfunded Revolver (9)
11.43%
4,985
4,927
4,736
10.70%
1,351
1,341
Graffiti Buyer, Inc. - Unfunded Term Loan (9)
(2
432
428
Graffiti Buyer, Inc. (Revolver) (7), (9)
3,949
3,913
Hancock Roofing and Construction L.L.C. (Revolver) (7)
10.45%
Hancock Roofing and Construction L.L.C. (Revolver) (7), (9)
31,992
31,720
31,432
Harris & Co. LLC. - Unfunded Term Loan A (9)
39,414
(345
Harris & Co. LLC. - Unfunded Term Loan B (9)
(440
Harris & Co. LLC - Unfunded Revolver (9)
7,401
(130
9.75%
9,651
9,535
9,583
11/07/2029
11.11%
7,941
7,829
7,862
Hills Distribution Inc. - Unfunded Term Loan (9)
10,812
10,389
HW Holdco, LLC (Revolver) (9)
IG Investments Holdings, LLC
11.35%
4,430
4,443
IG Investments Holdings, LLC (Revolver) (7), (9)
09/22/2027
Imagine Acquisitionco, LLC (Revolver) (9)
11/15/2027
1,193
10.96%
3M SOFR+685
4,553
4,534
4,582
1,672
1,204
1,237
Infinity Home Services Holdco, Inc. - 1st Amendment Unfunded Term Loan (9)
11/17/2025
4,288
Infinity Home Services Holdco, Inc. (Revolver)
13.75%
194
Infinity Home Services Holdco, Inc. - Unfunded Term Loan (9)
1,098
5,539
5,483
5,498
11.36%
15,776
15,747
13,567
(PIK 6.00%)
12.50%
ITI Holdings, Inc. (Revolver) (7), (9)
12.46%
4,938
4,893
Inventus Power, Inc. - Unfunded Revolver (9)
10.09%
11,544
11,388
Keel Platform, LLC - Unfunded Term Loan (9)
13,802
13,970
Kinetic Purchaser, LLC (Revolver) (7)
12.94%
10,786
10,689
10,678
Lash OpCo, LLC (Revolver) (7)
2,833
2,805
Lash OpCo, LLC (Revolver) (7), (9)
11.64%
13,018
13,015
12,784
LAV Gear Holdings, Inc. (Revolver) (7)
1,690
12.25%
3,661
3,491
263
18
(PIK 1.0%)
Ledge Lounger, Inc. (Revolver) (7), (9)
395
1M SOFR+535
22,309
22,150
Lightspeed Buyer Inc. (Revolver) (7), (9)
10.31%
2,809
2,774
LJ Avalon Holdings, LLC - Unfunded Term Loan (9)
LJ Avalon Holdings, LLC (Revolver) (7), (9)
45,055
44,374
44,379
Loving Tan Intermediate II, Inc. - Unfunded Term Loan (9)
(117
11.60%
1,753
Loving Tan Intermediate II, Inc. - Unfunded Revolver (9)
(53
9,992
10,067
12.77%
259
518
7,289
7,007
6,852
MBS Holdings, Inc. (Revolver) (7), (9)
11.25%
2,021
1,988
2,002
531
526
MDI Buyer, Inc. (Revolver) (7), (9)
242
1,958
1,938
1,909
Meadowlark Acquirer, LLC (Revolver) (9)
17,820
17,554
Medina Health, LLC (Revolver) (9)
10.11%
6,869
6,575
337
Megawatt Acquisitionco, Inc. - (Revolver) (9)
2,893
(162
Michael Baker International, LLC
12/01/2028
7,980
8,010
11.02%
3,101
Mission Critical Electronics, Inc. (Revolver) (7), (9)
31,840
31,410
31,362
MOREGroup Holdings, Inc. - Unfunded Term Loan (9)
MOREGroup Holdings, Inc. - (Revolver) (9)
(100
1,556
1,527
Municipal Emergency Services, Inc. - Term Loan B
777
Municipal Emergency Services, Inc. - Unfunded Term Loan (9)
1,387
Municipal Emergency Services, Inc. - Unfunded Term Loan B (9)
12/16/2024
486
Municipal Emergency Services, Inc. (Revolver) (7), (9)
947
NBH Group LLC (Revolver) (7), (9)
(50
9.56%
36,300
36,029
36,028
NFS - CFP Holdings LLC - Unfunded Term Loan (9)
NFS - CFP Holdings LLC - Unfunded Revolver (9)
19,800
NORA Acquisition, LLC (Revolver) (7), (9)
28,744
28,498
28,313
Omnia Exterior Solutions, LLC - Unfunded Term Loan (9)
(80
12/30/2024
8,001
Omnia Exterior Solutions, LLC (Revolver) (7), (9)
(63
8,426
8,333
ORL Acquisition, Inc.
14.00%
4,718
4,666
4,010
ORL Acquisition, Inc. (Revolver) (7), (9)
12,803
12,598
12,432
OSP Embedded Purchaser, LLC (Revolver) (9)
(85
Outcomes Group Holdings, Inc
04/02/2031
9.10%
3M SOFR+425
3,970
4,011
12.00%
3,812
3,825
Ox Two, LLC
05/18/2026
Construction and Building
11.12%
3M SOFR+651
22,540
22,385
Ox Two, LLC (Revolver)
3,387
11.51%
4,963
4,878
4,953
Pacific Purchaser, LLC - Unfunded Term Loan (9)
Pacific Purchaser, LLC - (Revolver) (9)
9.77%
17,500
17,327
17,325
PAR Excellence Holdings, Inc. - Unfunded Revolver (9)
10.81%
7,434
7,333
PCS Midco, Inc. - Unfunded Term Loan (9)
3,974
PCS Midco, Inc. - (Revolver) (9)
10.17%
7,415
7,346
11.99%
3M SOFR+725
5,798
5,735
4,638
(PIK 3.50%)
PL Acquisitionco, LLC - (Revolver) (9)
2,290
(458
26,334
26,140
25,939
PlayPower, Inc. - Unfunded Revolver (9)
(60
Pragmatic Institute, LLC (Revolver), (5)
12.82%
1,641
1,005
(PIK 12.085%)
19
6,579
6,530
6,546
Quantic Electronics, LLC - Funded revolver
333
Rancho Health MSO, Inc. - Unfunded Term Loan (9)
3,000
Rancho Health MSO, Inc. (Revolver) (7)
12/18/2025
210
Rancho Health MSO, Inc. (Revolver) (7), (9)
315
11.75%
1,448
1,439
1,433
Recteq, LLC (Revolver) (7), (9)
9,829
9,796
9,841
Riverpoint Medical, LLC (Revolver) (7)
Riverpoint Medical, LLC (Revolver) (7), (9)
776
19,200
19,008
RRA Corporate, LLC - Unfunded Term Loan 1 (9)
RRA Corporate, LLC - Unfunded Term Loan 2 (9)
1,410
1,409
1,395
RRA Corporate, LLC - Unfunded Revolver (9)
5,306
41,995
41,372
41,155
RTIC Subsidiary Holdings, LLC - Unfunded Revolver (9)
(188
1,140
1,124
1,126
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) - Unfunded Term Loan (9)
06/27/2026
(9
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) (Revolver) (7), (9)
860
13,563
13,363
13,428
Safe Haven Defense US LLC - Unfunded Revolver (9)
01/03/2025
2,524
Sales Benchmark Index LLC (Revolver) (7), (9)
1,293
Sargent & Greenleaf Inc.
12/20/2024
11.45%
1M SOFR+760
3,272
3,266
Sargent & Greenleaf Inc. (Revolver)
1M SOFR+660
Sargent & Greenleaf Inc. (Revolver) (9)
13.20%
3M SOFR+835
15,224
15,191
14,844
(PIK 5.60%)
1,578
1,539
Schlesinger Global, Inc. (Revolver) (7), (9)
1,901
1,879
1,834
11.50%
20,708
20,447
20,501
Sigma Defense Systems, LLC (Revolver) (7), (9)
Simplicity Financial Marketing Group Holdings Inc.
12/02/2026
11.73%
4,065
4,054
4,106
Simplicity Financial Marketing Group Holdings Inc. - Unfunded Term Loan (9)
4,656
93
Skopima Consilio Parent, LLC
05/17/2028
9.46%
1M SOFR+461
584
13,521
13,323
Smartronix, LLC - (Revolver) (9)
2,422
2,143
866
766
Smile Brands Inc. (Revolver) (7), (9)
678
(78
Smile Brands Inc. LC (Revolver) (7), (9)
12.40%
4,637
Solutionreach, Inc. (Revolver) (7), (9)
10.78%
2,253
2,232
Spendmend Holdings LLC - Unfunded Term Loan (9)
Spendmend Holdings LLC (Revolver)
10.25%
Spendmend Holdings LLC (Revolver) (9)
9.31%
1,990
1,975
10.26%
20,461
20,238
20,421
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) (Revolver) (9)
System Planning and Analysis, Inc. - Funded Revolver
9.59%
1,633
System Planning and Analysis, Inc. - (Revolver) (9)
6,732
11.48%
12,439
12,301
12,315
S101 Holdings, Inc. - Unfunded Term Loan 2 (9)
12/15/2024
9,036
11.83%
6,857
6,895
TCG 3.0 Jogger Acquisitionco, Inc. - (Revolver) (9)
2,426
10.51%
15,173
15,217
Teneo Holdings, LLC - Initial Term Loans
03/13/2031
6,987
2,566
2,538
The Bluebird Group LLC (Revolver) (7), (9)
The Vertex Companies, LLC (7)
3,377
3,333
3,356
The Vertex Companies, LLC (Revolver)
376
The Vertex Companies, LLC (Revolver) (7), (9)
10.98%
11,888
11,808
TPCN Midco, LLC
8,749
8,665
TPCN Midco, LLC - Unfunded Term Loan (9)
13,113
(184
TPCN Midco, LLC - Unfunded Revolver (9)
12,034
11,869
TransGo, LLC (Revolver) (7), (9)
11.33%
2,508
2,502
TWS Acquisition Corporation (Revolver) (7), (9)
10.23%
11,826
11,690
10.52%
1,188
Urology Management Holdings, Inc. - Unfunded Term Loan (9)
4,800
Walker Edison Furniture, LLC - Term Loan (11)
5,441
490
Walker Edison Furniture Company, LLC - Unfunded Term Loan (11)
83
Walker Edison Furniture Company, LLC - Funded Junior Revolver (11)
9,055
8,929
8,964
Watchtower Intermediate, LLC - Unfunded Term Loan (9)
Watchtower Intermediate, LLC (Revolver) (9)
Wildcat Buyerco, Inc.
02/26/2027
12,592
12,498
Wildcat Buyerco, Inc. - Unfunded Term Loan (9)
3,281
Wildcat Buyerco, Inc. (Revolver) (7), (9)
534
8.87%
3,483
3,475
3,480
12/31/2024
13,252
13,227
12,656
(PIK 1.5%)
1,488,717
1,472,064
Subordinate Debt - 0.3%
15.00%
1,042
1,027
1,026
18.00%
ORL Holdco, Inc. - Unfunded Convertible Notes (9)
12.31%
StoicLane, Inc. - Unfunded Convertible Notes (9)
2,693
Preferred Equity - 2.1% (6)
AFC Acquisitions, Inc. (Preferred) (8)
1,400
Anteriad Holdings, LP (f/k/a MeritDirect Holdings, LP) (7), (8)
Cartessa Aesthetics, LLC (Preferred) (8)
2,560
C5MI Holdco, LLC. - Preferred Equity (8)
233
EvAL Home Health Solutions, LLC - Preferred Equity (8)
1,631
Hancock Claims Consultants Investors, LLC (Preferred Equity) (8)
149
8.00%
1,432
Magnolia Topco LP - Class A Preferred Equity (8)
Magnolia Topco LP - Class B Preferred Equity (8)
842
NXOF Holdings, Inc. (Tyto Athene, LLC) (7)
2,621
ORL Holdco, Inc. (7)
PL Acquisitionco, LLC (Preferred Equity)
RTIC Parent Holdings, LLC - Class A Preferred Equity (8)
RTIC Parent Holdings, LLC - Class C Preferred Equity (8)
1,976
RTIC Parent Holdings, LLC - Class D Preferred Equity (8)
TPC Holding Company, LP (7)
662
TWD Parent Holdings, LLC (The Vertex Companies, LLC) (7)
43
UniTek Global Services, Inc. - Super Senior Preferred Equity (7)
20.00%
209
UniTek Global Services, Inc. - Senior Preferred Equity (7)
19.00%
UniTek Global Services, Inc. (7)
13.50%
16,031
18,305
Common Equity/Warrants - 15.9% (6)
A1 Garage Equity, LLC (8)
3,614
Ad.net Holdings, Inc. (7)
31,675
3,168
Aechelon InvestCo, LP - Unfunded (9)
3,686
AG Investco LP (7), (8)
1,008
AG Investco LP (7), (8), (9)
Altamira Intermediate Company II, Inc. (7)
21
Athletico Holdings, LLC (8)
3,837
1,179
119
By Light Investco LP (7), (8)
803
18,788
247
Carnegie HoldCo, LLC - Common Equity (8)
2,664
2,638
Connatix Parent, LLC (7)
Consello Pacific Aggregator, LLC (8)
921
Crane 1 Acquisition Parent Holdings, L.P. (7)
220
C5MI Holdco, LLC. - Common Equity (8)
1,654
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8)
1,500
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8), (9)
686,400
eCommission Holding Corporation (7), (10)
237
639
1,256
FedHC InvestCo LP (7), (8)
21,665
1,773
FedHC InvestCo LP (7), (8), (9)
7,566
285
Gauge Lash Coinvest LLC (7)
5,349
3,207
Gauge Schlesinger Coinvest LLC (7)
268
GCOM InvestCo LP
4,555
GGG Topco, LLC – Common Equity (8)
4,342
Hancock Claims Consultants Investors, LLC (7), (8)
275
1,870,915
1,871
1,872
Icon Partners V C, L.P. (7), (9)
629,085
IIN Group Holdings, LLC (8)
1,535
Ironclad Holdco, LLC (Applied Technical Services, LLC) (7)
ITC Infusion Co-invest, LP (8)
1,745
KL Stockton Co-Invest LP (Any Hour Services) (7), (8)
884
LEP Pequod Holdings, LP
350
865
1,004
Lightspeed Investment Holdco LLC (7)
2,118
1,998
Magnolia Topco LP - Class A Common Equity (8)
Magnolia Topco LP - Class B Common Equity (8)
1,250
Meadowlark Title, LLC (8)
Municipal Emergency Services, Inc. (7)
3,157
NEPRT Parent Holdings, LLC (Recteq, LLC) (7), (8)
New Medina Health, LLC (8)
4,171
NORA Parent Holdings, LLC (8)
2,256
North Haven Saints Equity Holdings, LP (8)
241
OceanSound Discovery Equity, LP (Holdco Sands Intermediate, LLC) (7), (8)
1,761
1,739
1,158,239
1,158
738
OHCP V BC COI, L.P. (9)
91,761
ORL Holdco, Inc
1,727,679
701
1,902,200
444
PennantPark-TSO Senior Loan Fund, LP (7)(10)
9,186
Pink Lily Holdco, LLC (8)
341
QuantiTech InvestCo LP (7), (8)
0
QuantiTech InvestCo LP (7), (8), (9)
QuantiTech InvestCo II LP (7), (8)
RFMG Parent, LP (Rancho Health MSO, Inc.) (7)
1,309
Safe Haven Defense MidCo, LLC - Common Equity (8)
SBI Holdings Investments LLC (Sales Benchmark Index LLC) (7)
716
199
SSC Dominion Holdings, LLC - Class B (US Dominion, Inc.) (7)
1,385
StellPen Holdings, LLC (CF512, Inc.) (7)
SV Aero Holdings, LLC (8)
1,157
TAC LifePort Holdings, LLC (7), (8)
815
1,357
221,296
103
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC) (8), (9)
144,310
113
TPCN Holdings, LLC - Common Equity (8)
1,053,200
1,053
864
UniVista Insurance (7), (8)
334
844
740
Watchtower Holdings, LLC (8)
1,292
WCP IvyRehab Coinvestment, LP (8)
221
WCP IvyRehab QP CF Feeder, LP (8)
3,793
3,987
WCP Ivyrehab QP CF Feeder, LP. - Unfunded (8), (9)
Wildcat Parent, LP (Wildcat Buyerco, Inc.) (7)
2,240
95
816
Kentucky Racing Holdco, LLC (Warrants) (8)
115,289
139,207
1,622,669
Investments in Controlled, Affiliated Portfolio Companies - 40.0% (3), (4)
First Lien Secured Debt - 31.3%
Marketplace Events, LLC - Super Priority First Lien Term Loan (7)
09/30/2025
10,213
Marketplace Events, LLC - Super Priority First Lien (7)
3,122
Marketplace Events, LLC
26,771
22,558
PennantPark Senior Secured Loan Fund I LLC (7), (10)
13.28%
270,421
274,634
Equity Interests - 8.7%
New MPE Holdings, LLC - Common Equity (8)
349
20,123
56,478
76,601
372,271
Total Investments - 226.1% (12)
1,994,940
Cash and Cash Equivalents - 12.8%
Money Market - BlackRock Federal FD Institutional 81
5.03%
22,211
89,835
89,839
112,046
Total Investments and Cash Equivalents - 238.9%
2,106,986
2,095,554
Liabilities in Excess of Other Assets - (138.9)%
(1,218,260
23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
PennantPark Floating Rate Capital Ltd. was organized as a Maryland corporation in October 2010. We are a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. On April 14, 2022, trading of the Company’s common stock commenced on the New York Stock Exchange after the Company voluntarily withdrew the principal listing of its common stock from the Nasdaq Stock Market LLC effective at market close on April 13, 2022.
Our investment objectives are to generate both current income and capital appreciation while seeking to preserve capital. We seek to achieve our investment objective by investing primarily in floating rate loans, and other investments made to U.S. middle-market private companies whose debt is rated below investment grade. Floating rate loans pay interest at variable rates, which are determined periodically, on the basis of a floating base lending rate such as SOFR, with or without a floor, plus a fixed spread. Under normal market conditions, we generally expect that at least 80% of the value of our managed assets will be invested in floating rate loans and other investments bearing a variable rate of interest, which may include, from time to time, variable rate derivative instruments. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt, subordinated debt, and, to a lesser extent, equity investments.
We execute our investment strategy directly and through our wholly owned subsidiaries, our unconsolidated joint venture and unconsolidated limited partnership.The term “subsidiary” means entities that primarily engage in investment activities in securities or other assets and are wholly owned by us. The Company does not intendto create or acquire primary control of any entity which primarily engages in investment activities of securities or other assets other than entities wholly owned by theCompany. We comply with the provisions of Section 18 of the 1940 Act governing capital structure and leverage on an aggregate basis with our subsidiaries. Oursubsidiaries comply with the provisions of Section 17 of the 1940 Act related to affiliated transactions and custody. To the extent that the Company forms a subsidiaryadvised by an investment adviser other than the Investment Adviser, the investment adviser to such subsidiaries will comply with the provisions of the 1940 Act relatingto investment advisory contracts, including but not limited to, Section 15, as if it were an investment adviser to the Company under Section 2(a)(20) of the 1940 Act.
We have entered into an investment management agreement, or (the "Investment Management Agreement"), with PennantPark Investment Advisers LLC (the "Investment Adviser"), an external adviser that manages our day-to-day operations. We have also entered into an administration agreement, or (the "Administration Agreement"), with PennantPark Investment Administration LLC (the "Administrator"), which provides the administrative services necessary for us to operate.
Funding I, our wholly-owned subsidiary and a special purpose entity, was organized in Delaware as a limited liability company in May 2011. We formed Funding I in order to establish a credit facility. The Investment Adviser serves as the collateral manager to Funding I and has irrevocably directed that any management fee owed with respect to such services is to be paid to us so long as the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee.
We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are subject to tax as corporations. These taxable subsidiaries allow us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.
In May 2017, we and a subsidiary of Kemper Corporation (NYSE: KMPR), Trinity Universal Insurance Company, or Kemper, formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. See Note 4.
In November 2017, we issued $138.6 million of our 2023 Notes. The principal on the 2023 Notes were payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% on December 15, 2023. On December 15, 2023, the remaining 2023 Notes were repaid in full. The 2023 Notes were general, unsecured obligations and ranked equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2023 Notes were listed on the TASE. In connection with this offering, we dual listed our common stock on the TASE.
On February 7, 2024, the Company filed a notice with the Israel Securities Authority and the Tel Aviv Stock Exchange Ltd (the “TASE”) voluntarily requesting to delist the Company’s common stock from trading on the TASE. The last day of trading on the TASE was May 6, 2024 and the delisting of the Company’s common stock from the TASE took effect on May 8, 2024.
In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by a diversified portfolio of the Securitization Issuer consisting primarily of middle market loans and participation interests in middle market loans. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031. On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly-owned subsidiaries, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. See Note 10.
In July 2024, the 2031 Asset-Backed Debt was refinanced through a $351.0 million debt securitization in the form of a collateralized loan obligation, or the "2036-R Asset-Backed Debt". The Company retained $85.0 million of the debt securitization. The 2036-R Asset-Backed Debt is secured by a diversified portfolio of primarily middle market loans and participation interest in middle market loans. The 2036-R Asset Backed Debt is schedule to mature in July 2036.
On February 22, 2024, the 2036 Securitization Issuer completed the 2036 Debt Securitization. The 2036 Asset-Backed Debt is secured by a diversified portfolio of the 2036-Securitization Issuer consisting primarily of middle market loans and participation interests in middle market loans. The 2036 Asset-Backed Debt is scheduled to mature in April 2036. On the closing date of the 2036 Debt Securitization, in consideration of our transfer to the 2036 Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly-owned subsidiaries. See Note 10.
In March 2021 and October 2021, we issued $100.0 million and $85.0 million, respectively, in aggregate principal amount of our 2026 Notes at a public offering price per note of 99.4% and 101.5% respectively. Interest on the 2026 Notes is paid semi-annually on April 1 and October 1 of each year, at a rate of 4.25% per year, commencing October 1, 2021. The 2026 Notes mature on April 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness.
The 2026 Notes are effectively subordinated to our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and are structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.
In April 2021, we formed PennantPark-TSO Senior Loan Fund LP ("PTSF"), an unconsolidated limited partnership, organized as a Delaware limited liability partnership. We sold $81.4 million in investments to a wholly-owned subsidiary of PTSF in exchange for cash in the amount of $69.5 million and an $11.9 million equity interest in PTSF representing 23.08% of the total outstanding Class A Units of PTSF. We recognized $0.4 million of realized gain upon the formation of PTSF. As of December 31, 2024, our capital commitment of $15.3 million is fully funded and we hold 23.08% of the total outstanding Class A Units of PTSF and a 4.99% voting interest in the general partner which manages PTSF. PTSF also invests primarily in middle-market and other corporate debt securities consistent with our strategy.
On February 4, 2022, we formed PFLT Investment Holdings II, LLC, a Delaware limited liability company (“Holdings II”), as a wholly owned subsidiary. On December 31, 2022, we contributed 100% of our interests in PFLT Investment Holdings, LLC ( “Holdings”) to Holdings II. Effective as of January 1, 2024, Holdings II elected to be treated as a corporation for U.S. federal income tax purposes. On January 3, 2024, we purchased an equity interest in Holdings from Holdings II and Holdings became a partnership for U.S. federal income tax purposes. The company and Holdings II entered into a limited liability company agreement with respect to Holdings that provides for certain payments and the sharing of income, gain, loss and deductions attributable to Holdings’ investments.
In July 2024, the Company established a $500.0 million ATM Program and terminated the existing $250.0 million ATM Program, each an at-the-market offering program, or "ATM Program", and together "ATM Programs".
During three months ended December 31, 2024 and 2023, we issued 7,276,000 and zero shares of our Common Stock, respectively, under ATM Programs at a weighted-average price of $11.30 and zero per share, respectively, raising $82.2 million and zero of net proceeds after commissions to the sales agents and inclusive of proceeds from the Investment Adviser to ensure that all shares were sold at or above NAV. During the quarter ended December 31, 2024 and 2023, we incurred less than $0.1 million and zero, respectively, of legal and other offering costs associated with establishing the ATM Programs. As of December 31, 2024 and September 30, 2024, we had $355.0 million and $437.3 million available under the respective ATM Programs.
We are operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act of 1936, as amended, or the Commodity Exchange Act.The Investment Advisor intends to continue to affirm the exclusion on an annual basis and therefore, does not expect to be subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of our consolidated financial statements, in conformity with U.S. generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated financial statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Changes in the economic and regulatory environment, financial markets, the credit worthiness of our portfolio companies, and any other parameters used in determining these estimates and assumptions could cause actual results to differ from these estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification, as amended, or ASC, serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated financial statements are issued.
Our consolidated financial statements are prepared in accordance with GAAP, consistent with ASC Topic 946, Financial Services – Investment Companies, and pursuant to the requirements for reporting on Form 10-K/Q and Articles 6, 10 and 12 of Regulation S-X, as appropriate. In accordance with Article 6-09 of Regulation S-X, we have provided a consolidated statement of changes in net assets in lieu of a Consolidated Statement of Changes in Stockholders’ Equity.
Our significant accounting policies consistently applied are as follows:
(a) Investment Valuations
We expect that there may not be readily available market values for many of the investments, which are or will be in our portfolio. We value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, 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, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 5.
Our portfolio generally consists of illiquid securities, including debt and equity investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:
25
Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
(b) Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses
Security transactions are recorded on a trade-date basis. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments, the Credit Facility and the 2023 Notes during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, or OID, market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties earned on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which may or may not be non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, amendment fees and agency fees, and are recorded as other investment income when earned. Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC Subtopic 450-30, Gain Contingencies, or ASC 450-30.
Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if 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. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. As of December 31, 2024, we had two portfolio companies on non-accrual, representing 0.4% and 0.1% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2024, we had two portfolio companies on non-accrual, representing 0.4% and 0.2% of our overall portfolio on a cost and fair value basis, respectively.
(c) Income Taxes
We have complied with the requirements of Subchapter M of the Code and have qualified to be treated as a RIC for federal income tax purposes. In this regard, we account for income taxes using the asset and liability method prescribed by ASC Topic 740, Income Taxes, or ASC 740. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Based upon our qualification and election to be treated as a RIC for U.S. federal income tax purposes, we typically do not incur material U.S. federal income taxes. However, we may choose to retain a portion of our calendar year income, which may result in the imposition of a federal excise tax, or we may incur taxes through our taxable subsidiaries, including the Taxable Subsidiary. For the three months ended December 31, 2024 and 2023, we recorded a provision for taxes on net investment income of $0.2 million and $0.2 million, respectively, pertaining to federal excise tax.
We recognize the effect of a tax position in our Consolidated Financial Statements in accordance with ASC 740 when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not considered to satisfy the “more-likely-than-not” threshold would be recorded as a tax expense or benefit. Penalties or interest, if applicable, that may be assessed relating to income taxes would be classified as other operating expenses in the financial statements. There were no tax accruals relating to uncertain tax positions and no amounts accrued for any related interest or penalties with respect to the periods presented herein. The Company’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. Although the Company files both federal and state income tax returns, the Company’s major tax jurisdiction is federal.
For the three months ended December 31, 2024, the Company recognized a provision for taxes of $0.6 million on unrealized appreciation (depreciation) on investments by the Taxable Subsidiary. For the three months ended December 31, 2023, the Company recognized a provision reduction for taxes of zero on unrealized appreciation (depreciation) on investments by the Taxable Subsidiary. The provision for taxes on unrealized appreciation (depreciation) on investments is the result of netting (i) the expected tax liability on gains from sales of investments and (ii) the expected tax benefit from the use of losses in the current year. As of December 31, 2024 and September 30, 2024, $1.1 million and $1.7 million, respectively, was accrued as a deferred tax liability on the Consolidated Statements of Assets and Liabilities relating to unrealized gain on investments held by the Taxable Subsidiary. For the three months ended December 31, 2024 and 2023, $0.1 million and zero, respectively, was accrued as a provision for taxes on the Consolidated Statements of Operations relating to realized gain on investments held by the Taxable Subsidiary. During the three months ended December 31, 2024, the Company paid zero in taxes on realized gains on the sale of investments held by the Taxable Subsidiary. During the three months ended December 31, 2023, the Company paid zero in taxes on realized gains on the sale of investments held by the Taxable Subsidiary.
We operate in a manner to maintain our election to be subject to tax as a RIC and to eliminate corporate-level U.S. federal income tax (other than the 4% excise tax) by distributing sufficient investment company taxable income and capital gain net income (if any). As a result, we will have an effective tax rate equal to 0% before the excise tax and income taxes incurred by the Taxable Subsidiary. As such, a reconciliation of the differences between our reported income tax expense and its tax expense at the federal statutory rate of 21% is not meaningful.
Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and net realized gains recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences are reclassified
26
among capital accounts in the Consolidated Statements of Assets and Liabilities to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.
(d) Distributions and Capital Transactions
Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid, if any, as a distribution is determined by the board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, may be distributed at least annually. The tax attributes for distributions will generally include ordinary income and capital gains but may also include certain tax-qualified dividends and/or a return of capital.
Capital transactions through offerings of our common stock are recorded when issued and offering costs are charged as a reduction of capital upon issuance of our common stock.
On July 17, 2024, we entered into new equity distribution agreements with Citizens JMP Securities, LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. as the sales agents (the "Sale Agents"), (together, the "Equity Distribution Agreements") in connection with the sale of our shares of common stock, with an aggregate offering price of up to $500 million under an at-the-market offering program ("ATM Program"). The Equity Distribution agreements provide that we may offer and sell shares of our common stock from time to time through a sales agent in amounts and at times to be determined by us. Actual sales will depend on a variety of factors to be determined by us from time to time, including, market conditions and the trading price of our common stock. The Investment Adviser may, from time to time, in its sole discretion, pay some or all of the commissions payable under the Equity Distribution Agreements or make additional supplemental payments to ensure that the sales price per share of our common stock in connection with all of the ATM Program offerings, net of any commissions of Sale Agents, will not be less than our then current NAV per share. Any such payments made by the Investment Adviser will not be subject to reimbursement by us. In connection with the entry into the Equity Distribution Agreements, the Company terminated the equity distribution agreements with each of Citizens JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. in connection with the Company’s prior $250 million ATM Program.
During the three months ended December 31, 2024 and 2023, we issued 7,276,000 and zero shares of common stock through the ATM Program at an average price of $11.30, raising $82.2 million of net proceeds after commissions to the sales agents and inclusive of proceeds from the Investment Adviser to ensure that all shares were sold at or above NAV, respectively. In connection with the share issuance, we expensed $0.1 million of deferred offering costs incurred related to establishing the ATM Program to additional paid in capital.
(e) Foreign Currency Translation
Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:
Although net assets and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair value of investments and liabilities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and liabilities.
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 to be more volatile than those of comparable U.S. companies or U.S. government securities.
(f) Consolidation
As permitted under Regulation S-X and as explained by ASC paragraph 946-810-45-3, PennantPark Floating Rate Capital Ltd. will generally not consolidate its investment in a company other than an investment company wholly-owned subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we have consolidated the results of our taxable subsidiaries, including the Taxable Subsidiary, Funding I, Securitization Issuer, and the 2036-Securitization Issuer in our Consolidated Financial Statements. We do not consolidate our non-controlling interest in PSSL or PTSF. See further description of our investment in PSSL in Note 4.
(g) Asset Transfers and Servicing
Asset transfers that do not meet ASC Topic 860, Transfers and Servicing, requirements for sale accounting treatment are reflected in the Consolidated Statements of Assets and Liabilities and the Consolidated Schedules of Investments as investments. The creditors of Funding I have received a security interest in all of its assets and such assets are not intended to be available to the creditors of PennantPark Floating Rate Capital Ltd. or any of its affiliates.
(h) Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update, or ASU, No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The FASB approved an (optional) two year extension to December 31, 2024, for transitioning away from LIBOR. The Company utilized the optional expedients and exceptions provided by ASU 2020-04 during the three months ended December 31, 2024, the effect of which was not material to the Consolidated Financial Statements and the notes thereto.
27
In March 2022, the FASB issued ASU No. 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Company has adopted the new accounting standard implementing appropriate controls and procedures, the effect of which was not material to the consolidated financial statements and the notes thereto.
In June 2022, the FASB issued Accounting Standards Update 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, or ASU 2022-03, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early application is permitted. The Company has adopted the new accounting standard, the effect of which was not material to the consolidated financial statements and the notes thereto.
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities' segment disclosure by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosure of a reportable segment's profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for our fiscal years beginning December 15, 2024, and should be applied on a retrospective basis to all periods presented, noting early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023 - 09 "Improvements to Income Tax Disclosures" ("ASU 2023 - 09"). ASU 2023 - 09 intends to improve the transparency of income tax disclosures. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. We are currently assessing the impact of this guidance, however, we do not expect a material impact to our consolidated financial statements and related disclosures.
3. AGREEMENTS AND RELATED PARTY TRANSACTIONS
(a) Investment Management Agreement
The Investment Management Agreement with the Investment Adviser was reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in May 2024. Under the Investment Management Agreement, the Investment Adviser, subject to the overall supervision of our board of directors, manages the day-to-day operations of and provides investment advisory services to us. The Investment Adviser serves as the collateral manager to Funding I and has irrevocably directed that any management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee. For providing these services, the Investment Adviser receives a fee from us consisting of two components— a base management fee and an incentive fee.
Base Management Fee
The base management fee is calculated at an annual rate of 1.00% of our “average adjusted gross assets,” which equals our gross assets (net of U.S. Treasury Bills, temporary draws under any credit facility, cash and cash equivalents, repurchase agreements or other balance sheet transactions undertaken at the end of a fiscal quarter for purposes of preserving investment flexibility for the next quarter and unfunded commitments, if any) and is payable quarterly in arrears. The base management fee is calculated based on the average adjusted gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. For example, if we sold shares on the 45th day of a quarter and did not use the proceeds from the sale to repay outstanding indebtedness, our gross assets for such quarter would give effect to the net proceeds of the issuance for only 45 days of the quarter during which the additional shares were outstanding. For the three months ended December 31, 2024 and 2023, the Investment Adviser earned a base management fee of $5.3 million and $3.0 million, respectively, from us.
Incentive Fee
The incentive fee has two parts, as follows:
One part is calculated and payable quarterly in arrears based on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, Pre-Incentive Fee Net Investment Income means interest income, dividend income and any other income, including any other fees (other than fees for providing managerial assistance), such as amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense or amendment fees under any credit facility and distribution paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero-coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a percentage of the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7.00% annualized). We pay the Investment Adviser an incentive fee with respect to our Pre-Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.75%, (2) 50% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.9167% in any calendar quarter (11.67% annualized) (we refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the hurdle but is less than 2.9167%) as the “catch-up,” which is meant to provide our Investment Adviser with 20% of our Pre-Incentive Fee Net Investment Income, as if a hurdle did not apply, if this net investment income exceeds 2.9167% in any calendar quarter), and (3) 20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.9167% in any calendar quarter. These calculations are pro-rated for any share issuances or repurchases during the relevant quarter, if applicable. For the three months ended December 31, 2024 and 2023, the Investment Adviser earned $7.5 million and $4.9 million, respectively, in incentive fees on net investment income from us.
28
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date) and equals 20% of our 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. For the three months ended December 31, 2024 and 2023, the Investment Adviser did not accrue an incentive fee on capital gains.
Under GAAP, we are required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, we considered the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to 20% of such amount, less the aggregate amount of actual capital gains related to incentive fees paid in all prior years. If such amount is negative, then there is no accrual for such year. There can be no assurance that such unrealized capital appreciation will be realized in the future. The incentive fee accrued for, but not payable, under GAAP on our unrealized and realized capital gains for the three months ended December 31, 2024 and 2023, was zero, respectively.
(b) Administration Agreement
The Administration Agreement with the Administrator was reapproved by our board of directors, including a majority of the directors who are not interested persons of us, in May 2024. Under the Administration Agreement, the Administrator provides administrative services and office facilities to us. For providing these services, facilities and personnel, we have agreed to reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs. The amount billed by the Administrator may include credits related to its administrative agreement with PSSL. The Administrator also offers, on our behalf, significant managerial assistance to portfolio companies to which we are required to offer such assistance. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statements of Operations. For the three months ended December 31, 2024 and 2023, we recorded administrative expenses of approximately $0.5 million and $0.6 million, including expenses the Administrator incurred for services described above, respectively.
Under the Administration Agreement the Administrator may be reimbursed by the Company for the costs and expenses to be borne by the Company set forth above include the costs and expenses allocable with respect to the provision of in-house legal, tax, or other professional advice and/or services to the Company, including performing due diligence on its prospective portfolio companies as deemed appropriate by the Administrator, where such in-house personnel perform services that would be paid by the Company if outside service providers provided the same services, subject to the Board's oversight.
(c) Other Related Party Transactions
The Company, the Investment Adviser and certain other affiliates have been granted an order for exemptive relief by the SEC for the Company to co-invest with other funds managed by the Investment Adviser. If we co-invest with other affiliated funds, our Investment Adviser would not receive compensation except to the extent permitted by the exemptive order and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.
There were no transactions subject to Rule 17a-7 under the 1940 Act during each of the three months ended December 31, 2024 and 2023.
For the three months ended December 31, 2024, we sold $187.7 million in investments to PSSL at fair value, respectively, and recognized $(0.1) million of net realized gain (losses). For the three months ended December 31, 2023, we sold $62.7 million in investments to PSSL at fair value, respectively, and recognized zero of net realized losses.
For the three months ended December 31, 2024 and 2023, we sold no investments to PTSF.
As of December 31, 2024 and September 30, 2024, PFLT had a receivable from the affiliates of $0.3 million and $0.3 million, respectively, presented as due from affiliate on the Consolidated Statements of Assets and Liabilities. This amount relates to cash owed to agency fees and collected on behalf of the Company and trades between the funds.
29
4. INVESTMENTS
For the three months ended December 31, 2024 and 2023, purchases of investments, including PIK interest totaled $608.3 million and $303.5 million, respectively. Sales and repayments of investments for the three months ended December 31, 2024 and 2023 totaled $401.3 million and $103.8 million, respectively.
Investments and cash and cash equivalents consisted of the following:
($ in thousands)
Investment Classification
Fair Value
First lien
1,521,496
1,509,048
First lien in PSSL
Subordinate debt
Equity
145,552
177,788
131,312
177,635
Equity interests in PSSL
Total investments
Cash and cash equivalents
Total investments and cash and cash equivalents
The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets (excluding cash and cash equivalents) in such industries:
Industry Classification
December 31, 2024 (1)
September 30, 2024 (1)
All Other
Total
PennantPark Senior Secured Loan Fund I LLC
In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. As of December 31, 2024 and September 30, 2024, PSSL had total assets of $1,110 million and $988.1 million, respectively, and its investment portfolio consisted of investments in 118 and 109 portfolio companies, respectively. As of December 31, 2024, at fair value, the largest investment in a single portfolio company in PSSL was $21.2 million and the five largest investments totaled $98.6 million. As of September 30, 2024, at fair value, the largest investment in a single portfolio company in PSSL was $21.3 million and the five largest investments totaled $97.3 million. PSSL invests in portfolio companies in the same industries in which we may directly invest.
We and Kemper provide capital to PSSL in the form of first lien secured debt and equity interests. As of December 31, 2024 and September 30, 2024, we and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding first lien secured debt and equity interests. As of the same dates, our investment in PSSL consisted of first lien secured debt of $237.7 million (zero remaining unfunded) and $237.7 million (zero remaining unfunded), respectively, and equity interests of $101.9 million ($87.5 remaining unfunded) and $101.9 million (zero remaining unfunded), respectively.
We and Kemper each appointed two members to PSSL’s four-person board of directors and investment committee. All material decisions with respect to PSSL, including those involving its investment portfolio, require unanimous approval of a quorum of the board of directors or investment committee. Quorum is defined as (i) the presence of two members of the board of directors or investment committee, provided that at least one individual is present that was elected, designated or appointed by each member; (ii) the presence of three members of the board of directors or investment committee, provided that the individual that was elected, designated or appointed by the member with only one individual present shall be entitled to cast two votes on each matter; and (iii) the presence of four members of the board of directors or investment committee shall constitute a quorum, provided that two individuals are present that were elected, designated or appointed by each member.
In December 2024, PSSL entered into a $325.0 million (increased from $260.0 million) senior secured revolving credit facility which bears interest at SOFR plus 225 basis points (including a spread adjustment) with Ally Bank through its wholly-owned subsidiary, PennantPark Senior Secured Loan Facility LLC II, or PSSL Subsidiary II, subject to leverage and borrowing base restrictions.
In January 2021, PSSL completed a $300.7 million debt securitization in the form of a collateralized loan obligation, or the “2032 Asset-Backed Debt”. The 2032 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO II, Ltd., a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2032 Asset-Backed Debt is scheduled to mature in January 2032. On the closing date of the transaction, in consideration of PSSL’s transfer to PennantPark CLO II, Ltd. of the initial closing date loan portfolio, which included loans distributed to PSSL by certain of its wholly owned subsidiaries and us, PennantPark CLO II, Ltd. transferred to PSSL 100% of the Preferred Shares of PennantPark CLO II, Ltd. and 100% of the Class E Notes issued by PennantPark CLO II, Ltd.
In May 2024, PSSL completed the refinancing of the 2032 Asset-Backed Debt through a $300.7 million debt securitization in the form of a collateralized loan obligation, or the "2036 PSSL Asset-Backed Debt". The 2036 PSSL Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO II, Ltd., a wholly-owned subsidiary of PSSL, consisting primarily of middle market loans and participation interest in middle market loans. The 2036 PSSL Asset-Backed Debt is scheduled to mature in April 2036. PSSL retained the preferred shares and Class E-R Notes through a consolidated subsidiary.
In April 2023, PSSL completed a $297.8 million debt securitization in the form of a collateralized loan obligation, or the “2035 Asset-Backed Debt”. The 2035 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO VI, LLC, a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2035 Asset-Backed Debt is scheduled to mature in April 2035. On the closing date of the transaction, in consideration of PSSL’s transfer to PennantPark CLO VI, LLC of the initial closing date loan portfolio, which included loans distributed to PSSL by certain of its wholly owned subsidiaries and us, PennantPark CLO VI, LLC transferred to PSSL 100% of the Preferred Shares of CLO VI, LLC.
Below is a summary of PSSL’s portfolio at fair value:
1,046,178
913,281
Weighted average cost yield on income producing investments
10.8
11.4
Number of portfolio companies in PSSL
Largest portfolio company investment
21,220
21,274
Total of five largest portfolio company investments
98,604
97,292
Below is a listing of PSSL’s individual investments as of December 31, 2024 (Par and $ in thousands):
Issuer Name (6)
Basis PointSpread AboveIndex (1)
Par or Number of Shares
Fair Value(2)
First Lien Secured Debt - 1,863.8%
SOFR+475
2,895
2,850
10/2/2029
SOFR+525
9,900
9,750
9,628
ACP Falcon Buyer, Inc.
8/1/2029
10.09
SOFR+550
18,715
18,400
18,902
5/7/2026
SOFR+626
8,685
8,641
Alpine Acquisition Corp II
11/30/2026
Containers and Packaging
10.65
SOFR+610
12,696
12,488
11,807
(PIK 8.65%)
6/30/2026
Media: Advertising, Printing & Publishing
SOFR+590
4,647
4,563
4,523
11,127
11,042
10,989
Arcfield Acquisition Corp.
8/3/2029
9.62
SOFR+500
6,000
5,988
5,985
8/28/2029
9,975
9,881
9,875
9/13/2029
SOFR+575
9,879
Beacon Behavioral Services, LLC
6/21/2029
12,673
12,652
11/8/2029
SOFR+675
10,000
9,916
9,850
7/1/2029
4,888
4,819
4,753
2/28/2030
14,788
14,548
BioDerm, Inc.
1/31/2028
SOFR+650
8,865
8,778
8,754
9/17/2026
SOFR+540
14,934
14,752
14,679
10.41
SOFR+600
8,666
8,642
8,622
9/26/2029
Automotive
SOFR+535
441
416
391
5/16/2025
11.53
SOFR+698
12,932
12,917
7/31/2029
14,963
14,749
14,738
Carisk Buyer, Inc - Amendment No.1 Term Loan
12/1/2029
9,931
2/7/2030
15,205
14,991
14,977
6/14/2028
9,514
9,415
10/1/2029
15,000
14,876
14,880
8/20/2026
SOFR+619
6,533
6,474
6,435
10/28/2028
8.47
SOFR+400
6,690
6,498
6,506
Connatix Buyer, Inc.
7/13/2027
SOFR+561
3,765
3,726
8/16/2027
SOFR+586
2,046
2,047
8/31/2027
14,525
14,378
2,594
2,423
2,516
11/3/2025
Consumer Goods: Durable
SOFR+635
13,694
13,677
13,640
Duggal Acquisiton, LLC
9/30/2030
4,988
4,940
Dynata, LLC - First Out Term Loan (5)
7/15/2028
SOFR+526
1,266
Dynata, LLC - Last Out Term Loan
SOFR+576
8,418
7,808
1/10/2029
8,843
8,745
8,776
5,945
5,940
Exigo Intermediate II, LLC
3/15/2027
10.92
12,514
12,394
ETE Intermediate II, LLC
5/29/2029
11.01
12,218
12,011
Eval Home Solutions Intermediate, LLC
5/10/2030
9,245
9,112
9,152
Fairbanks More Defense
6/17/2028
SOFR+450
10,092
10,051
10,141
9/27/2030
9.41
9,988
9,893
9,888
3/16/2026
SOFR+560
3,620
3,612
8/10/2027
10.03
3,713
3,679
3,657
2,153
2,133
8/9/2030
19,950
19,785
HEC Purchaser Corp
6/17/2029
3,682
3,641
3,667
Hills Distribution, Inc
10.40
8,935
8,813
8,845
5/10/2026
3,486
3,458
Imagine Acquisitionco, LLC
SOFR+510
9,131
9,005
6,014
1/31/2025
11.75
SOFR+715
11,250
11,236
8,437
(PIK 2.25%)
6/30/2025
SOFR+761
8,094
ITI Holdings, Inc.
3/3/2028
10.05
SOFR+565
3,890
3,849
SOFR+615
13,492
13,301
2/18/2027
12.28
SOFR+785
14,923
14,750
14,700
LAV Gear Holdings, Inc. (5)
10.87
SOFR+643
15,352
15,331
14,600
(PIK 10.87%)
2/3/2026
10.00
11,330
11,267
11,216
1/31/2030
Environmental Industries
2,553
2,511
5/31/2028
7,389
7,277
7,334
Lucky Bucks, LLC - First-Out Term Loan (5)
10/2/2028
Hotel, Gaming and Leisure
SOFR+765
Lucky Bucks, LLC - Last-Out Term Loan
MAG DS Corp
4/1/2027
2,212
2,068
Magenta Buyer, LLC - First-Out Term Loan
7/31/2028
11.60
SOFR+701
Magenta Buyer, LLC - Second-Out Term Loan
12.60
SOFR+801
458
270
(PIK 6.25%)
Magenta Buyer, LLC - Third-Out Term Loan
11.85
SOFR+726
1,695
570
(PIK 5.50%)
MBS Holdings, Inc.
4/16/2027
10.67
SOFR+585
8,309
8,226
7/25/2028
6,213
6,244
2,315
2,283
SOFR+625
19,151
18,878
Megawatt Acquisitionco, Inc
3/1/2030
15,632
15,427
13,661
3/31/2025
5,536
MOREGroup Holdings, Inc
1/16/2030
13,034
12,865
9/28/2027
SOFR+515
3,386
3,350
NBH Group LLC
8/19/2026
Healthcare, Education & Childcare
10.38
10,575
10,486
9/13/2030
14,859
14,850
8/31/2029
20,883
Omnia Exterior Solutions, LLC - Second Amendment Term Loan
12,989
12,881
12,891
5/7/2027
SOFR+636
15,640
15,451
ORL Acquisitions, Inc.
9/3/2027
SOFR+940
2,170
2,156
1,888
9,831
9,815
Output Services Group, Inc - First-Out Term Loan
SOFR+800
821
Output Services Group, Inc - Last-Out Term Loan
5/30/2028
2/4/2028
9/30/2028
11,908
11,727
11,801
PAR Excellence Holdings, Inc
9/3/2030
4,954
PCS Midco, Inc
3,862
9/29/2025
SOFR+543
9,366
9,293
9,281
11/9/2027
11.99
SOFR+725
7,927
7,850
5,787
(PIK 4.00%)
Pragmatic Institute, LLC (4)
7/6/2028
Education
0.00
11,953
11,454
5,020
2,752
9.81
18,908
18,832
18,767
1/29/2026
4,788
4,764
8/15/2029
4,941
5/3/2029
9,950
9,813
9,776
6/15/2029
4,325
4,259
4,260
S101 Acquisition, Inc
5,671
5,616
5,643
5,944
Safe Haven Defense US, LLC
5/23/2029
9,946
7/7/2026
SOFR+620
9,268
9,247
7/14/2025
SOFR+835
12,574
11,976
(PIK 0.50%)
6/13/2029
4,833
SOFR+690
18,537
18,310
18,444
4,850
4,791
10/14/2025
11,922
11,901
10,551
7/17/2025
11.74
4,566
3/1/2028
4,060
SOFR+425
1,700
1,418
SV-Aero Holdings, LLC
11/1/2030
14,925
14,550
14,417
14,565
STG Distribution, LLC (fka Reception Purchaser) - First Out New Money Term Loans
10/3/2029
12.87
1,855
1,752
1,836
(PIK 7.25%)
STG Distribution, LLC (fka Reception Purchaser) - Second Out Term Loans
12.12
SOFR+760
4,314
2,309
2,243
(PIK 6.50%)
TCG 3.0 Jogger Acquisitionco
1/23/2029
19,577
19,278
19,381
9.46
342
332
343
Teneo Holdings, LLC
3/13/2031
5,459
5,501
7/27/2026
10.98
SOFR+665
8,504
8,421
The Vertex Companies, LLC
Construction and Engineering
10.50
17,617
17,379
17,370
Consumer Goods: Non-Durable
10.44
16,482
16,379
16,481
Transgo, LLC
17,884
17,647
6/16/2025
SOFR+640
779
780
778
4/1/2028
SOFR+490
14,670
14,587
14,464
6/15/2026
6,806
6,739
Walker Edison Furniture Company LLC (4)(5)
3/1/2029
5,708
5,028
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (4)(5)
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(4)(5)
42
Watchtower Buyer, LLC
12/3/2029
12,158
11,988
1/16/2025
SOFR+740
17,264
17,262
1,064,272
1,041,856
Equity Securities - 7.6%
48Forty Intermediate Holdings, Inc.- Common Equity
New Insight Holdings, Inc.
116
2,225
74
Output Services Group, Inc
126
1,012
1,316
Walker Edison Furniture - Common Equity
36
Total Equity Securities
8,498
4,322
Total Investments - 1,871.60%
1,072,770
Cash and Cash Equivalents - 95.9%
BlackRock Federal FD Institutional 30
53,629
Total Investments and Cash Equivalents —1,971.0%
1,126,399
1,099,807
Liabilities in Excess of Other Assets — (1,871.0)%
(1,043,908
Members' Equity—100.0%
55,899
34
Below is a listing of PSSL’s individual investments as of September 30, 2024 (Par and $ in thousands):
Issuer Name (7)
First Lien Secured Debt - 1,404.5%
10.95
2,903
2,855
9,925
9,771
9,602
18,762
18,434
18,837
11.28
8,708
8,658
Aeronix, Inc
9.85
15,880
15,665
11.30
12,722
12,481
12,213
4,717
4,613
4,625
4,584
11,155
11,058
10,988
11.56
11,115
10,967
11,059
9,836
9,825
4,900
4,828
11.18
15,423
15,167
11.70
8,888
8,797
14,974
14,779
14,718
5,546
5,523
5,435
12/4/2025
10.97
SOFR+611
2,274
442
417
12.18
13,084
13,059
15,243
15,025
15,015
9,539
9,431
11.21
6,751
6,682
6,649
8.96
6,708
6,540
2,051
2,052
14,562
14,398
2,600
2,420
2,509
11.20
13,805
13,788
Dynata, LLC - First Out Term Loan (6)
1,360
1,264
1,358
10.88
8,439
7,769
8/31/2030
8.85
4,973
8,763
8,732
12,546
12,418
12,484
12,249
12,032
9,132
9,176
10,117
10,071
10,128
11.43
3,696
3,689
3,511
10.45
3,723
3,685
2,131
2,110
3,691
3,648
3,665
8,835
8,868
9,154
9,018
SOFR+685
6,029
5,932
6,089
11,287
11,274
9,707
8,164
8,041
3,900
3,855
13,289
14,731
14,539
14,584
LAV Gear Holdings, Inc. (6)
11.42
12,125
12,102
11,907
LAV Gear Holdings, Inc. - Term Loan Incremental
11.64
2,861
2,856
2,810
11,258
2,559
11.10
7,407
7,288
7,296
Lucky Bucks, LLC - First-Out Term Loan (6)
12.77
2,218
12.13
12.38
452
11.63
1,675
Marketplace Events, LLC - Super Priority First Lien Term Loan (6)
9/30/2025
1,845
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3)(6)
564
Marketplace Events, LLC (6)
9/30/2026
4,837
4,068
7,256
7,183
MBS Holdings, Inc. (New Issue) - Incremental
SOFR+660
523
514
528
MBS Holdings, Inc. (New Issue) - Second Incremental
11.09
551
543
554
4,829
4,851
MDI Buyer, Inc. - Incremental
11.25
1,416
2,348
2,319
2,289
10.85
19,199
18,911
15,671
14,794
5,551
13,067
12,871
3,395
3,355
10,602
10,504
10,284
20,913
15,682
15,480
14.00
2,140
2,124
1,819
SOFR+843
SOFR+668
3,842
5/18/2026
11.12
SOFR+651
4,307
4,282
11.51
11,938
11,745
11,914
10.81
3,871
3,818
9,391
9,289
9,302
7,816
7,733
6,253
Pragmatic Institute, LLC (5)
12.35
SOFR+750
11,855
11,480
7,261
(PIK 12.35%)
2,775
2,758
2,761
1,016
Reception Purchaser, LLC
2/28/2028
4,875
3,656
4,796
4,777
9,830
4,336
4,266
9,973
9,873
1/3/2025
9,260
12.45
4,916
4,906
13.20
12,388
12,387
12,078
4,842
4,729
18,620
Simplicity Financial Marketing Group Holdings, Inc
12/2/2026
11,359
11,206
11,472
5/17/2028
SOFR+461
1,290
1,268
1,289
11,887
11,860
10,520
12.40
4,560
4,070
4,017
9.31
1,777
1,653
10.26
14,588
14,445
14,558
19,626
19,312
19,430
338
5,418
5,490
07/27/26
8,521
8,427
08/31/27
7,636
7,538
7,639
TPC Canada Parent, Inc. and TPC US Parent, LLC
11/24/25
10.84
16,524
16,394
12/29/28
18,552
18,293
06/16/25
11.33
04/01/28
14,585
14,376
06/15/26
10.76
6,823
6,742
6,755
Walker Edison Furniture Company LLC (4)(6)
03/01/29
4,986
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (4)(6)
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(4)(6)
12/03/29
12,189
12,007
12,067
02/27/27
16,014
15,916
12/31/24
16,736
16,722
15,983
920,485
906,532
Equity Securities - 10.5%
New MPE Holdings, LLC
2,710
1,104
6,749
Total Investments - 1,415.0%
928,983
Cash and Cash Equivalents - 106.0%
5.03
68,429
Total Investments and Cash Equivalents —1,521.0%
997,412
981,710
Liabilities in Excess of Other Assets — (1,421.0)%
(917,163
64,547
Below are the Consolidated Statements of Assets and Liabilities for PSSL ($ in thousands):
Investments at fair value (amortized cost—$1,072,770 and $928,983, respectively)
1,297
Cash and cash equivalents (cost—$53,629 and $68,429, respectively)
4,722
79
3,367
1,642
1,109,630
988,122
Credit facility payable
259,100
146,100
2035 Asset-backed debt, net (par—$246,000 and $246,000, respectively)
244,046
243,934
2036 Asset-backed debt, net (par—$246,000 and $246,000, respectively)
244,444
244,372
Notes payable to members
271,600
Interest payable on credit facility and asset backed debt
9,127
17,521
Interest payable on notes to members
6,949
7,315
Accrued expenses
882
822
Due to affiliate
65
1,053,731
923,575
Commitments and contingencies
Members' equity
Total liabilities and members' equity
Below are the Consolidated Statements of Operations for PSSL ($ in thousands):
29,425
26,048
583
177
30,008
26,225
Interest and expense on credit facility and asset-backed debt
14,085
13,398
Interest expense on notes to members
8,853
8,220
Administration fees
558
493
24,099
22,438
5,909
3,787
Realized and unrealized gain (loss) on investments:
1,333
(6,420
(10,890
8,059
Net realized and unrealized gain (loss) on investments
(9,557
1,639
Net increase (decrease) in members' equity resulting from operations
(3,648
5,426
(1) No management or incentive fees are payable by PSSL. If any fees were to be charged, they would be separately disclosed in the Consolidated Statement of Operations.
38
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:
Level 1:
Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2:
Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3:
Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our 2031 Asset-Backed Debt, 2036 Asset-Backed Debt, 2036-R Asset-Backed Debt, and our Credit Facility are classified as Level 3. Our 2026 Notes are classified as Level 2 as they are financial instruments with readily observable market inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.
The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions 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 disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable orderly market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.
Our investments are generally structured as floating rate loans, mainly first lien secured debt, but also may include second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by our Investment Adviser and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments valued using unobservable inputs are included in Level 3 of the fair value hierarchy.
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.
In addition to using the above inputs to value cash equivalents, investments, our 2023 Notes, our 2026 Notes, our 2031 Asset-Backed Debt, our 2036 Asset-Backed Debt, 2036-R Asset-Backed Debt and our Credit Facility, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.
As outlined in the table below, some of our Level 3 investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such bids do not reflect the fair value of an investment, it may independently value such investment by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available. In accordance with ASC 820, we do not categorize any investments for which fair value is measured using the net asset value per share as a practical expedient within the fair value hierarchy.
The remainder of our investment portfolio and our long-term Credit Facility are valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities, discounted for lack of marketability and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an earnings before interest, taxes, depreciation and amortization, or EBITDA, multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA multiple will have the opposite effect.
39
Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes ($ in thousands):
Asset Category
Fair value at December 31, 2024
Valuation Technique
Unobservable Input
Range of Input(Weighted Average) (1)
107,391
Market Comparable
Broker/Dealer bids or quotes
N/A
1,833,348
Market yield
6.5% - 21.0% (10.4%)
7,262
Enterprise Market Value
EBITDA multiple
8.0x - 10.5.x (10.3x)
15,775
Revenue multiple
0.7x - 1.0.x (0.8x)
Subordinated debt
2,826
5.3% - 23.2% (20.0%)
15.0x
168,869
1.8x - 16.8x (12.0x)
Total Level 3 investments
2,136,080
Long-Term Credit Facility
5.8%
____________________________________________
Fair value at September 30, 2024
132,197
1,589,437
Market Yield
7.9% - 21.1% (9.1%)
25,063
0.8x - 9.8x (3.4x)
2,688
11.8% - 16.5% (14.0 %)
5x
168,450
0.4x - 18.8x (11.0x)
1,917,839
5.4%
Our investments, cash and cash equivalents, Credit Facility, 2026 Notes, 2031 Asset-Backed Debt, 2036-R Asset-Backed Debt, and 2036 Asset-Backed Debt were categorized as follows in the fair value hierarchy for ASC 820 purposes ($ in thousands):
Fair Value at December 31, 2024
Description
Level 1
Level 2
Level 3
Measured at NetAsset Value (1)
1,963,776
226,699
57,830
Credit Facility payable
2026 Notes payable(2)
2036 Asset-Backed Debt(2)
2036-R Asset-Backed Debt(2)
Total debt
1,342,307
1,158,281
Fair Value at September 30, 2024
1,746,697
Second lien
2,692
234,115
65,665
1,177,033
993,201
The tables below show a reconciliation of the beginning and ending balances for fair valued investments measured using significant unobservable inputs (Level 3)
($ in thousands):
Three Months Ended December 31, 2024
First Lien
Second lien,subordinateddebt and equityinvestments
Totals
Beginning balance
171,142
Net realized gain (loss)
634
26,040
Net change in unrealized appreciation (depreciation)
(7,513
(13,600
(21,113
Purchases, PIK interest, net discount accretion and non-cash exchanges
597,859
16,121
613,980
Sales, repayments and non-cash exchanges
(373,901
(27,399
(401,300
Transfers in and/or out of Level 3
Ending balance
172,304
Net change in unrealized appreciation (depreciation) reported within the net change in unrealized appreciaiton (depreciation) on investments in our consolidated statements of operations attributable to our Level 3 assets still held at the reporting date.
(2,261
6,964
4,703
Three Months Ended December 31, 2023
906,166
100,782
1,006,948
(4,304
5,478
(858
4,620
288,248
18,950
307,198
(105,124
(1,384
(106,508
1,090,464
118,705
1,209,169
Net change in unrealized depreciation reported within the net change in unrealized depreciation on investments in our consolidated statements of operations attributable to our Level 3 assets still held at the reporting date.
(1,085
295
(790
The table below shows a reconciliation of the beginning and ending balances for liabilities recognized at fair value and measured using significant unobservable inputs (Level 3)($ in thousands):
Beginning balance (cost – $443,855 and $85,619, respectively)
85,619
Net change in unrealized (depreciation) appreciation included in earnings
(89
Borrowings
165,000
Repayments
Ending balance (cost – $608,855 and $260,855 respectively)
260,917
41
As of December 31, 2024, we had outstanding non-U.S. dollar borrowings on our Credit Facility. The following information related to such borrowings ($ in thousands):
Foreign Currency
AmountBorrowed
Borrowing Cost
Current Value
Reset Date
Unrealized appreciation (depreciation)
Canadian Dollar
CAD 2,000
1,391
1/1/2025
As of September 30, 2024 we had outstanding non-U.S. dollar borrowings on our Credit Facility. The following information related to such borrowings (CAD and $ in thousands):
1,481
10/1/2024
Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to the Credit Facility. We elected to use the fair value option for the Credit Facility to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Credit Facility for the three months ended December 31, 2024 and did not incur any expenses relating to amendment costs on the Credit Facility during the three months ended December 31, 2023. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including our 2026 Notes, 2031 Asset-Backed Debt, 2036 Asset-Backed Debt, and the 2036-R Asset-Backed Debt.
For the three months ended December 31, 2024, the Credit Facility had a net change in unrealized appreciation (depreciation) of $0.1 million. For the three months ended December 31, 2023, the Credit Facility had a net change in unrealized appreciation (depreciation) of less than $(0.1) million. As of December 31, 2024 and September 30, 2024, the net unrealized appreciation (depreciation) on the Credit Facility totaled approximately $0.1 million and zero, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility in a manner consistent with the valuation process that our board of directors uses to value our investments.
6. TRANSACTIONS WITH AFFILIATED COMPANIES
An affiliated portfolio company is a company in which we have ownership of 5% or more of its voting securities. A portfolio company is generally presumed to be a non-controlled affiliate when we own at least 5% but less than 25% of its voting securities and a controlled affiliate generally when we own more than 25% of its voting securities. Transactions related to our funded investments with both controlled and non-controlled affiliates for the three months ended December 31, 2024 were as follows ($ in thousands):
Name of Investment
Gross Additions
Gross Reductions
Net Change inUnrealizedAppreciation(Depreciation)
Interest Income
Dividend/Other Income
Net RealizedGains (Losses)
Controlled Affiliates
Marketplace Events, LLC**
$57,107
$4,214
$(36,984)
$(24,337)
$—
$5,062
$306
$25,493
PennantPark Senior Secured'Loan Fund I LLC *
294,128
(7,567)
7,746
Total Controlled Affiliates
$351,235
$(31,904)
$286,561
$12,808
$4,681
* We and Kemper are the members of PSSL, a joint venture formed as a Delaware limited liability company that is not consolidated by us for financial reporting purposes. The members of PSSL make investments in PSSL in the form of first lien secured debt and equity interests, and all portfolio and other material decisions regarding PSSL must be submitted to PSSL’s board of directors or investment committee, both of which are comprised of two members appointed by each of us and Kemper. Because management of PSSL is shared equally between us and Kemper, we do not believe we control PSSL for purposes of the 1940 Act or otherwise.
** Marketplace was sold during the quarter.
Fair Value at September 30, 2023
Sale of/ Distribution from Affiliates
Fair Value at December 31, 2023
34,028
392
(305
34,115
1,241
PennantPark Senior Secured
Loan Fund I LLC *
260,969
1,248
262,217
7,193
294,997
296,332
7. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE
The following information sets forth the computation of basic and diluted per share net increase in net assets resulting from operations
($ in thousands, except per share data):
Numerator for net increase in net assets resulting from operations
Denominator for basic and diluted weighted average shares
81,663,331
58,734,702
Basic and diluted net increase in net assets per share resulting from operations
8. CASH AND CASH EQUIVALENTS
Cash equivalents represent cash in money market funds pending investment in longer-term portfolio holdings and for other general purposes. Our portfolio may consist of temporary investments in U.S. Treasury Bills (of varying maturities), repurchase agreements, money market funds or repurchase agreement-like treasury securities. These temporary investments with original maturities of 90 days or less are deemed cash equivalents and are included in the Consolidated Schedule of Investments. At the end of each fiscal quarter, we may take proactive steps to preserve investment flexibility for the next quarter by investing in cash equivalents, which is dependent upon the composition of our total assets at quarter-end. We may accomplish this in several ways, including purchasing U.S. Treasury Bills and closing out positions on a net cash basis after quarter-end, temporarily drawing down on the Credit Facility, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from average adjusted gross assets for purposes of computing the Investment Adviser’s management fee. U.S. Treasury Bills with maturities greater than 60 days from the time of purchase are valued consistent with our valuation policy. As of December 31, 2024 and September 30, 2024, cash and cash equivalents consisted of money market funds and non-money market fund in the amounts of $26.7 million and $22.2 million and $75.6 million and $89.8 million at fair value, respectively.
9. FINANCIAL HIGHLIGHTS
Below are the financial highlights ($ in thousands, except per share data):
Per Share Data:
Net asset value, beginning of period
11.13
Net investment income (1)
Net change in realized and unrealized gain (loss) (1)
(0.02
0.05
Net increase (decrease) in net assets resulting from operations (1)
Distributions to stockholders (1), (2)
(0.31
Accretive effect of common stock issuance
(0.01
Net asset value, end of period
Per share market value, end of period
Total return *(3)
-2.87
16.68%
Shares outstanding at end of period
84,855,896
Ratios** / Supplemental Data:
Ratio of operating expenses to average net assets** (4)
6.34
5.86
Ratio of debt related expenses to average net assets** (5)
9.66
5.47
Ratio of total expenses to average net assets** (5)
16.00
Ratio of net investment income to average net assets** (5)
12.95
11.89
Net assets at end of period
Weighted average debt outstanding
1,277,742
528,462
Weighted average debt per share (1)
15.65
9.00
Asset coverage per unit (6)
1,714
1,972
Portfolio turnover rate*
17.69
7.98
Note: The expense and investment income ratios above do not reflect the Company's proportionate share of income and expenses of PSSL and PTSF
* Not annualized for periods less than one year.
** Re-occurring investment income and expenses included in these ratios are annualized for periods less than one year
10. DEBT
The annualized weighted average cost of debt for the three months ended December 31, 2024 and 2023, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 7.0% and 6.8%, respectively.
On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the Small Business Credit Availability Act, or SBCAA). As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), effective as of April 5, 2019, subject to compliance with certain disclosure requirements. As of December 31, 2024 and September 30, 2024, our asset coverage ratio, as computed in accordance with the 1940 Act, was 171% and 174%, respectively.
Credit Facility
Funding I’s multi-currency Credit Facility with affiliates of Truist Bank, or the Lenders, was upsized during the quarter ended December 31, 2024 to $736.0 million (increased from $636 million in December 2024) as of December 31, 2024, subject to satisfaction of certain conditions and the regulatory restrictions that the 1940 Act imposes on us as a BDC, has an interest rate spread above SOFR (or an alternative risk-free floating interest rate index) of 225 basis points, a maturity date of August 2029 and a revolving period that ends in August 2027. As of December 31, 2024 and September 30, 2024, Funding I had $608.8 million and $443.9 million of outstanding borrowings under the Credit Facility, respectively. The Credit Facility had a weighted average interest rate of 6.8% and 7.5%, exclusive of the fee on undrawn commitments as of December 31, 2024 and September 30, 2024, respectively. As of December 31, 2024 and September 30, 2024, we had $127.2 million and $192.1 million of unused borrowing capacity under the Credit Facility, respectively, subject to leverage and borrowing base restrictions.
During the revolving period, the Credit Facility bears interest at SOFR (or an alternative risk-free floating interest rate index) plus 225 basis points and, after the revolving period, the rate will reset to Base Rate (or an alternative risk-free floating interest rate index) plus 250 basis points for the remaining two years, maturing in August 2029. The Credit Facility is secured by all of the assets of Funding I. Both, we and Funding I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
The Credit Facility contains covenants, including, but not limited to, restrictions of loan size, industry requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions on certain payments and issuance of debt. The Credit Facility compliance reporting is prepared on a basis of accounting other than GAAP. As of December 31, 2024, we were in compliance with the covenants relating to the Credit Facility.
We own 100% of the equity interest in Funding I and treat the indebtedness of Funding I as our leverage. Our Investment Adviser serves as collateral manager to Funding I under the Credit Facility.
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Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made all required payments of (1) cash interest and, if applicable, principal to the Lenders, (2) administrative expenses and (3) claims of other unsecured creditors of Funding I. The Investment Adviser has irrevocably directed that any management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.
2023 Notes
In November 2017, we issued $138.6 million aggregate principal amount of our 2023 Notes that matured on December 15, 2023. The 2023 Notes were issued pursuant to a deed of trust between the Company and Mishmeret Trust Company, Ltd., as trustee, in November 2017. In connection with this offering, we have dual listed our common stock on the TASE. On February 7, 2024, the Company filed a notice with the Israel Securities Authority and the Tel Aviv Stock Exchange Ltd (the “TASE”) voluntarily requesting to delist the Company’s common stock from trading on the TASE. The last day of trading on the TASE was May 6, 2024 and the delisting of the Company’s common stock from the TASE took effect on May 8, 2024.
The 2023 Notes paid interest at a rate of 4.3% per year. As a result of the downgrade of the 2023 Notes from “ilA+” to “ilA-” in March 2020, the interest rate of the 2023 Notes was increased to 4.3% from 3.8%. Interest on the 2023 Notes was payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2018. The principal on the 2023 Notes was payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% of the original principal amount on December 15, 2023. On December 15, 2023, the remaining outstanding 2023 Notes were repaid in full.
2026 Notes
In March 2021 and in October 2021, we issued $100.0 million and $85.0 million, respectively, in aggregate principal amount of $185.0 million of our 2026 Notes at a public offering price per note of 99.4% and 101.5%, respectively. Interest on the 2026 Notes is paid semi-annually on April 1 and October 1 of each year, at a rate of 4.25% per year, commencing October 1, 2021. The 2026 Notes mature on April 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are our general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all of our existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.
2031 Asset-Backed Debt / 2036-R Asset-Backed Debt
In September 2019, the Company completed the $301.4 million term debt securitization. Term debt securitizations, also known as CLOs, are a form of secured financing incurred by the Company, which is consolidated by the Company and subject to the Company’s asset coverage requirements. The 2031 Asset-Backed Debt was issued by the Securitization Issuer. The 2031 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $78.5 million Class A-1 Senior Secured Floating Rate Loans maturing 2031, which bear interest at the three-month SOFR plus 1.8%, (ii) $15.0 million Class A-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 3.7%, (iii) $14.0 million Class B-1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 2.9%, (iv) $16.0 million Class B-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 4.3%, (v) $19.0 million Class C‑1 Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 4.0%, (vi) $8.0 million Class C-2 Secured Deferrable Fixed Rate Notes due 2031, which bear interest at 5.4%, and (vii) $18.0 million Class D Secured Deferrable Floating Rate Loans due 2031, which bear interest at the three-month SOFR plus 4.8% and (B) the borrowing of $77.5 million Class A‑1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 1.8%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent. The annualized interest on the 2031 Asset-Backed Debt will be paid, to the extent of funds available. The reinvestment period of the Debt Securitization ended on October 15, 2023 and the 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031.
On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly-owned subsidiaries, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. The Preferred Shares of the Securitization Issuer do not bear interest and had a stated value of approximately $55.4 million at the closing of the Debt Securitization.
The 2031 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Class D Secured Deferrable Floating Rate Notes and the Preferred Shares of the Securitization Issuer were eliminated in consolidation. As of December 31, 2024 and September 30, 2024, the Company had zero 2031 Asset-Backed Debt outstanding.
Our Investment Adviser serves as collateral manager to the Securitization Issuer pursuant to the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.
On July 25, 2024, the Company closed the refinancing and upsize of a four-year reinvestment period, twelve-year final maturity $351.0 million debt securitization in the form of a collateralized loan obligation (the “2036-R Asset-Backed Debt”). The 2036-R Asset-Backed Debt was executed through: (A) the issuance by the Issuers of the following classes of notes pursuant that certain indenture, dated September 19, 2019, by and among the Issuers and U.S. Bank Trust Company, National Association, as amended by the second supplemental indenture, dated June 25, 2024): (i) $203 million of A-1-R Notes, which bear interest at the three-month SOFR plus 1.75%, (ii) $10.5 million of A-2-R Notes, which bear interest at three-month SOFR plus 1.90%, (iii) $12 million of Class B-R Notes, which bear interest at three-month SOFR plus 2.05%, (iv) $28 million of C-R Notes, which bear interest at three-month SOFR plus 2.75% and (v) $21 million of D-R Notes, which bear interest at three-month SOFR plus 4.30%, (B) the issuance by the Issuer of $64 million of subordinated notes pursuant to the Indenture and (C) the borrowing by the Issuer of $12.5 million of Class B-R Loans, which bear interest at three-month SOFR plus 2.05%, pursuant to a credit agreement, dated the closing date, by and among the Issuers, the various financial institutions and other persons party thereto, as lenders and U.S. Bank Trust Company, National Association, as loan agent and as trustee. The Replacement Debt matures in July 2036. The Replacement Debt was 100% funded at closing.
The obligations of the Issuers under the Replacement are non-recourse to the Company. The Company will retain the Class D-R Notes and the Subordinated Notes through a consolidated subsidiary. As of December 31, 2024 and September 30, 2024, the Company had $266.0 million, respectively, 2036-R Asset-Backed Debt outstanding with a weighted average interest rate of 6.5% and 7.2%, respectively. As of December 31, 2024 and September 30, 2024, the unamortized fees on the 2036-R Asset-Backed Debt were $0.7 million and $0.8 million, respectively.
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2036 Asset-Backed Debt
In February 2024, the Company completed the $350.6 million term debt securitization. Term debt securitizations, also known as CLOs, are a form of secured financing incurred by the Company, which is consolidated by the Company and subject to the Company’s asset coverage requirements. The 2036 Asset-Backed Debt was issued by the 2036 Securitization Issuer. The 2036 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the 2036 Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $139.5 million of AAA(sf) Class A-1 Notes, which bear interest at the three-month SOFR plus 2.30%, (ii) $14 million of AAA(sf) Class A-2 Notes, which bear interest at three-month SOFR plus 2.70%, (iii) $24.5 million of AA(sf) Class B Notes, which bear interest at three-month SOFR plus 2.90%, (iv) $28 million of A(sf) Class C Notes, which bear interest at three-month SOFR plus 3.90%, (v) $21 million of BBB-(sf) Class D Notes, which bear interest at three-month SOFR plus 5.90%, (together, the “Secured Notes”), and (vi) $63.6 million of subordinated notes (“Subordinated Notes”) and (B) the borrowing of $60.0 million AAA(sf) Class A-1 Senior Secured Floating Rate Loans (the “Class A-1 Loans” and together with the Secured Notes and Subordinated Notes, the “Debt”), which bear interest at three-month SOFR plus 2.30%, under a credit agreement (the “Credit Agreement”), dated as of the Closing Date, by and among the Issuer, as borrower, various financial institutions, as lenders, and Wilmington Trust, National Association, as collateral agent and as loan agent. The annualized interest on the 2036 Asset-Backed Debt will be paid, to the extent of funds available. The Debt is scheduled to mature on April 18, 2036.
The 2036 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Subordinated Notes of the 2036-Securitization Issuer were eliminated in consolidation. As of December 31, 2024 and September 30, 2024, the Company had $287.0 million of 2036 Asset-Backed Debt outstanding with a weighted average interest rate of 7.4% and 8.1%, respectively. As of December 31, 2024 and September 30, 2024, the unamortized fees on the 2036 Asset-Backed Debt were $2.8 million and $2.9 million, respectively.
Our Investment Adviser serves as collateral manager to the 2036-Securitization Issuer pursuant to the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.
11. COMMITMENTS AND CONTINGENCIES
From time to time, we may be a party to legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Unfunded debt and equity investments, if any, are disclosed in the Consolidated Schedules of Investments. As of December 31, 2024 and September 30, 2024, we had $695.8 million and $632.2 million, respectively, in commitments to fund investments. Additionally, as described in Note 4, the Company had unfunded commitments of $87.5 million and zero to PSSL as of December 31, 2024 and September 30, 2024, respectively, that may be contributed primarily for the purpose of funding new investments approved by the PSSL board of directors or investment committee.
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of PennantPark Floating Rate Capital Ltd. and its Subsidiaries
Results of Review of Interim Financial StatementsWe have reviewed the accompanying consolidated statement of assets and liabilities of PennantPark Floating Rate Capital, Ltd. and its Subsidiaries (the Company), including the consolidated schedule of investments, as of December 31, 2024, the related consolidated statements of operations and changes in net assets for the three-month periods ended December 31, 2024 and 2023, and cash flows for the three-month periods ended December 31, 2024 and 2023, and the related notes to the consolidated financial statements (collectively, the interim financial information or financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of September 30, 2024, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended (not presented herein); and in our report dated November 25, 2024, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, as of September 30, 2024, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities, including the consolidated schedule of investments, from which it has been derived.
Basis for Review ResultsThese interim financial statements are the responsibility of the Company’s management. We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
/s/ RSM US LLP
New York, New York
February 10, 2025
Awareness Letter of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of PennantPark Floating Rate Capital Ltd. and its Subsidiaries
We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of PennantPark Floating Rate Capital Ltd. and its Subsidiaries for the periods ended December 31, 2024 and 2023, as indicated in our report dated February 10, 2025; because we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended December 31, 2024, is incorporated by reference in Registration Statement No.333-279726 on Form N-2.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to us and our consolidated subsidiaries regarding future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our Company, our industry, our beliefs and our assumptions. The forward-looking statements contained in this Report involve risks and uncertainties, including statements as to:
We use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and similar expressions to identify forward-looking statements. You should not place undue influence on the forward-looking statements as our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors in “Risk Factors” and elsewhere in this Report.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Report should not be regarded as a representation by us that our plans and objectives will be achieved.
We have based the forward-looking statements included in this Report on information available to us on the date of this Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this Report, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including reports on Form 10-Q/K and current reports on Form 8-K.
You should understand that under Section 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under the Exchange Act.
The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained elsewhere in this Report.
Overview
PennantPark Floating Rate Capital Ltd. is a BDC whose objectives are to generate both current income and capital appreciation while seeking to preserve capital by investing primarily in floating rate loans and other investments made to U.S. middle-market companies.
We believe that floating rate loans to U.S. middle-market companies offer attractive risk-reward to investors due to a limited amount of capital available for such companies. We use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion. Our investments are typically rated below investment grade. Securities rated below investment grade are often referred to as “leveraged loans,” “high yield” securities or “junk bonds” and are often higher risk compared to debt instruments that are rated above investment grade and have speculative characteristics. However, when compared to junk bonds and other non-investment grade debt,
senior secured floating rate loans typically have more robust capital-preserving qualities, such as historically lower default rates than junk bonds, represent the senior source of capital in a borrower’s capital structure and often have certain of the borrower’s assets pledged as collateral. Our debt investments may generally range in maturity from three to ten years and are made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions.
Under normal market conditions, we generally expect that at least 80% of the value of our managed assets will be invested in floating rate loans and other investments bearing a variable-rate of interest. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We also generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt and subordinated debt and, to a lesser extent, equity investments. We seek to create a diversified portfolio by generally targeting an investment size between $5 million and $30 million, on average, although we expect that this investment size will vary proportionately with the size of our capital base.
Our investment activity depends on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.
Organization and Structure of PennantPark Floating Rate Capital Ltd.
PennantPark Floating Rate Capital Ltd., a Maryland corporation organized in October 2010, is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we elected to be treated, and intend to qualify annually, as a RIC under the Code.
We execute our investment strategy directly and through our wholly owned subsidiaries, our unconsolidated joint venture and unconsolidated limited partnership. The term “subsidiary” means entities that primarily engage in investments activities in securities or other assets that are wholly owned by us. The Company does not intend to create or acquire primary control of an entity which primarily engages in investment activities of securities or other assets other than entities wholly owned by the Company. We comply with the provisions of Section 18 of the 1940 Act governing capital structure and leverage on an aggregate basis with our subsidiaries. Our subsidiaries comply with the provisions of Section 17 of the 1940 Act related to affiliated transactions and custody. To the extent that the Company forms a subsidiary advised by an investment adviser other than the Investment Adviser, the investment adviser to such subsidiaries will comply with the provisions of the 1940 Act relating to investment advisory contracts, including but not limited to, Section 15, as if it were an investment adviser to the Company under Section 2(a)(20) of the 1940 Act.
Our investment activities are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our day-to-day activities.
Revenues
We generate revenue in the form of interest income on the debt securities we hold and capital gains and dividends, if any, on investment securities that we may acquire in portfolio companies. Our debt investments, whether in the form of first lien secured debt, second lien secured debt or subordinated debt, typically have a term of three to ten years and bear interest at a floating or fixed rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, our investments provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of amendment, commitment, origination, structuring or diligence fees, fees for providing significant managerial assistance and possibly consulting fees. Loan origination fees, OID and market discount or premium are capitalized and accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which may or may not be non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees and agency fees, and are recorded as other investment income when earned. Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC Subtopic 450-30, Gain Contingencies, or ASC 450-30.
Expenses
Our primary operating expenses include the payment of a management fee and the payment of an incentive fee to our Investment Adviser, if any, our allocable portion of overhead under our Administration Agreement and other operating costs as detailed below. Our management fee compensates our Investment Adviser for its work in identifying, evaluating, negotiating, consummating and monitoring our investments. Additionally, we pay interest expense on the outstanding debt and unused commitment fees on undrawn amounts under our various debt facilities. We bear all other direct or indirect costs and expenses of our operations and transactions, including:
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Generally, during periods of asset growth, we expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities would be additive to the expenses described above.
PORTFOLIO AND INVESTMENT ACTIVITY
PennantPark Floating Rate Capital Ltd.
As of December 31, 2024, our portfolio totaled $2,193.9 million, and consisted of $1,963.8 million of first lien secured debt (including $237.7 million in PSSL), $3.4 million of subordinated debt and $226.7 million of preferred and common equity (including $48.9 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of December 31, 2024, we had two portfolio companies on non-accrual, representing 0.4% and 0.1% of our overall portfolio on a cost and fair value basis, respectively. As of December 31, 2024, the portfolio had net unrealized depreciation of $40.4 million. Our overall portfolio consisted of 159 companies with an average investment size of $13.8 million and had a weighted average yield on debt investments of 10.6%, and was invested 90% in first lien secured debt (including 11% in PSSL), zero in second lien secured debt and less than 1% in subordinate debt and 10% in preferred and common equity (including 2% in PSSL). As of December 31, 2024, approximately 100% of the investments held by PSSL were first lien secured debt.
As of September 30, 2024, our portfolio totaled $1,983.5 million and consisted of $1,746.7 million of first lien secured debt (including $237.7 million in PSSL), $2.7 million of second lien secured debt and subordinated debt and $234.1 million of preferred and common equity (including $56.5 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of September 30, 2024, we had two portfolio companies on non-accrual, representing 0.4% and 0.2% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2024, the portfolio had net unrealized depreciation of $11.4 million. Our overall portfolio consisted of 158 companies with an average investment size of $12.6 million, had a weighted average yield on debt investments of 11.5%, and was invested 88% in first lien secured debt (including 12% in PSSL), less than 1% in second lien secured debt and subordinated debt and 12% in preferred and common equity (including 3% in PSSL). As of September 30, 2024, over 99% of the investments held by PSSL were first lien secured debt.
For the three months ended December 31, 2024, we invested $606.9 million in 11 new and 58 existing portfolio companies at a weighted average yield on debt investments of 10.3%. For the three months ended December 31, 2024, sales and repayments of investments totaled $401.3 million, including $187.7 million of sales to PSSL.
For the three months ended December 31, 2023, we invested $302.6 million in 13 new and 34 existing portfolio companies at a weighted average yield on debt investments of 11.9%. For the three months ended December 31, 2023, sales and repayments of investments totaled $103.8 million, including $62.7 million of sales to PSSL.
As of December 31, 2024, PSSL’s portfolio totaled $1,046.2 million and consisted of 118 companies with an average investment size of $8.9 million and at a weighted average yield on debt investments of 10.8%. As of September 30, 2024, PSSL’s portfolio totaled $913.3 million, consisted of 109 companies with an average investment size of $8.4 million and at a weighted average yield on debt investments of 11.4%.
For the three months ended December 31, 2024, PSSL invested $224.9 million (including $187.7 million purchased from the Company) in 17 new and eight existing portfolio companies at a weighted average yield on debt investments of 10.3%. Sales and repayments of investments for the three months ended December 31, 2024 totaled $86.6 million.
For the three months ended December 31, 2023, PSSL invested $75.7 million (including $62.7 million purchased from the Company) in four new and nine existing portfolio companies at a weighted average yield on debt investments of 12.3%. For the three months ended December 31, 2023, sales and repayments of investments totaled $27.7 million
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At-the-Market Offering
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to ASC serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements. We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the three months from those disclosed in our 2024 Annual Report on Form 10-K.
Investment Valuations
We expect that there may not be readily available market values for many of our investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, 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, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material.
Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
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Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.
On December 3, 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards of directors can satisfy their valuation obligations and requires, among other things, the boards of directors to periodically assess material valuation risks and take steps to manage those risks. The rule also permits boards of directors, subject to board oversight and certain other conditions, to designate the fund’s investment adviser to perform fair value determinations. The new rule went into effect on March 8, 2021 and had a compliance date of September 8, 2022. We came into compliance with Rule 2a-5 under the 1940 Act before the compliance date. While our board of directors has not elected to designate the Investment Adviser as the valuation designee at this time, we have adopted certain revisions to our valuation policies and procedures in order comply with the applicable requirements of Rule 2a-5 under the 1940 Act.
In addition to using the above inputs to value cash equivalents, investments, our 2026 Notes, our 2031 Asset-Backed Debt, our 2036 Asset-Backed Debt, our 2036-R Asset-Backed Debt, and our Credit Facility, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.
Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to the Credit Facility. We elected to use the fair value option for the Credit Facility and the 2023 Notes to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Credit Facility during the three months ended December 31, 2024 and 2023, respectively. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including the 2026 Notes, 2031 Asset-Backed Debt, 2036 Asset-Backed Debt, and the 2036-R Asset-Backed Debt.
For the three months ended December 31, 2024, the Credit Facility had a net change in unrealized appreciation (depreciation) of $0.1 million. For the three months ended December 31, 2023, the Credit Facility had a net change in unrealized appreciation (depreciation) of less than $(0.1) million. As of December 31, 2024 and September 30, 2024, the net unrealized appreciation (depreciation) on the Credit Facility totaled approximately $0.1 million and zero, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility in a manner consistent with the valuation process that our board of directors uses to value our investments. Our 2023 Notes traded on the TASE and were fully paid off during in December 2023.
On February 7, 2024, the Company filed a notice with the Israel Securities Authority and “TASE” voluntarily requesting to delist the Company’s common stock from trading on the TASE. The last day of trading on the TASE was May 6, 2024 and the delisting of the Company’s common stock from the TASE took effect on May 8, 2024.
Revenue Recognition
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, OID, market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which may or may not be non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, amendment fees and agency fees, and are recorded as other investment income when earned.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments, our Credit Facility, during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
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Foreign Currency Translation
Payment -in-kind, or PIK Interest
We have investments in our portfolio which contain a PIK interest provision. PIK interest is added to the principal balance of the investment and is recorded as income. In order for us to maintain our ability to be subject to tax as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends for federal income tax purposes, even though we may not have collected any cash with respect to interest on PIK securities.
Federal Income Taxes
We have elected to be treated and intend to qualify annually to maintain our election to be treated, as a RIC under Subchapter M of the Code. To maintain our RIC tax election, we must, among other requirements, meet certain annual source-of-income and quarterly asset diversification requirements. We also must annually distribute dividends for federal income tax purposes to our stockholders out of the assets legally available for distribution of an amount generally at least equal to 90% of the sum of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, or investment company taxable income, determined without regard to any deduction for dividends paid.
Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute dividends for U.S. federal income tax purposes to our stockholders in respect of each calendar year of an amount at least equal to the sum of (1) 98% of our net ordinary income (subject to certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income (i.e., the excess, if any, of our capital gains over capital losses), adjusted for certain ordinary losses, generally for the one-year period ending on October 31 of the calendar year plus (3) any net ordinary income or capital gain net income for the preceding years that was not distributed during such years on which we did not incur any corporate income tax, or the Excise Tax Avoidance Requirement. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, out of the assets legally available for such distributions in the manner described above, we have retained and may continue to retain such net capital gains or investment company taxable income, subject to maintaining our ability to be taxed as a RIC, in order to provide us with additional liquidity.
Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and net realized gain recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences are reclassified among capital accounts in the Consolidated Financial Statements to reflect their appropriate tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.
For the three months ended December 31, 2024, we recorded a provision for taxes on net investment income of $0.2 million pertaining to federal excise tax. For the three months ended December 31, 2023, we recorded a provision for taxes on net investment income of $0.2 million pertaining to federal excise tax.
We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are taxed as corporations. These taxable subsidiaries allow us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three months ended December 31, 2024 and 2023.
Investment Income
For the three months ended December 31, 2024, investment income was $67.0 million, which was attributable to $61.0 million from first lien secured debt and $6.0 million from other investments. For the three months ended December 31, 2023, investment income was $38.0 million, which was attributable to $33.2 million from first lien secured debt and $4.8 million from other investments. The increase in investment income compared to the same period in the prior year was primarily due to the increase in the size of our debt portfolio.
For the three months ended December 31, 2024, expenses totaled $37.0 million and were comprised of: $22.4 million of debt related interest and expenses, $5.3 million of base management fees, $7.5 million of performance-based incentive fees, and $1.7 million of general and administrative expenses and $0.2 million of taxes. For the three months ended December 31, 2023, expenses totaled $18.5 million and were comprised of; $8.9 million of debt related interest and expenses, $3.0 million of base management fee, $4.9 million of performance-based incentive fee, $1.6 million of general and administrative expenses and $0.2 million of taxes. The increase in expenses compared to the same period in the prior year was primarily due to the increase in interest expense from increased borrowings and an increase in base management fee and incentive fee as a result of the increase in our investment portfolio.
Net Investment Income
For the three months ended December 31, 2024, net investment income totaled $30.0 million or $0.37 per share. For the three months ended December 31, 2023, net investment income totaled $19.4 million or $0.33 per share. The increase in net investment income was primarily due to an increase in investment income partially offset by an increase in expenses.
Net Realized Gains or Losses
For the three months ended December 31, 2024, net realized gains (losses) totaled $26.7 million. For the three months ended December 31, 2023, net realized (losses) totaled $(3.1) million. The change in net realized gains (losses) was primarily due to changes in the market conditions of our investments and the values at which they were realized.
Unrealized Appreciation or Depreciation on Investments and Debt
For the three months ended December 31, 2024, we reported net change in unrealized appreciation (depreciation) on investments of $(29.0) million. For the three months ended December 31, 2023, we reported net change in unrealized appreciation (depreciation) on investments of $6.2 million. As of December 31, 2024 and September 30, 2024, our net unrealized appreciation (depreciation) on investments totaled $(40.4) million and $(11.4) million, respectively. The net change in unrealized appreciation (depreciation) on our investments was primarily due to the operating performance of the portfolio companies within our portfolio, changes in the capital market conditions of our investments and realization of investments.
For the three months ended December 31, 2024, our Credit Facility had a net change in unrealized appreciation (depreciation) of $0.1 million. For the three months ended December 31, 2023, our Credit Facility had a net change in unrealized appreciation (depreciation) of less than $(0.1) million. As of December 31, 2024 and September 30, 2024, the net unrealized appreciation (depreciation) on the Credit Facility totaled approximately $0.1 million and zero, respectively. The net change in net unrealized (appreciation) or depreciation was primarily due to changes in the capital markets.
Net Change in Net Assets Resulting from Operations
For the three months ended December 31, 2024, net increase (decrease) in net assets resulting from operations totaled $28.3 million or $0.35 per share. For the three months ended December 31, 2023, net increase (decrease) in net assets resulting from operations totaled $22.5 million or $0.38 per share. The net increase or (decrease) from operations compared to the same period in the prior year was primarily due to operating performance of our portfolio and changes in capital market conditions of our investments along with change in size and cost yield of our debt portfolio and costs of financing.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived primarily from cash flows from operations, including income earned, proceeds from investment sales and repayments, and proceeds of securities offerings and debt financings. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our debt capital, proceeds from our portfolio and proceeds from public and private offerings of securities to finance our investment objectives and operations. As of December 31, 2024, in accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing.
On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the SBCAA). As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), effective as of April 5, 2019, subject to compliance with certain disclosure requirements. As of December 31, 2024 and September 30, 2024, our asset coverage ratio, as computed in accordance with the 1940 Act, was 171% and 174%, respectively.
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For the three months ended December 31, 2024 and 2023, the annualized weighted average cost of debt, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 7.0% and 6.8%, respectively. As of December 31, 2024 and September 30, 2024, we had $127.1 million and $192.1 million of unused borrowing capacity under the Credit Facility, respectively, subject to leverage and borrowing base restrictions.
Funding I’s multi-currency Credit Facility with the Lenders was $736.0 million (increased from $636 million in December 2024) as of December 31, 2024 subject to satisfaction of certain conditions and regulatory restrictions that the 1940 Act imposes on us as a BDC, has an interest rate spread above SOFR (or an alternative risk-free floating interest rate index) of 225 basis points, a maturity date of August 2029 and a revolving period that ends in August 2027. As of December 31, 2024 and September 30, 2024, PennantPark Floating Rate Funding I, LLC, our wholly-owned subsidiary, borrowed $608.9 million and $443.9 million under the Credit Facility, respectively, and the weighted average interest rate, exclusive of the fee on undrawn commitments, was of 6.8% and 7.5%, respectively, exclusive of the fee on undrawn commitments.
During the revolving period, the Credit Facility bears interest at SOFR (or an alternative risk-free floating interest rate index) plus 225 basis points and, after the revolving period, the rate will reset to Base Rate (or an alternative risk-free floating interest rate index) plus 250 basis points for the remaining two years, maturing in August 2029. The Credit Facility is secured by all of the assets of Funding I. Both PennantPark Floating Rate Capital Ltd. and Funding I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
The Credit Facility contains covenants, including but not limited to, restrictions of loan size, currency types and amounts, industry requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions on certain payments and issuance of debt. The Credit Facility compliance reporting is prepared on a basis of accounting other than GAAP. As of December 31, 2024, we were in compliance with the covenants relating to our Credit Facility.
Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made (1) all required cash interest and, if applicable, principal payments to the Lenders, (2) required administrative expenses and (3) claims of other unsecured creditors of Funding I. We cannot assure you that there will be sufficient funds available to make any distributions to us or that such distributions will meet our expectations from Funding I. The Investment Adviser has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.
In March 2021 and in October 2021, we issued $100.0 million and $85.0 million, respectively, in aggregate principal amount of our 2026 Notes at a public offering price per note of 99.4% and 101.5%, respectively. Interest on the 2026 Notes is paid semi-annually on April 1 and October 1 of each year, at a rate of 4.25% per year, commencing October 1, 2021. The 2026 Notes mature on April 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are our general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness and structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.
In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $78.5 million Class A-1 Senior Secured Floating Rate Notes maturing 2031, which bear interest at the three-month SOFR plus 1.8%, (ii) $15.0 million Class A-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 3.7%, (iii) $14.0 million Class B-1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 2.9%, (iv) $16.0 million Class B-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 4.3%, (v) $19.0 million Class C‑1 Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 4.0%, (vi) $8.0 million Class C-2 Secured Deferrable Fixed Rate Notes due 2031, which bear interest at 5.4%, and (vii) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 4.8% and (B) the borrowing of $77.5 million Class A‑1 Senior Secured Floating Rate Loans due 2031, which bear interest at the three-month SOFR plus 1.8%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031. As of December 31, 2024 and September 30, 2024, the Company had zero of 2031 Asset-Backed Debt outstanding.
On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by our wholly-owned subsidiary, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. The Preferred Shares of the Securitization Issuer do not bear interest and had a stated value of $55.4 million at the closing of the Debt Securitization.
The 2031 Asset-Backed Debt constitutes secured obligations of the Securitization Issuers, and the indenture governing the 2031 Asset-Backed Debt includes customary covenants and events of default. The 2031 Asset-Backed Debt has not been, and will not be, registered under the Securities Act or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from registration.
Our Investment Adviser serves as collateral manager to the Securitization Issuer pursuant to a collateral management agreement between our Investment Adviser and the Securitization Issuer, or the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.
In July 2024, the 2031 Asset-Backed Debt was refinanced through a $351.0 million debt securitization in the form of a collateralized loan obligation, or the "2036-R Asset-Backed Debt". The Company retained $85.0 million of the debt securitization. The 2036-R Asset-Backed Debt was executed through: (A) the issuance by the 2036-R Securitization Issuers of the following classes of notes pursuant that certain indenture, dated September 19, 2019, by and among the 2036-R Securitization Issuers and U.S. Bank Trust Company, National Association, as amended by the second supplemental indenture, dated June 25, 2024): (i) $203 million of A-1-R Notes, which bear interest at the three-month SOFR plus 1.75%, (ii) $10.5 million of A-2-R Notes, which bear interest at three-month SOFR plus 1.90%, (iii) $12 million of Class B-R Notes, which bear interest at three-month SOFR plus 2.05%, (iv) $28 million of C-R Notes, which bear interest at three-month SOFR plus 2.75% and (v) $21 million of D-R Notes, which bear interest at three-month SOFR plus 4.30%, (B) the issuance by the issuer of $64 million of subordinated notes pursuant to the Indenture and (C) the borrowing by one of the 2036-R Securitization Issuers of $12.5 million of Class B-R Loans, which bear interest at three-month SOFR plus 2.05%, pursuant to a credit agreement, by and among the 2036-R Securitization Issuers, the various financial institutions and other persons party thereto, as lenders and U.S. Bank Trust Company, National Association, as loan agent and as trustee. The 2036-R Asset-Backed Debt matures in July 2036. As of December 31, 2024 and September 30, 2024, the Company had $266 million and $266.0 million of 2036-R Asset-Backed Debt outstanding with a weighted average interest rate of 6.5% and7.2%, respectively. As of December 31, 2024 and September 30, 2024, the unamortized fees on the 2036-R Asset-Backed Debt were $0.7 million and $0.8 million, respectively.
In February 2024, the Company completed the $350.6 million term debt securitization. Term debt securitizations, also known as CLOs, are a form of secured financing incurred by the Company, which is consolidated by the Company and subject to the Company’s asset coverage requirements. The 2036 Asset-Backed Debt was issued by the 2036 Securitization Issuer. The 2036 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the 2036 Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $139.5 million of AAA(sf) Class A-1 Notes, which bear interest at the
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three-month secured overnight financing rate published by the Federal Reserve Bank of New York (“SOFR”) plus 2.30%, (ii) $14 million of AAA(sf) Class A-2 Notes, which bear interest at three-month SOFR plus 2.70%, (iii) $24.5 million of AA(sf) Class B Notes, which bear interest at three-month SOFR plus 2.90%, (iv) $28 million of A(sf) Class C Notes, which bear interest at three-month SOFR plus 3.90%, (v) $21 million of BBB-(sf) Class D Notes, which bear interest at three-month SOFR plus 5.90%, (together, the “Secured Notes”), and (vi) $63.6 million of subordinated notes (“Subordinated Notes”) and (B) the borrowing of $60.0 million AAA(sf) Class A-1 Senior Secured Floating Rate Loans (the “Class A-1 Loans” and together with the Secured Notes and Subordinated Notes, the “Debt”), which bear interest at three-month SOFR plus 2.30%, under a credit agreement (the “Credit Agreement”), dated as of the Closing Date, by and among the Issuer, as borrower, various financial institutions, as lenders, and Wilmington Trust, National Association, as collateral agent and as loan agent. The annualized interest on the 2036 Asset-Backed Debt will be paid, to the extent of funds available. The Debt is scheduled to mature on April 18, 2036.
The 2036 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Preferred Shares of the 2036-Securitization Issuer were eliminated in consolidation. As of December 31, 2024 and September 30, 2024, the Company had $287.0 million of 2036 Asset-Backed Debt outstanding with a weighted average interest rate of 7.4% and 8.1%, respectively. As of December 31, 2024, and September 30, 2024 the unamortized fees on the 2036 Asset-Backed Debt were $2.8 million and $2.9 million, respectively.
We may raise equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, securitizing a portion of our investments among other considerations or mergers and acquisitions. Furthermore, the Credit Facility availability depends on various covenants and restrictions as discussed in the preceding paragraphs. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes.
We have entered into certain contracts under which we have material future commitments. Under our Investment Management Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in May 2024, PennantPark Investment Advisers serves as our investment adviser. Payments under our Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our average adjusted gross assets and (2) an incentive fee based on our performance.
Under our Administration Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in May 2024, the Administrator furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. The Administration Agreement was amended on July 1, 2022. If requested to provide significant managerial assistance to our portfolio companies, we or the Administrator will be paid an additional amount based on the services provided. Payment under our Administration Agreement is based upon our allocable portion of the Administrator’s overhead in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of our Chief Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs.
If any of our contractual obligations discussed above are terminated, our costs under new agreements that we enter into may increase. In addition, we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement and our Administration Agreement. Any new investment management agreement would also be subject to approval by our stockholders.
As of December 31, 2024 and September 30, 2024, we had cash and cash equivalents of $102.3 million and $112.1 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.
For the three months ended December 31, 2024, our operating activities used cash of $232.7 million and our financing activities provided cash of $222.9 million. Our operating activities used cash primarily due to our investment activities and our financing activities provided cash primarily due to borrowings under our Credit Facility.
For the three months ended December 31, 2023, our operating activities used cash of $181.9 million and our financing activities provided cash of $157.2 million. Our operating activities used cash primarily due to our investment activities and our financing activities provided cash primarily due to borrowings under our Credit Facility partially offset by the repayment of the 2023 Notes.
In April 2023, PSSL completed a $297.8 million debt securitization in the form of a collateralized loan obligation, or the “2035 Asset-Backed Debt”. The 2035 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO VI, LLC, a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2035 Asset-Backed Debt is scheduled to mature in April 2035. On the closing date of the transaction, in consideration of PSSL’s transfer to PennantPark CLO VI, LLC of the initial closing date loan portfolio, which included loans distributed to PSSL by certain of its wholly owned subsidiaries and us, PennantPark CLO VI, LLC transferred to PSSL 100% of the Preferred Shares of CLO VI, LLC
Below is a listing of PSSL’s individual investments as of September 30, 2024 ($ in thousands):
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Below are the consolidated statements of assets and liabilities for PSSL ($ in thousands):
(1)As of December 31, 2024 and September 30, 2024, PSSL had unfunded commitments to fund investments of less than $0.1 million and $0.6 million, respectively.
Below are the consolidated statements of operations for PSSL ($ in thousands):
Off-Balance Sheet Arrangements
We currently engage in no off-balance sheet arrangements other than our funding requirements for the unfunded investments described above.
Distributions
In order to be treated as a RIC for federal income tax purposes and to not be subject to corporate-level tax on undistributed income or gains, we are required, under Subchapter M of the Code, to annually distribute dividends for U.S. federal income tax purposes to our stockholders out of the assets legally available for distribution of an amount generally at least equal to 90% of our investment company taxable income, determined without regard to any deduction for dividends paid.
Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute dividends for federal income tax purposes to our stockholders in respect of each calendar year an amount at least equal to the Excise Tax Avoidance Requirement. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, out of the assets legally available for such distributions in the manner described above, we have retained and may continue to retain such net capital gains or investment company taxable income, subject to maintaining our ability to be taxed as a RIC, in order to provide us with additional liquidity.
During the three months ended December 31, 2024, we declared distributions of $0.3075 per share for total distributions of $25.2 million. During the three months ended December 31, 2023, we declared distributions of $0.3075 per share for total distributions of $18.1 million. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.
We intend to continue to make monthly distributions to our stockholders. Our monthly distributions, if any, are determined by our board of directors quarterly.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage ratio for borrowings applicable to us as a BDC under the 1940 Act and due to provisions in future credit facilities. If we do not distribute at least a certain percentage of our income annually, we could suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions at a particular level.
Recent Accounting Pronouncements
We are subject to financial market risks, including changes in interest rates. As of December 31, 2024, our debt portfolio consisted of approximately 100.0% variable-rate investments. The variable-rate loans are usually based on a SOFR (or an alternative risk-free floating interest rate index) rate and typically have durations of three months, after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.
Assuming that the most recent Consolidated Statements of Assets and Liabilities was to remain constant, and no actions were taken to alter the existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates:
Change in Interest Rates
Change in Interest Income, Net of Interest Expense(in thousands)
Change in Interest Income,Net of InterestExpense Per Share
Down 1%
(8,277
(0.10
Up 1%
8,277
0.10
Up 2%
16,553
0.20
Up 3%
24,830
0.29
Up 4%
33,120
0.39
Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.
Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds, as well as our level of leverage. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income or net assets.
We may hedge against interest rate and foreign currency fluctuations by using standard hedging instruments such as futures, options and forward contracts or our Credit Facility subject to the requirements of the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates and foreign currencies, they may also limit our ability to participate in benefits of lower interest rates or higher exchange rates with respect to our portfolio of investments with fixed interest rates or investments denominated in foreign currencies. During the periods covered by this Report, we did not engage in interest rate hedging activities or foreign currency derivatives hedging activities.
As of the period ended December 31, 2024, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that, our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting
PART II – OTHER INFORMATION
None of us, our Investment Adviser or our Administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Investment Adviser or Administrator. From time to time, we, our Investment Adviser or Administrator, may be a party to certain legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these and any future legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
In addition to the other information set forth in this Report, you should consider carefully the factors discussed below, as well as in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024 filed on November 26, 2024, which could materially affect our business, financial condition and/or operating results. The risks described as in our Annual Report on Form 10-K are not the only risks facing PennantPark Floating Rate Capital Ltd. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
None.
Not applicable.
10b5-1 Disclosure
None of the officers or directors of the Company have adopted or terminated any Rule 10b5-1 trading arrangements applicable to them (if any) or the Company.
Unless specifically indicated otherwise, the following exhibits are incorporated by reference to exhibits previously filed with the SEC:
3.1
Articles of Amendment and Restatement of the Registrant (Incorporated by reference to Exhibit 99(A) to the Registrant's Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-170243), filed on March 29, 2011).
3.2
Articles of Amendment to Articles of Amendment and Restatement of the Registrant (Incorporated by reference to Exhibit 3.2) to the Registrant's Quarterly Report on Form 10-Q (File No. 814-00891), filed on August 07, 2024).
3.3
Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 814-00891), filed on May 11, 2020).
4.1
Form of Share Certificate (Incorporated by reference to Exhibit 99(D) to the Registrant's Pre-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-170243), filed on April 5, 2011).
10.1*
Facility Amount Increase Request, dated as of December 11, 2024, among Truist Bank, as Administrative Agent, PennantPark Floating Rate Funding I, LLC, PennantPark Investment Advisers, LLC, Raymond James Bank, Western Alliance Bank and U.S. Bank Trust Company, National Association as Collateral Administrator.
10.9
Amended and Restated Purchase and Contribution Agreement, dated as of August 12, 2021, among PennantPark Floating Rate Capital Ltd., as the seller, and PennantPark Floating Rate Funding I, LLC, as the buyer. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 814-00891), filed on August 18, 2021).
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
32.1*
Certification of Chief Executive Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.
32.2*
Certification of Chief Financial Officer pursuant to section 906 of The Sarbanes-Oxley Act of 2002.
99.1
Privacy Policy of the Registrant (Incorporated by reference to Exhibit 99.1 to the Registrant’s Annual Report on Form 10-K (File No. 814-00891), filed on November 17, 2011).
101.INS*
Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page formatted as Inline XBRL and contained in Exhibit 101
* Filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 10, 2025
By:
/s/ Arthur H. Penn
Arthur H. Penn
Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)
/s/ Richard T. Allorto, Jr.
Richard T. Allorto, Jr.
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)