UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the Quarterly Period Ended
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
Delaware |
86-3687484 |
(State or Other Jurisdiction of |
(I.R.S. Employer |
Incorporation or Organization) |
Identification No.) |
(Address of principal executive offices)
(
(Registrant’s telephone number, including area code)
Not Applicable
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)
registered pursuant to Section 12(b) of the Act:
Title of each class
|
Trading Symbol
|
Name of each exchange on which registered
|
|
|
|
None |
Securities registered pursuant to Section 12(g) of the Act:
Common shares of beneficial interest, par value $0.001 per share
(Title of class)
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 ☐
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).
Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, anon-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 |
☐ |
☒ |
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 issuer had
TABLE OF CONTENTS
|
|
|
Page |
|
|
|
|
PART I |
3 |
||
|
|
|
|
|
Item 1. |
3 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (Unaudited) |
4 |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited) |
6 |
|
|
|
|
|
|
Consolidated Schedules of Investments as of March 31, 2024 and December 31, 2023 (Unaudited) |
7 |
|
|
|
|
|
|
15 |
|
|
|
|
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
32 |
|
|
|
|
|
Item 3. |
47 |
|
|
|
|
|
|
Item 4. |
48 |
|
|
|
|
|
PART II |
49 |
||
|
|
|
|
|
Item 1. |
49 |
|
|
|
|
|
|
Item 1A. |
49 |
|
|
|
|
|
|
Item 2. |
49 |
|
|
|
|
|
|
Item 3. |
49 |
|
|
|
|
|
|
Item 4. |
49 |
|
|
|
|
|
|
Item 5. |
50 |
|
|
|
|
|
|
Item 6. |
50 |
|
|
|
||
51 |
|||
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q (the “Quarterly Report”) contains forward-looking statements that involve substantial known and unknown risks, uncertainties and other factors. Undue reliance should not be placed on such statements. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our company, our current and prospective portfolio investments, our industry, our beliefs and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including:
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of the assumptions could prove to be inaccurate, and as a result, the forward-looking statements based on those assumptions also could be inaccurate. We have based the forward-looking statements included in this report on information available to us on the date of this
1
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, 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 have filed or in the future may file with the SEC, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.
2
PART I – FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements.
Onex Direct Lending BDC Fund
Consolidated Statements of Assets and Liabilities
(Unaudited)
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Assets: |
|
|
|
|
|
|
||
Non-controlled/non-affiliated investments, at fair value (amortized cost |
|
$ |
|
|
$ |
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Restricted cash |
|
|
|
|
|
|
||
Interest and other receivables |
|
|
|
|
|
|
||
Deferred financing costs (net of $ |
|
|
|
|
|
|
||
Prepaid expenses |
|
|
|
|
|
|
||
Total Assets |
|
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
|
||
Credit facility (Note 5) |
|
|
|
|
|
|
||
Payable for investments purchased |
|
|
|
|
|
|
||
Management fee payable (Note 3) |
|
|
|
|
|
|
||
Incentive fee payable (Note 3) |
|
|
|
|
|
|
||
Administration fee payable (Note 3) |
|
|
|
|
|
|
||
Interest payable |
|
|
|
|
|
|
||
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Total Liabilities |
|
|
|
|
|
|
||
|
|
— |
|
|
|
— |
|
|
Net Assets |
|
$ |
|
|
$ |
|
||
Net Assets: |
|
|
|
|
|
|
||
Common shares, $ |
|
$ |
|
|
$ |
|
||
Additional paid-in capital |
|
|
|
|
|
|
||
Accumulated distributable earnings (losses) |
|
|
( |
) |
|
|
( |
) |
Net Assets |
|
$ |
|
|
$ |
|
||
Net Asset Value Per Share |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
3
Onex Direct Lending BDC Fund
Consolidated Statements of Operations
(Unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Investment Income |
|
|
|
|
|
|
||
Non-controlled, non-affiliated investments: |
|
|
|
|
|
|
||
Interest income |
|
$ |
|
|
$ |
|
||
Payment-in-kind interest income |
|
|
|
|
|
|
||
Other income |
|
|
|
|
|
|
||
Total Investment Income |
|
|
|
|
|
|
||
Expenses: |
|
|
|
|
|
|
||
Management fee |
|
|
|
|
|
|
||
Incentive fee |
|
|
|
|
|
|
||
Administration fee |
|
|
|
|
|
|
||
Professional fees |
|
|
|
|
|
|
||
Trustees’ fees |
|
|
|
|
|
|
||
Interest and credit facility expense |
|
|
|
|
|
|
||
Other general and administrative expense |
|
|
|
|
|
|
||
Total Expenses |
|
|
|
|
|
|
||
Incentive fee waiver |
|
|
— |
|
|
|
( |
) |
Reimbursement of expense support |
|
|
|
|
|
— |
|
|
Net Expenses |
|
|
|
|
|
|
||
Net Investment Income (Loss) |
|
|
|
|
|
|
||
Realized and unrealized gain (loss) |
|
|
|
|
|
|
||
Net realized gains (losses) on investments: |
|
|
|
|
|
|
||
Non-controlled, non-affiliated investments |
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments: |
|
|
|
|
|
|
||
Non-controlled, non-affiliated investments |
|
|
( |
) |
|
|
( |
) |
Net realized and unrealized gain (loss) |
|
|
( |
) |
|
|
( |
) |
Net Increase (Decrease) in Net Assets Resulting from Operations |
|
$ |
|
|
$ |
|
||
Net investment income (loss) per common share —Basic and Diluted |
|
$ |
|
|
$ |
|
||
Net increase (decrease) in net assets resulting from operations per common share—Basic and Diluted |
|
$ |
|
|
$ |
|
||
Weighted Average Common Shares Outstanding—Basic and Diluted (Note 7) |
|
|
|
|
|
|
||
The accompanying notes are an integral part of these consolidated financial statements.
4
Onex Direct Lending BDC Fund
Consolidated Statements of Changes in Net Assets
(Unaudited)
|
|
Common Shares |
|
|
Capital in Excess of |
|
|
Total Distributable |
|
|
|
|
||||||||
Three Months Ended March 31, 2024 |
|
Number of Shares |
|
|
Par Value |
|
|
Par |
|
|
Earnings (Losses) |
|
|
Total Net Assets |
|
|||||
Balance as of December 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net investment income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Issuance of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Redemption of common shares |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Distributions to shareholders |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Shares issued in connection with dividend reinvestment plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance as of March 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
Common Shares |
|
|
Capital in Excess of |
|
|
Total Distributable |
|
|
|
|
||||||||
Three Months Ended March 31, 2023 |
|
Number of Shares |
|
|
Par Value |
|
|
Par |
|
|
Earnings (Losses) |
|
|
Total Net Assets |
|
|||||
Balance as of December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Net investment income (loss) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net realized gain (loss) on investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Issuance of common shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Redemption of common shares |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Distributions to shareholders |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|||
Shares issued in connection with dividend reinvestment plan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Balance as of March 31, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
5
Onex Direct Lending BDC Fund
Consolidated Statements of Cash Flows
(Unaudited)
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Cash Flows from Operating Activities: |
|
|
|
|
|
|
||
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to |
|
|
|
|
|
|
||
Net realized (gains)/losses on investments |
|
|
( |
) |
|
|
( |
) |
Net change in unrealized (appreciation) depreciation on investments |
|
|
|
|
|
|
||
Net accretion of discount on investments |
|
|
( |
) |
|
|
( |
) |
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Payment-in-kind interest income |
|
|
( |
) |
|
|
( |
) |
Purchases and drawdowns of investments |
|
|
( |
) |
|
|
( |
) |
Sales and repayments of investments |
|
|
|
|
|
|
||
(Increase) decrease in operating assets: |
|
|
|
|
|
|
||
Interest and other receivables |
|
|
( |
) |
|
|
|
|
Prepaid expenses |
|
|
|
|
|
|
||
Increase (decrease) in operating liabilities: |
|
|
|
|
|
|
||
Management fee payable |
|
|
( |
) |
|
|
|
|
Incentive fee payable |
|
|
|
|
|
( |
) |
|
Administration fee payable |
|
|
|
|
|
( |
) |
|
Interest payable |
|
|
( |
) |
|
|
|
|
Payable for investments purchased |
|
|
( |
) |
|
|
— |
|
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
|
|
|
|
( |
) |
|
Cash Flows from Financing Activities: |
|
|
|
|
|
|
||
Proceeds from issuance of common shares |
|
|
|
|
|
|
||
Redemption of common shares |
|
|
( |
) |
|
|
( |
) |
Distributions to shareholders |
|
|
( |
) |
|
|
( |
) |
Borrowings on credit facility |
|
|
|
|
|
|
||
Payments on credit facility |
|
|
( |
) |
|
|
— |
|
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
||
Cash and cash equivalents and restricted cash, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents and restricted cash, end of period |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Supplemental and Non-Cash Information |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Reinvestments of distributions |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Reconciliation of Cash and Cash Equivalents and Restricted Cash |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash |
|
|
|
|
|
|
||
Total cash and cash equivalents and restricted cash |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these consolidated financial statements.
6
Onex Direct Lending BDC Fund
Consolidated Schedule of Investments
March 31, 2024
(Unaudited)
Portfolio Company (1) |
|
Investment Type |
|
Reference Rate and Spread (2) |
|
Floor |
|
|
Interest Rate (2) |
|
|
Initial Acquisition Date |
|
Maturity Date |
|
Par/Shares |
|
|
Amortized Cost (3) |
|
|
Fair Value (4) |
|
|
% of Net Assets |
|
|
Footnotes |
||||||
Non-controlled/Non-affiliated investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Beverage, Food & Tobacco |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Project Cloud Holdings, LLC |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|
(5) |
|||||||||
Project Cloud Holdings, LLC |
|
Revolving Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
Total Beverage, Food & Tobacco |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
BCP V Everise Acquisition LLC |
|
Cov-Lite Term Loan B |
|
|
|
— |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
||||||||
Milestone Technologies, Inc. |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Milestone Technologies, Inc. |
|
First Amendment Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|||||||||
Milestone Technologies, Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
MIS Acquisition, LLC |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
MIS Acquisition, LLC |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Montana Buyer Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Montana Buyer Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
Total Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Construction & Building |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Steele Solutions, Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Steele Solutions, Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Total Construction & Building |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Consumer Goods: Durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
BCDI Meteor Acquisition, LLC |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Hy Cite Enterprises, LLC |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Total Consumer Goods: Durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Connect America.com, LLC |
|
Term Facility |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Connect America.com, LLC |
|
Incremental Term Facility |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Wellful Inc. |
|
Initial Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (12) |
|||||||||
Wellful Inc. |
|
Amendment No. 1 Incremental Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (12) |
|||||||||
Total Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
KUEHG Corp. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(15) |
|||||||||
Zips Car Wash, LLC |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) |
|||||||||
Total Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Financial Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
The Ultimus Group Midco, LLC |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(15) |
|||||||||
The Ultimus Group Midco, LLC |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) (15) |
|||||
The Ultimus Group Midco, LLC |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) (15) |
|||||
Total Financial Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Forest Products & Paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
7
Portfolio Company (1) |
|
Investment Type |
|
Reference Rate and Spread (2) |
|
Floor |
|
|
Interest Rate (2) |
|
|
Initial Acquisition Date |
|
Maturity Date |
|
Par/Shares |
|
|
Amortized Cost (3) |
|
|
Fair Value (4) |
|
|
% of Net Assets |
|
|
Footnotes |
||||||
Jackson Paper Manufacturing Company |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Jackson Paper Manufacturing Company |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Total Forest Products & Paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Healthcare & Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amplity Parent, Inc. |
|
Restatement Date Term Loan (First Lien) |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
||||||||||
Amplity Parent, Inc. |
|
Revolving Credit Facility |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
||||||||||
APT Opco, LLC |
|
Senior Secured Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
APT Opco, LLC |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) |
|||||||||
Celerion Buyer, Inc. |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Celerion Buyer, Inc. |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
% |
|
(7) (8) (11) (13) |
||||||
Celerion Buyer, Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
% |
|
(7) (8) (11) (13) |
||||||
MMS Bidco LLC |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Spark DSO, LLC |
|
First Lien Term Loan |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
||||||||||
Spark DSO, LLC |
|
Revolver |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
||||||||||
Total Healthcare & Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
High Tech Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
2022-1 Incremental Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (10) |
|||||||||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
2023-1 Incremental Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (10) |
|||||||||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
2023-1 Incremental Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (7) (8) 10) (11) (13) |
|||||||||
Bullhorn, Inc. |
|
Amendment No. 1 Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (10) |
|||||||||
Medallia, Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (9) |
||||||||||
SailPoint Technologies Holdings Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
SailPoint Technologies Holdings Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Total High Tech Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foundation Risk Partners, Corp. |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (15) |
|||||||||
Foundation Risk Partners, Corp. |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) (15) |
|||||||||
Total Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pansophic Learning Ltd. |
|
Senior Secured Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
S4T Holdings Corp. |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
S4T Holdings Corp. |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) |
|||||||||
Total Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Transportation: Cargo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Keystone Purchaser, LLC |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (9) |
|||||||||
Total Transportation: Cargo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
IMB Midco LLC (formerly, WSP Midco LLC) |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
IMB Midco LLC (formerly, WSP Midco LLC) |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
% |
|
(7) (8) (11) (13) |
||||
Total Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Total Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
8
Portfolio Company (1) |
|
Investment Type |
|
Reference Rate and Spread (2) |
|
Floor |
|
|
Interest Rate (2) |
|
|
Initial Acquisition Date |
|
Maturity Date |
|
Par/Shares |
|
|
Amortized Cost (3) |
|
|
Fair Value (4) |
|
|
% of Net Assets |
|
|
Footnotes |
||||
Milestone Technologies, Inc. (Maverick Acquisition Holdings, LP) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|||||
KeyData Associates Inc. |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
(10) |
|||||
Total Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Connect America.com, LLC |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
(14) |
|||||
Total Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
S4T Holdings Corp. (Vistria ESS Holdings, LLC) |
|
Equity Units |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|||||
Total Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
IMB Holdco LLC (formerly, WSP Holdco LLC) |
|
Class A Common Units |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
(6) |
|||||
IMB Holdco LLC (formerly, WSP Holdco LLC) |
|
Series P Units |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
(6) |
|||||
Total Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Total Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Total Non-controlled/Non-affiliated investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
% |
|
|
||||
Liabilities in Excess of Other Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
- |
% |
|
|
||
Total Net Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
|
% |
|
|
||||
9
Portfolio Company |
|
Type |
|
Total |
|
|
Funded |
|
|
Expired |
|
|
Unfunded Commitment |
|
||||
Amplity Parent, Inc. |
|
Revolver |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
APT Opco, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Celerion Buyer Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Celerion Buyer Inc. |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Foundation Risk Partners, Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Jackson Paper Manufacturing Company |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Milestone Technologies, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
MIS Acquisition, LLC |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Montana Buyer Inc. |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Project Cloud Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Project Cloud Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
S4T Holdings Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
SailPoint Technologies Holdings Inc. |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Spark DSO, LLC |
|
Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Spark DSO, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Steele Solutions, Inc. |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
The Ultimus Group Midco, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
The Ultimus Group Midco, LLC |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
IMB Midco LLC (formerly, WSP Midco LLC) |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Zips Car Wash, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
10
Onex Direct Lending BDC Fund
Consolidated Schedule of Investments
December 31, 2023
Portfolio Company (1) |
|
Investment Type |
|
Reference Rate and Spread (2) |
|
Floor |
|
|
Interest Rate (2) |
|
|
Initial Acquisition Date |
|
Maturity Date |
|
Par/Shares |
|
|
Amortized Cost (3) |
|
|
Fair Value (4) |
|
|
% of Net Assets |
|
|
Footnotes |
||||||
Non-controlled/Non-affiliated investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Automotive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Crash Champions Intermediate, LLC |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
% |
|
(5) |
|||||||||
Crash Champions Intermediate, LLC |
|
2022 Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Crash Champions Intermediate, LLC |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Crash Champions Intermediate, LLC |
|
Revolving Credit Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
Total Automotive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Beverage, Food & Tobacco |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Project Cloud Holdings, LLC |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Project Cloud Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) |
|||||||||
Project Cloud Holdings, LLC |
|
Revolving Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
Total Beverage, Food & Tobacco |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
BCP V Everise Acquisition LLC |
|
Cov-Lite Term Loan B |
|
|
|
— |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||||
Kelso Industries LLC |
|
Eighth Amendment Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Kelso Industries LLC |
|
Revolving Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
Milestone Technologies, Inc. |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Milestone Technologies, Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
MIS Acquisition, LLC |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
MIS Acquisition, LLC |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Montana Buyer Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Montana Buyer Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
|||||||||
Total Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Construction & Building |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Steele Solutions, Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Steele Solutions, Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Total Construction & Building |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Consumer Goods: Durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
BCDI Meteor Acquisition, LLC |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Hy Cite Enterprises, LLC |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Total Consumer Goods: Durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Connect America.com, LLC |
|
Term Facility |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Connect America.com, LLC |
|
Incremental Term Facility |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Wellful Inc. |
|
Initial Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (12) |
|||||||||
Wellful Inc. |
|
Amendment No. 1 Incremental Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (12) |
|||||||||
Total Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Zips Car Wash, LLC |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) |
|||||||||
11
Portfolio Company (1) |
|
Investment Type |
|
Reference Rate and Spread (2) |
|
Floor |
|
|
Interest Rate (2) |
|
|
Initial Acquisition Date |
|
Maturity Date |
|
Par/Shares |
|
|
Amortized Cost (3) |
|
|
Fair Value (4) |
|
|
% of Net Assets |
|
|
Footnotes |
||||||
Total Consumer Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Forest Products & Paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Jackson Paper Manufacturing Company |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Jackson Paper Manufacturing Company |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Total Forest Products & Paper |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Healthcare & Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Amplity Parent, Inc. |
|
Restatement Date Term Loan (First Lien) |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
||||||||||
Amplity Parent, Inc. |
|
Revolving Credit Facility |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
||||||||||
APT Opco, LLC |
|
Senior Secured Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
APT Opco, LLC |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) |
|||||||||
Celerion Buyer, Inc. |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Celerion Buyer, Inc. |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
% |
|
(7) (8) (11) (13) |
|||||
Celerion Buyer, Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
% |
|
(7) (8) (11) (13) |
|||||
MMS Bidco LLC |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Spark DSO, LLC |
|
First Lien Term Loan |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
||||||||||
Spark DSO, LLC |
|
Revolver |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(8) (13) |
||||||||||
Total Healthcare & Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
High Tech Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
2022-1 Incremental Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (10) |
|||||||||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
2023-1 Incremental Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (10) |
|||||||||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
2023-1 Incremental Delayed Draw Term Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(5) (7) (8) 10) (11) (13) |
|||||
Bullhorn, Inc. |
|
Amendment No. 1 Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (10) |
|||||||||
GS AcquisitionCo, Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
Medallia, Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (9) |
||||||||||
SailPoint Technologies Holdings Inc. |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
SailPoint Technologies Holdings Inc. |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
Total High Tech Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Foundation Risk Partners, Corp. |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (15) |
|||||||||
Foundation Risk Partners, Corp. |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) (15) |
|||||||||
Total Insurance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Pansophic Learning Ltd. |
|
Senior Secured Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
S4T Holdings Corp. |
|
Term Loan (First Lien) |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
S4T Holdings Corp. |
|
Delayed Draw Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (8) (13) |
|||||||||
Total Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Transportation: Cargo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Keystone Purchaser, LLC |
|
Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) (9) |
|||||||||
Total Transportation: Cargo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||||
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
IMB Midco LLC (formerly, WSP Midco LLC) |
|
Initial Term Loan |
|
|
|
% |
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
(5) |
|||||||||
IMB Midco LLC (formerly, WSP Midco LLC) |
|
Revolving Loan |
|
|
|
% |
|
|
— |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
|
|
% |
|
(7) (8) (11) (13) |
|||||
12
Portfolio Company (1) |
|
Investment Type |
|
Reference Rate and Spread (2) |
|
Floor |
|
|
Interest Rate (2) |
|
|
Initial Acquisition Date |
|
Maturity Date |
|
Par/Shares |
|
|
Amortized Cost (3) |
|
|
Fair Value (4) |
|
|
% of Net Assets |
|
|
Footnotes |
||||
Total Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Total Debt Investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Milestone Technologies, Inc. (Maverick Acquisition Holdings, LP) |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|||||
KeyData Associates Inc. |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
(10) |
|||||
Total Business Services |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Connect America.com, LLC |
|
Common Equity |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
(14) |
|||||
Total Consumer Goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
||||
Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
S4T Holdings Corp. (Vistria ESS Holdings, LLC) |
|
Equity Units |
|
|
|
|
|
|
|
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
% |
|
|
|||||
Total Sovereign & Public Finance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000 |
|
|
|
359,543 |
|
|
|
0.1 |
% |
|
|
|
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
IMB Holdco LLC (formerly, WSP Holdco LLC) |
|
Class A Common Units |
|
|
|
|
|
|
|
|
|
10/1/2021 |
|
N/A |
|
|
3,400 |
|
|
|
3,400,000 |
|
|
|
— |
|
|
|
0.0 |
% |
|
(6) |
IMB Holdco LLC (formerly, WSP Holdco LLC) |
|
Series P Units |
|
|
|
|
|
|
|
|
|
5/15/2023 |
|
N/A |
|
|
374 |
|
|
|
374,000 |
|
|
|
575,721 |
|
|
|
0.2 |
% |
|
(6) |
Total Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,774,000 |
|
|
|
575,721 |
|
|
|
0.2 |
% |
|
|
|
Total Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,585,173 |
|
|
|
7,033,311 |
|
|
|
2.6 |
% |
|
|
|
Total Non-controlled/Non-affiliated investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
541,963,717 |
|
|
|
533,065,800 |
|
|
|
195.5 |
% |
|
(16) |
|
Liabilities in Excess of Other Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(260,364,491 |
) |
|
|
-95.5 |
% |
|
|
||
Total Net Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
272,701,309 |
|
|
|
100.0 |
% |
|
|
||
13
Portfolio Company |
|
Type |
|
Total |
|
|
Funded |
|
|
Expired |
|
|
Unfunded Commitment |
|
||||
Amplity Parent, Inc. |
|
Revolver |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|||
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
Delayed Draw Term Loan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
APT Opco, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
Celerion Buyer Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Celerion Buyer Inc. |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Crash Champions Intermediate, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Crash Champions Intermediate, LLC |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Foundation Risk Partners, Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Jackson Paper Manufacturing Company |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Kelso Industries LLC |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Milestone Technologies, Inc. |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
MIS Acquisition, LLC |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Montana Buyer Inc. |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Project Cloud Holdings, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Project Cloud Holdings, LLC |
|
Revolver |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
S4T Holdings Corp. |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||
SailPoint Technologies Holdings Inc. |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Spark DSO, LLC |
|
Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Steele Solutions, Inc. |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Steele Solutions, Inc. |
|
Delayed Draw Term Loan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
IMB Midco LLC (formerly, WSP Midco LLC) |
|
Delayed Draw Term Loan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
IMB Midco LLC (formerly, WSP Midco LLC) |
|
Revolver |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Zips Car Wash, LLC |
|
Delayed Draw Term Loan |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The accompanying notes are an integral part of these consolidated financial statements.
14
Onex Direct Lending BDC Fund
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Organization
Onex Direct Lending BDC Fund (formerly known as Onex Falcon Direct Lending BDC Fund) (the “Company”, “we”, “us”, or “our”), a Delaware statutory trust formed on April 27, 2021, is a non-diversified, closed-end management investment company that has elected to be treated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company also elected to be treated as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
The Company commenced operations on October 1, 2021.
On August 25, 2021, the Company formed a wholly-owned blocker entity, Onex Direct Lending BDC Blocker LLC (formerly known as Onex Falcon Direct Lending BDC Blocker LLC) (the “ODL Blocker”), which holds certain of the Company’s portfolio equity investments. On September 21, 2021, the Company formed a wholly-owned, special-purpose, bankruptcy-remote subsidiary, Onex Direct Lending BDC SPV, LLC (formerly known as Onex Falcon Direct Lending BDC SPV, LLC) (the “ODL SPV”), which holds certain of the Company’s portfolio loan investments that are used as collateral for the debt financing facility provided by Société Générale. On December 13, 2022, the Company formed a wholly-owned entity, Connect America OFDL BDC Holdings, LLC (the “OFDL Holdings”), which holds certain of the Company's portfolio equity investments.
Effective March 5, 2024, Onex Falcon Investment Advisors, LLC, the Company’s prior investment adviser, assigned the Investment Advisory Agreement (as defined below) to Onex Credit Advisor, LLC. The Company is managed by the Adviser. The Adviser, subject to the overall supervision of the Board, provides investment advisory services to the Company. The Adviser also provides administrative services necessary for the Company to operate.
The Company’s investment objective is to generate current income while preserving capital and, to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.
The Company invests primarily in high-quality senior secured first lien loans and other credit investments of “middle market companies” located in the United States. The Company defines “high-quality” as investments deemed by the Adviser, after diligence and underwriting, to have favorable risk-reward characteristics including, but not limited to, a low probability of default, favorable investment terms, and an appropriate capital structure to companies of high creditworthiness with stable cash flow generation. The Company may also seek to invest in the subordinated debt and equity, including warrants, options, and convertible instruments, of middle market companies.
The Company’s fiscal year ends on December 31.
Note 2. Significant Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) pursuant to the requirements for reporting on Form 10-Q and Regulation S-X, as appropriate. These unaudited consolidated financial statements (“consolidated financial statements”) reflect adjustments that in the opinion of the Company are necessary for the fair presentation of the financial position and results of operations as of and for the periods presented herein and notes thereto should be read in conjunction with the consolidated financial statements and notes thereto in the Company's Form 10-K for the year ended December 31, 2023, as filed with the SEC. The Company is considered an investment company under U.S. GAAP and therefore applies the accounting and reporting guidance applicable to investment companies.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ from those estimates, and such differences could be material.
Consolidation
In accordance with U.S. GAAP guidance on consolidation, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of
15
providing services to the Company. Accordingly, the Company consolidated the accounts of the Company’s wholly-owned subsidiaries, ODL SPV, ODL Blocker and OFDL Holdings, in its consolidated financial statements. All intercompany balances and transactions have been eliminated in consolidation.
Segments
In accordance with U.S. GAAP guidance on segment reporting, the Company has determined that its operations comprise a reporting segment.
Cash and Cash Equivalents and Restricted Cash
Cash consists of deposits held at a custodian bank. Cash equivalents consists of money market investments. The carrying amounts for money market investments approximate fair value. Restricted cash consists of deposits pledged as collateral. Cash, cash equivalents and restricted cash are held at major financial institutions and, at times, may exceed the insured limits under applicable law.
Investments
Investment transactions are recorded on the trade date. Realized gains or losses on investments are calculated using the specific identification method as the difference between the net proceeds received (excluding prepayment fees, if any) and the amortized cost basis of the investment without regard to unrealized appreciation or depreciation previously recognized, and include investments charged off during the period, net of recoveries. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation when gains or losses are recognized.
Valuation Procedures
The Board has designated the Adviser as its “valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and in that role the Adviser is responsible for performing fair value determinations relating to all of the Company’s investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value methodologies, in accordance with valuation policies and procedures that have been approved by the Board. Although the Board designated the Adviser as “valuation designee,” the Board ultimately is responsible for fair value determinations under the 1940 Act.
Investments for which market quotations are readily available are typically valued at the average bid and ask prices of such market quotations, which are generally obtained from independent pricing services, broker-dealers or market makers. To validate market quotations, the Company will utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities for which market quotations are not readily available or are deemed not to represent fair value, are valued at fair value as determined in good faith by the Adviser, in accordance with a valuation policy approved by the Board and a consistently applied valuation process. Accordingly, such investments go through the Company’s multi-step valuation process as described below. Investments purchased within the quarter before the valuation date may each be valued at cost, unless such valuation, in the judgment of the Adviser, does not represent fair value.
The Adviser undertakes a multi-step valuation process, which includes, among other procedures, the following:
As part of the valuation process, the Adviser may consider other information and may use valuation methods including but not limited to (i) market quotes for similar investments, (ii) recent trading activity, (iii) discounting forecasted cash flows of the investment, (iv) models that consider the implied yields from comparable debt, (v) third party appraisals, (vi) sale negotiations and purchase offers received from independent parties and (vii) estimated value of underlying assets to be received in any liquidation or restructuring.
16
As part of the valuation process, the Adviser will primarily use the “income approach” by using a present value technique that discounts the estimated contractual cash flows. Discount rates applied to estimated contractual cash flows for an underlying asset vary by specific investment, industry, priority and nature of the debt security and are assessed relative to leveraged loan and high-yield bond indices at the valuation date. The use of market indices as part of the valuation methodology is subject to adjustment for many factors, including priority, collateral used as security, structure, performance and other quantitative and qualitative attributes of the asset being valued. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board or its delegates will consider whether the pricing indicated by the external event corroborates its valuation.
When the Company determines its NAV as of the last day of a month that is not also the last day of a calendar quarter, the Company intends to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser’s valuation team determines such a change has occurred with respect to one or more investments, the Adviser’s valuation team will determine whether to update the value for each relevant investment, using positive assurance from an independent valuation firm where applicable in accordance with our valuation policy, pursuant to authority delegated by the Board.
Financial Accounting Standards Board Accounting Standards Codification Topic 820: Fair Value Measurements and Disclosures (“ASC 820”) specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. ASC 820 also provides guidance regarding a fair value hierarchy, which prioritizes information used to measure fair value and the effect of fair value measurements on earnings and provides for enhanced disclosures determined by the level of information used in the valuation.
The Company classifies the inputs used to measure fair values into the following hierarchy:
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of observable input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and it considers factors specific to the investment.
Transfers between levels, if any, are recognized at the beginning of the period in which the transfer occurs. In addition to using the above inputs in investment valuations, the Company applies the valuation policy approved by its Board that is consistent with ASC 820. Consistent with the valuation policy, the Company evaluates the source of inputs, including any markets in which its investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. When a security is valued based on prices provided by reputable dealers or pricing services (that is, broker quotes), the Company subjects those prices to various additional criteria in making the determination as to whether a particular investment would qualify for treatment as a Level 2 or Level 3 investment. For example, the Company reviews pricing provided by dealers or pricing services in order to determine if observable market information is being used, versus unobservable inputs. Some additional factors considered include the number of prices obtained as well as an assessment as to their quality, such as the depth of the relevant market relative to the size of the Company’s position.
A determination of fair value involves subjective judgments and estimates and depends on the facts and circumstances present at each valuation date. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Company’s investments may fluctuate from period to period. Additionally, the fair value of such investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If the Company were required to liquidate a
17
portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.
In addition, changes in the market environment, including the impact of changes in broader market indices and credit spreads, and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.
Revenue Recognition
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any.
Loans are generally placed on non-accrual status when there is reasonable doubt that principal or interest will be collected in full. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. Accrued interest is generally reversed when a loan is placed on non-accrual status. Payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability of the outstanding principal and interest. Non-accrual loans may be restored to accrual status when past due principal and interest is paid current and are likely to remain current based on management’s judgment.
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.
Loan origination fees, original issue discount and market discount are capitalized, and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. The Company records prepayment premiums on loans and securities as fee income when it receives such amounts.
Payment-in-Kind Interest
Payment-in-kind (“PIK”) interest, computed at the contractual rate specified in each loan agreement, is added to the principal balance of the loan and recorded as interest income and generally becomes due at maturity. To maintain the Company’s status as a RIC, this non-cash source of income must be paid out to shareholders in the form of distributions, even though the Company has not yet collected the cash.
Deferred Financing Costs
Origination and other expenses related to the Company’s revolving credit facility are recorded as deferred financing costs and amortized as part of interest expense using the straight-line method over the stated life of the debt instrument.
Organization and Offering Costs
Organization costs include, among other things, the cost of incorporating, including the cost of legal services, printing, consulting services and other fees pertaining to the Company’s organization. Costs associated with the organization of the Company are expensed as incurred. Offering costs include legal expenses related to the preparation of the Company’s private placement memorandum in connection with the Company's offering of common shares. Offering costs are capitalized as deferred offering expenses and are amortized over twelve months from incurrence.
Earnings per Share
Basic earnings per share is calculated by dividing net income or loss attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated in the same manner, with further adjustments to reflect the dilutive effect of common share equivalents outstanding.
18
Income Taxes
The Company has elected to be regulated as a BDC under the 1940 Act. The Company has elected to be treated for U.S. federal income tax purposes, and intends to qualify annually, as a RIC. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income or excise taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as distributions. Rather, any tax liability related to income earned and distributed would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.
The Company evaluates tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more likely than not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more likely than not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, ongoing analyses of tax laws, regulations and interpretations thereof.
To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source of income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least
In addition, based on the excise tax distribution requirements, the
The Company has analyzed the tax positions taken on federal and state income tax returns for all open tax years and has concluded that
Distributions to Common Shareholders
Distributions to the Company’s shareholders are recorded on the record date. The amount to be paid out as a distribution is determined by the Board and is generally based upon earnings estimated by the Adviser. Net realized capital gains, if any, would generally be distributed at least annually, although the Company may decide to retain such capital gains.
The Company has adopted an “opt out” dividend reinvestment plan (“DRP”) for its shareholders. As a result, if the Company makes a cash distribution, its shareholders will have their cash distributions reinvested in additional shares of the Company including fractional shares as necessary, unless they specifically “opt out” of the DRP to receive the distribution in cash. Under the DRP, cash distributions to participating shareholders will be reinvested in additional shares of the Company at a purchase price equal to the net asset value per share as of the last day of the calendar quarter immediately preceding the date such distribution was declared.
The Company may distribute taxable distributions that are payable in cash or shares at the election of each shareholder. Under certain applicable provisions of the Code and the U.S. Treasury regulations, distributions payable in cash or in common shares at the election of shareholders are treated as taxable distributions. As a result, a U.S. shareholder may be required to pay tax with respect to such distributions in excess of any cash received. If a U.S. shareholder sells the shares it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the distribution, depending on the market price of the Company’s shares at the time of the sale. Furthermore, with respect to non-U.S. shareholders, the Company may be required to withhold U.S. tax with respect to such distributions, including in respect of all or a portion of such distribution that is payable in shares.
Foreign Currency Translation
19
denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates. The portion of gains and losses on foreign investments resulting from fluctuations in foreign currencies is included in net realized and unrealized gain or loss from investments.
Investments denominated in foreign currencies and foreign currency transactions may involve certain considerations and risks not typically associated with those of domestic origin. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices more volatile than those of comparable U.S. companies or U.S. government securities.
Note 3. Related Party Transactions
Administration Agreement
Pursuant to an agreement between the Company and the Company’s prior investment adviser, Onex Falcon Investment Advisors, LLC, effective September 16, 2021, as amended and restated on March 5, 2024 between the Company and the Adviser (the “Administration Agreement”), the Adviser (or, in such context, the “Administrator”) performs, oversees, or arranges for, the performance of administrative and compliance services necessary for the operations of the Company, which includes office facilities, equipment, bookkeeping and recordkeeping services and such other services as the Adviser, subject to review by the Board, shall from time to time determine to be necessary or useful to perform its obligations under the Administration Agreement. Under the Administration Agreement, the Adviser also provides managerial assistance on the Company’s behalf to those companies that have accepted the Company’s offer to provide such assistance.
In addition, pursuant to the Administration Agreement, the Adviser may pay third-party providers of goods or services and the Company will pay or reimburse the Adviser for certain expenses incurred by any such third parties for work done on its behalf.
The Company reimburses the Adviser for the allocable portion of the Adviser’s overhead and other expenses incurred by the Adviser and requested to be reimbursed by the Adviser in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of the Company’s Chief Compliance Officer and Chief Financial Officer and their respective staffs. In addition, if requested to provide significant managerial assistance to the Company’s portfolio companies, the Company will reimburse the allocated costs incurred by the Adviser and Administrator in providing those services. No person who is an officer, trustee or employee of the Adviser or its affiliates and who serves as a trustee of the Company receives any compensation from the Company for his or her services as a trustee.
For the three months ended March 31, 2024 and 2023, the Company incurred administrative fees of $
Investment Advisory Agreement
Effective March 5, 2024, the Company’s prior investment adviser, Onex Falcon Investment Advisors, LLC, assigned the investment advisory agreement effective September 16, 2021, as amended and restated on August 9, 2023, to the Adviser, a wholly-owned subsidiary of Onex Corp., pursuant to Rule 2a-6 under the 1940 Act. The Adviser serves as the Company’s investment adviser pursuant to the second amended and restated investment advisory agreement between the Company and the Adviser dated March 5, 2024 (the “Investment Advisory Agreement”). Pursuant to the Investment Advisory Agreement, the Adviser provides overall investment advisory services for the Company and in accordance with the terms of the Investment Advisory Agreement and the Company’s investment objective, policies and restrictions as in effect from time to time: determines the composition of the Company’s portfolio, the nature and timing of the changes to, the portfolio and the manner of implementing such changes; identifies investment opportunities and makes investment decisions for the Company; monitors investments; performs due diligence on prospective portfolio companies; exercises voting rights in respect of portfolio securities and other investments; serve on, and exercise observer rights for, boards of directors and similar committees of the Company’s portfolio companies; negotiates, obtains and manages financing facilities and other forms of leverage; and provides the Company with such other investment advisory and related services as the Company may, from time to time, reasonably require for the investment of capital.
20
Under the terms of the Investment Advisory Agreement, the Company will pay the Adviser a base management fee and a performance-based incentive fee.
Prior to July 1, 2023, the base management fee was payable quarterly in arrears at an annual rate of
For the three months ended March 31, 2024 and 2023, management fees were $
The Subordinated Incentive Fee on Income will be determined and paid quarterly in arrears based on the amount by which (x) the “Pre-Incentive Fee Net Investment Income” (as defined below) in respect of the current calendar quarter and the eleven preceding calendar quarters (in either case, the “Trailing Twelve Quarters”) exceeds (y) the Preferred Return Amount (as defined below) in respect of the Trailing Twelve Quarters. For purposes of the Subordinated Incentive Fee on Income calculations, each calendar quarter comprising the relevant Trailing Twelve Quarters that commenced prior to October 1, 2023 shall be known as a “Legacy Fee Quarter” while a calendar quarter that commenced on or after October 1, 2023 shall be known as a “Current Fee Quarter.” The Preferred Return Amount will be determined on a quarterly basis, and will be calculated by multiplying 1.75% by the Company’s NAV at the beginning of each applicable calendar quarter comprising the relevant Trailing Twelve Quarters. The Preferred Return Amount will be calculated after making appropriate adjustments to the Company’s NAV at the beginning of each applicable calendar quarter for Company subscriptions and distributions during the applicable calendar quarter. The amount of the Subordinated Incentive Fee on Income that will be paid to the Adviser for a particular quarter will equal the excess of the Subordinated Incentive Fee on Income so calculated less the aggregate Subordinated Incentive Fees on Income that were paid to the Adviser and/or earned, but waived, by the Adviser, in the preceding eleven calendar quarters (or portion thereof) comprising the relevant Trailing Twelve Quarters.
For this purpose, “Pre-Incentive Fee Net Investment Income” means interest income, dividend income and any other income (including, without limitation, any accrued income that the Company has not yet received in cash and any other fees such as commitment, origination, structuring, diligence and consulting fees or other fees that the Company receives from portfolio companies) (the “Ordinary Income”) accrued during the calendar quarter, minus the Company’s operating expenses accrued during the calendar quarter (including, without limitation, the Management Fee, administration expenses and any interest expense and distributions paid on any issued and outstanding preferred shares, but excluding the Subordinated Incentive Fee on Income and the Incentive Fee on Capital Gains). For the avoidance of doubt, Pre-Incentive Fee Net Investment Income does not include any realized capital gains, realized capital losses or unrealized capital appreciation or depreciation.
“Net Capital Loss” in respect of a particular period means the difference, if positive, between (i) aggregate capital losses, whether realized or unrealized, in such period and (ii) aggregate capital gains, whether realized or unrealized, in such period.
Prior to October 1, 2023, the calculation of the Subordinated Incentive Fee on Income for each quarter is as follows:
21
Beginning on October 1, 2023, the calculation of the Subordinated Incentive Fee on Income for each quarter is as follows:
The Subordinated Incentive Fee on Income is subject to a cap (the “Incentive Fee Cap”). The Incentive Fee Cap in any quarter is an amount equal to (a)
The Incentive Fee on Capital Gains shall be determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Advisory Agreement). This fee shall equal
For accounting purposes only, the Company accrues, but does not pay, a capital gains incentive fee with respect to unrealized capital appreciation. The accrual of this theoretical capital gains incentive fee assumes all unrealized capital appreciation is realized in order to reflect a theoretical capital gains incentive fee that would be payable to the Investment Adviser at each measurement date. It should be noted that a fee so calculated and accrued would not be payable under the Investment Advisers Act of 1940 (the “Advisers Act”) or the Investment Advisory Agreement, and would not be paid based upon such computation of capital gains incentive fees in subsequent periods. Amounts actually paid to the Adviser will be consistent with the Advisers Act and formula reflected in the Investment Advisory Agreement which specifically excludes consideration of unrealized capital gain.
For the three months ended March 31, 2024 and 2023, incentive fees were $
Revolving Loan Agreement
On September 8, 2022, the Company entered into an unsecured revolving loan agreement (the “Revolving Onex Loan”) with Onex Credit Finance Corporation, a subsidiary of the ultimate parent entity of the Adviser (the “Onex Entity”), whereby the Onex
22
Entity could advance amounts to the Company (each such amount, an “Onex Loan”) with a maximum outstanding principal amount of $
On May 5, 2023, the Company terminated the Revolving Onex Loan and entered into an unsecured revolving loan agreement with Onex Credit Finance II Corporation (“OCF II”) (the “Revolving OCF II Loan”), a subsidiary of the ultimate parent entity of the Adviser, whereby OCF II may advance amounts to the Company (each such amount, an “Onex Loan II”) with a maximum outstanding principal amount of $
Co-Investment Exemptive Relief
As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term. On March 29, 2022, the SEC issued an order, which was amended on September 26, 2023 (the “Order”) granting the Company's application for exemptive relief to co-invest in portfolio companies with certain other funds managed by the Adviser or its affiliates (“Affiliated Funds”) and, subject to satisfaction of certain conditions, proprietary accounts of the Adviser or its affiliates (“Proprietary Accounts”) in a manner consistent with the Company’s investment objective, positions, policies, strategies and restrictions as well as regulatory requirements and other pertinent factors. Pursuant to the Order, the Company is permitted to co-invest with Affiliated Funds and/or Proprietary Accounts if, among other things, a “required majority” (as defined in Section 57(o) of the 1940 Act) of its independent trustees make certain conclusions in connection with a co-investment transaction, including that (1) the terms of the transactions, including the consideration to be paid, are reasonable and fair to the Company and its shareholders and do not involve overreaching of the Company or its shareholders on the part of any person concerned, and (2) the transaction is consistent with the interests of the Company’s shareholders and is consistent with its investment objective and strategies and certain criteria established by the Board.
Organization and Offering Costs
Under the Investment Advisory Agreement and the Administrative Agreement, the Company, either directly or through reimbursements to the Adviser or its affiliates, is responsible for its organization and offering costs. Prior to the Company’s commencement of operations, the Adviser funded the Company’s organization and offering costs in the amount of $
Expense Support Agreement
On September 15, 2021, the Company entered into the Expense Support Agreement with the Adviser.
Commencing with the fourth quarter of 2021 and on a quarterly basis thereafter, the Adviser may elect to pay certain expenses of the Company from time to time, which the Company will be obligated to reimburse to the Adviser at a later date if certain conditions are met. Any payment so required to be made by the Adviser is referred to herein as an “Expense Payment.”
The Adviser’s obligation to make an Expense Payment becomes a liability of the Adviser, and the right to such Expense Payment becomes an asset of the Company, no later than the last business day of the applicable calendar quarter. The Expense Payment for any calendar quarter shall, as promptly as possible, be: (i) paid by the Adviser to the Company in any combination of cash or other immediately available funds, and/or (ii) offset against amounts due from the Company to the Adviser.
Pursuant to the Expense Support Agreement, “Available Operating Funds” means the sum of (i) the Company’s net investment company taxable income (including net short-term capital gains reduced by net long-term capital losses), (ii) the Company’s net capital gains (including the excess of net long-term capital gains over net short-term capital losses), and (iii) dividends and other distributions paid to or otherwise earned by the Company on account of investments in portfolio companies (to the extent such amounts listed in clause (iii) are not included under clauses (i) and (ii) above.)
23
Following any calendar quarter in which Available Operating Funds exceed the cumulative distributions paid to the Company’s shareholders in such calendar quarter (the amount of such excess being hereinafter referred to as “Excess Operating funds”), the Company shall pay such Excess Operating Funds, or a portion thereof in accordance with the stipulation below, as applicable, to the Adviser until such time as all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar quarter have been reimbursed or waived. Any payments required to be made by the Company pursuant to the preceding sentence are referred to herein as a “Reimbursement Payment.”
The amount of the Reimbursement Payment for any calendar quarter will be equal to the lesser of (i) the Excess Operating Funds in such calendar quarter, and (ii) the aggregate amount of all Expense Payments made by the Adviser to the Company within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by the Company to the Adviser. No Reimbursement Payment shall be made if: (1) the Effective Rate of Distributions Per Share (defined below) declared by the Company at the time of such proposed Reimbursement Payment is less than the Effective Rate of Distributions Per Share at the time the Expense Payment was made to which such Reimbursement Payment relates, or (2) the Company’s Operating Expense Ratio at the time of such proposed Reimbursement Payment is greater than the Operating Expense Ratio at the time the Expense Payment was made to which such Reimbursement Payment relates. For purposes of the Expense Support Agreement, “Effective Rate of Distributions Per Share” means the annualized rate (based on a 365 day year) of regular cash distributions per share exclusive of returns of capital, distribution rate reductions due to distribution and shareholder fees, and declared special dividends or special distributions, if any. The “Operating Expense Ratio” is calculated by dividing Operating Expenses, less organizational and offering expenses, base management and incentive fees owed to the Adviser, and interest expense, by the Company’s net assets.
The Company’s obligation to make a Reimbursement Payment becomes a liability to the Company, and the right to such Reimbursement Payment becomes an asset of the Adviser, no later than the last business day of the applicable calendar quarter. The Reimbursement Payment for any calendar quarter shall, as promptly as possible, be paid by the Company to the Adviser in any combination of cash or other immediately available funds. Any Reimbursement Payments shall be deemed to have reimbursed the Adviser for Expense Payments in chronological order beginning with the oldest Expense Payment eligible for reimbursement.
The Expense Support Agreement may be terminated at any time, without penalty, by the Company or the Adviser, with or without notice. The Expense Support Agreement automatically terminates in the event of (a) the termination by the Company of the Investment Advisory Agreement, or (b) the Board determines to dissolve or liquidate the Company.
The following table summarizes the Expense Payments that may be subject to reimbursement pursuant to the Expense Support Agreement:
Quarter Ended |
|
Expense |
|
|
Reimbursement |
|
|
Unreimbursed |
|
|
Eligible for |
|||
December 31, 2021 |
|
$ |
|
|
$ |
|
|
$ |
|
|
||||
For the three months ended March 31, 2024, the Company reimbursed $
Shares held by Affiliated Accounts
As of March 31, 2024 and December 31, 2023, certain entities affiliated with the Company held shares of the Company. As of March 31, 2024 and December 31, 2023, the Adviser and its affiliate held an aggregate of
Potential Conflicts of Interest
The members of the senior management and investment teams of the Adviser serve or may serve as officers, trustees or principals of entities that operate in the same, related or an unrelated line of business as the Company does. In serving in these multiple and other capacities, they may have obligations to other clients or investors in those entities, the fulfillment of which may or may not be in the Company’s best interests or in the best interest of the Company’s shareholders. The Company’s investment objectives may overlap with the investment objectives of such investment funds, accounts or other investment vehicles.
24
Note 4. Investments and Fair Value Measurements
The following table summarizes the composition of the Company’s investment portfolio at amortized cost and fair value as of March 31, 2024 and December 31, 2023:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Amortized Cost |
|
|
Fair Value |
|
|
Amortized Cost |
|
|
Fair Value |
|
||||
Senior Secured Loans |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Investments |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Generally, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned more than 25% of its voting securities or it had the power to exercise control over the management or policies of such portfolio company, and would be an “affiliated person” of a portfolio company if it owned 5% or more of its voting securities. As of March 31, 2024 and December 31, 2023, the Company did not “control” and was not an “affiliated person” of any of its portfolio companies, each as defined in the 1940 Act.
The following tables summarize the industry and geographic composition of the Company’s investment portfolio based on fair value as of March 31, 2024 and December 31, 2023:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Fair Value |
|
|
Percentage |
|
|
Fair Value |
|
|
Percentage |
|
||||
Automotive |
|
$ |
— |
|
|
|
— |
% |
|
$ |
|
|
|
% |
||
Beverage, Food & Tobacco |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Business Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Construction & Building |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Consumer Goods: Durable |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Consumer Goods: Non-durable |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Consumer Services |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Financial Services |
|
|
|
|
|
% |
|
|
— |
|
|
|
— |
% |
||
Forest Products & Paper |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Healthcare & Pharmaceuticals |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
High Tech Industries |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Insurance |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Sovereign & Public Finance |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Transportation: Cargo |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Wholesale |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total Investments |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Fair Value |
|
|
Percentage |
|
|
Fair Value |
|
|
Percentage |
|
||||
United States |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
Canada |
|
|
|
|
|
% |
|
|
|
|
|
% |
||||
Total Investments |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||
The following table summarizes the fair value hierarchy of the Company’s investment portfolio as of March 31, 2024:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Senior Secured Loans |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Equity |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total Investments |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
The following table summarizes the fair value hierarchy of the Company’s investment portfolio as of December 31, 2023:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Senior Secured Loans |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Equity |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
||
Total Investments |
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
25
The following table presents changes in the fair value of investments for which Level 3 inputs were used to determine the fair value for the three months ended March 31, 2024:
|
|
Senior Secured Loans |
|
|
Equity |
|
|
Total |
|
|||
Balance as of January 1, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Purchases and drawdowns of investments |
|
|
|
|
|
— |
|
|
|
|
||
Proceeds from principal pre-payments and sales of investments |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Payment-in-kind |
|
|
|
|
|
— |
|
|
|
|
||
Net accretion of discount on investments |
|
|
|
|
|
— |
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net realized gain (loss) on investments |
|
|
|
|
|
— |
|
|
|
|
||
Transfers into Level 3 (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Transfers out of Level 3 (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Balance as of March 31, 2024 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net change in unrealized appreciation (depreciation) on Level 3 investments still held |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following table presents changes in the fair value of investments for which Level 3 inputs were used to determine the fair value for the three months ended March 31, 2023:
|
|
Senior Secured Loans |
|
|
Equity |
|
|
Total |
|
|||
Balance as of January 1, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Purchases of investments |
|
|
|
|
|
— |
|
|
|
|
||
Proceeds from principal pre-payments and sales of investments |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Payment-in-kind |
|
|
|
|
|
— |
|
|
|
|
||
Net accretion of discount on investments |
|
|
|
|
|
— |
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net realized gain (loss) on investments |
|
|
|
|
|
— |
|
|
|
|
||
Transfers into Level 3 (1) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Transfers out of Level 3 (1) |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Balance as of March 31, 2023 |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net change in unrealized appreciation (depreciation) on Level 3 investments still held |
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
The valuation techniques and significant unobservable inputs used in the valuation of Level 3 investments as of March 31, 2024 were as follows:
Investment type |
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable |
|
Range (Weighted Average) |
|
Impact to Valuation from an Increase in Input |
|
Senior Secured Loans |
|
$ |
|
|
Discounted cash flow |
|
Discount rate |
|
|
|||
|
|
|
|
|
Yield analysis |
|
Market yield |
|
|
|||
|
|
|
|
|
Enterprise value waterfall |
|
EBITDA multiple |
|
|
|||
|
|
|
|
|
Recent transactions |
|
Transaction price |
|
N/A |
|
N/A |
|
Equity |
|
|
|
|
Enterprise value waterfall |
|
EBITDA multiple |
|
|
|||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31, 2024, the valuation technique for certain investments classified as Wholesale amounting to $13,398,240 changed to enterprise value waterfall approach. These investments were previously valued utilizing the yield analysis approach. The change was due to market conditions and is more reflective of the go forward performance.
26
The valuation techniques and significant unobservable inputs used in the valuation of Level 3 investments as of December 31, 2023 were as follows:
Investment type |
|
Fair Value |
|
|
Valuation Technique |
|
Unobservable |
|
Range (Weighted Average) |
|
Impact to Valuation from an Increase in Input |
|
Senior Secured Loans |
|
$ |
|
|
Discounted cash flow |
|
Discount rate |
|
|
|||
|
|
|
|
|
Yield analysis |
|
Market yield |
|
|
|||
|
|
|
|
|
Recent transactions |
|
Transaction price |
|
N/A |
|
N/A |
|
Equity |
|
|
|
|
Enterprise value waterfall |
|
EBITDA multiple |
|
|
|||
|
|
$ |
|
|
|
|
|
|
|
|
|
|
Note 5. Borrowings
On October 4, 2021, the ODL SPV, as borrower, and the Company, solely in its capacities as equity holder and collateral manager, entered into a Loan and Servicing Agreement with Société Générale, as initial lender and agent, and certain financial institutions (the “Lenders”), and U.S. Bank National Association as collateral agent and collateral custodian (the “SPV Facility”), as amended on December 27, 2021, as further amended on March 31, 2022, July 14, 2022 and on April 4, 2023, pursuant to which the amount made available to ODL SPV was increased from $
In connection with the SPV Facility, on October 4, 2021, the Company entered into a sale and contribution agreement with the ODL SPV, which provides for the sale and contribution of certain loans to the ODL SPV and for future sales from the Company to the ODL SPV on an ongoing basis. Such loans sold and contributed to ODL SPV constitute part of the initial portfolio of assets securing the SPV Facility.
The SPV Facility includes customary covenants, including certain financial maintenance covenants, limitation on the activities of ODL SPV, including limitations on incurrence of incremental indebtedness, and customary events of default. The SPV Facility is secured by a lien on assets held by the ODL SPV and on any payments received by ODL SPV in respect of those assets.
Further, as discussed in Note 3 above, on September 8, 2022, the Company entered into the Revolving Onex Loan with the Onex Entity. On May 5, 2023, the Company terminated the Revolving Onex Loan and entered into the Revolving OCF II Loan with OCF II.
Debt obligations consisted of the following as of March 31, 2024 and December 31, 2023:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Total Borrowing Capacity |
|
|
Principal Outstanding |
|
|
Total Borrowing Capacity |
|
|
Principal Outstanding |
|
||||
SPV Facility |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Revolving OCF II Loan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Due to the short-term nature of the SPV Facility, the outstanding principal balance approximates fair value. The fair value of the credit facility would be categorized as Level 3.
27
For the three months ended March 31, 2024 and 2023, the components of interest expense were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Interest expense |
|
$ |
|
|
$ |
|
||
Amortization of deferred financing costs |
|
|
|
|
|
|
||
Total interest and credit facility expense |
|
$ |
|
|
$ |
|
||
Average debt outstanding |
|
$ |
|
|
$ |
|
||
Weighted average interest rate |
|
|
% |
|
|
% |
||
Note 6. Share Transactions
The Company is authorized to issue an unlimited number of common shares at $
The following table summarizes the total shares issued and proceeds received during the three months ended March 31, 2024:
Period Ended |
|
Shares Issued |
|
|
Proceeds Received |
|
||
March 31, 2024 |
|
|
|
|
$ |
|
||
|
|
|
|
|
$ |
|
||
The following table summarizes the total shares issued and proceeds received during the three months ended March 31, 2023:
Period Ended |
|
Shares Issued |
|
|
Proceeds Received |
|
||
March 31, 2023 |
|
|
|
|
$ |
|
||
|
|
|
|
|
$ |
|
||
Distributions
The Company may fund its cash distributions to shareholders from any sources of funds available to it, including offering proceeds, borrowings, net investment income from operations, capital gains proceeds from the sale of assets, non-capital gains proceeds from the sale of assets, dividends or other distributions paid to the Company on account of preferred and common equity investments in portfolio companies and fee and expense reimbursement waivers from the Adviser or the Administrator, if any. The Company has not established limits on the amount of funds it may use from available sources to make distributions. During certain periods, the Company’s distributions may exceed its taxable earnings. As a result, it is possible that a portion of the distributions the Company makes may represent a return of capital. A return of capital generally is a return of a shareholder’s investment rather than a return of earnings or gains derived from the Company’s investment activities.
With respect to distributions, the Company has adopted an “opt out” DRP for common shareholders. As a result, in the event of a declared distribution, each shareholder that has not “opted out” of the DRP will have their distributions automatically reinvested in additional common shares rather than receiving cash distributions. Shareholders who receive distributions in the form of common shares will be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions.
The following table summarizes the distribution declarations and common shares issued pursuant to the distribution reinvestment plan for the three months ended March 31, 2024:
Date Declared |
|
Record Date |
|
Payment Date |
|
Amount Per Share |
|
|
Distribution Declared |
|
|
DRP Shares Issued |
|
|||
|
|
|
$ |
|
|
$ |
|
|
|
|
||||||
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|||
The following table summarizes the distribution declarations and common shares issued pursuant to the distribution reinvestment plan for the three months ended March 31, 2023:
Date Declared |
|
Record Date |
|
Payment Date |
|
Amount Per Share |
|
|
Distribution Declared |
|
|
DRP Shares Issued |
|
|||
|
|
|
$ |
|
|
$ |
|
|
|
|
||||||
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|||
28
Share Repurchase Program
In the first quarter of 2023, the Company began offering, and on a quarterly basis, intends to continue offering, to repurchase up to
All shares purchased by the Company pursuant to the terms of each offer to repurchase will be retired and thereafter will be authorized and unissued shares.
Any periodic repurchase offers are subject in part to the Company’s available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively. While the Company intends to continue to conduct quarterly tender offers as described above, the Company is not required to do so and may suspend or terminate the share repurchase program at any time.
The following table presents the share repurchases completed during the three months ended March 31, 2024:
Tender Offer |
|
Tender Offer Expiration |
|
Tender Offer |
|
|
Price Paid per Share |
|
|
Total Number of Shares Repurchased |
|
|
Maximum Number of Shares that may yet be purchased under the repurchase plan (1) |
|
||||
|
|
|
|
|
$ |
|
|
|
|
|
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
The following table presents the share repurchases completed during the three months ended March 31, 2023:
Tender Offer |
|
Tender Offer Expiration |
|
Tender Offer |
|
|
Price Paid per Share |
|
|
Total Number of Shares Repurchased |
|
|
Maximum Number of Shares that may yet be purchased under the repurchase plan (1) |
|
||||
|
|
|
|
|
$ |
|
|
|
|
|
|
— |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Note 7. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per common share for the three months ended March 31, 2024 and 2023:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Net increase in net assets resulting from operations |
|
$ |
|
|
$ |
|
||
Weighted average common shares outstanding—basic and diluted |
|
|
|
|
|
|
||
Net increase in net assets resulting from operations per common share—basic and diluted |
|
$ |
|
|
$ |
|
||
Note 8. Income Taxes
The Company has elected to be treated as a RIC under the Code, and intends to operate in a manner so as to continue to qualify for the tax treatment applicable to RICs. As a RIC, the Company is not subject to federal income tax on the portion of its taxable income and gains distributed currently to its shareholders as a distribution. The Company’s quarterly distributions, if any, are determined by the Board. The Company anticipates distributing substantially all of its taxable income and gains, within the Subchapter M rules, and thus the Company anticipates that it will not incur any federal or state income tax at the RIC level. As a RIC, the Company is also subject to a federal excise tax based on distributive requirements of its taxable income on a calendar year basis.
29
Depending on the level of taxable income earned in a tax year, the Company may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a
Taxable Subsidiaries
Certain of the Company's subsidiaries are subject to U.S. federal and state corporate-level income taxes. As of March 31, 2024 and December 31, 2023, there were deferred tax assets of $
Note 9. Financial Highlights
The following is a schedule of financial highlights for the three months ended March 31, 2024 and 2023:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Per share data: |
|
|
|
|
|
|
||
Net asset value, beginning of period |
|
$ |
|
|
$ |
|
||
Results of operations: |
|
|
|
|
|
|
||
Net investment income (loss) (1) |
|
|
|
|
|
|
||
Net realized and unrealized gain (loss) (6) |
|
|
|
|
|
( |
) |
|
Net increase (decrease) in net assets resulting from operations (1) |
|
|
|
|
|
|
||
Shareholder distributions: (2) |
|
|
|
|
|
|
||
Distributions from net investment income |
|
|
( |
) |
|
|
( |
) |
Net decrease in net assets resulting from shareholder distributions |
|
|
( |
) |
|
|
( |
) |
Net asset value, end of period |
|
$ |
|
|
$ |
|
||
Shares outstanding, end of period |
|
|
|
|
|
|
||
Total return based on net asset value (3) |
|
|
% |
|
|
% |
||
Ratio/Supplemental Data: |
|
|
|
|
|
|
||
Net assets, end of period |
|
$ |
|
|
$ |
|
||
Ratio of net investment income (loss) to average net assets (4) |
|
|
% |
|
|
% |
||
Ratio of total expenses to average net assets (4) |
|
|
% |
|
|
% |
||
Ratio of net expenses to average net assets (4) |
|
|
% |
|
|
% |
||
Average debt outstanding |
|
$ |
|
|
$ |
|
||
Portfolio turnover |
|
|
% |
|
|
% |
||
Total amount of senior securities outstanding |
|
$ |
|
|
$ |
|
||
Asset coverage per unit (5) |
|
$ |
|
|
$ |
|
||
Note 10. Commitments and Contingencies
In the normal course of its business, the Company may enter into contracts that require it to make certain representations and warranties and which provide for general indemnifications. Given that these would involve future claims against the Company that have not yet been made, the Company’s potential exposure under these arrangements is unknown. Based upon past experience, management expects the risk of loss under these indemnification provisions to be remote.
From time to time, the Company may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with its portfolio companies. As of March 31, 2024, the Company is not aware of any pending or threatened litigation.
30
See Note 3 for a discussion of the Company's conditional reimbursement to the Adviser under the Expense Support Agreement.
The Company may, from time to time, enter into commitments to fund investments.
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Unfunded delayed draw term loan commitments |
|
$ |
|
|
$ |
|
||
Unfunded revolver obligations |
|
|
|
|
|
|
||
|
|
$ |
|
|
$ |
|
||
The Company maintains sufficient capacity to cover outstanding unfunded portfolio company commitments that the Company may be required to fund.
Note 11. Subsequent Events
Management has evaluated subsequent events through the date of issuance of these financial statements and has determined that there are no subsequent events outside the ordinary scope of business that require adjustment to, or disclosure in, the financial statements other than those disclosed below.
On April 1, 2024, the Company, in connection with its private placement of its common shares, issued
On
31
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The discussion and analysis contained in this section refers to our financial condition, results of operations and cash flows. The information contained in this section should be read in conjunction with the consolidated financial statements and notes thereto in this Quarterly Report. This discussion includes forward-looking statements that involve numerous risks and uncertainties and should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking Statements” set forth on page 1 of this Quarterly Report. Actual results could differ materially from those implied or expressed in any forward-looking statements. Except as otherwise indicated, the terms “we,” “us,” “our,” and the “Company” refer to Onex Direct Lending BDC Fund.
Overview
We are a Delaware statutory trust structured as a non-diversified, closed-end management investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for U.S. federal income tax purposes, we elected to be treated as a RIC under Subchapter M of the Code. To qualify as a RIC, we must, among other things, invest at least 70% of our total assets in “qualifying assets”, meet certain source-of-income and asset diversification requirements, and timely distribute to our shareholders generally at least 90% of our investment company taxable income for each year. As of March 31, 2024 and December 31, 2023, the total amount of non-qualifying assets to total assets was approximately 6.4% and 5.8%, respectively.
Our investment objective is to generate current income while preserving capital, and to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.
We invest primarily in high-quality senior secured first lien loans and other credit investments of “middle market companies” located in the United States. The Company defines “high-quality” as investments deemed by the Adviser, after diligence and underwriting, to have favorable risk-reward characteristics including, but not limited to, a low probability of default, favorable investment terms, and an appropriate capital structure to companies of high creditworthiness with stable cash flow generation. The Company may also seek to invest in the subordinated debt and equity, including warrants, options, convertible instruments, of middle market companies.
On August 25, 2021, we formed a wholly-owned blocker entity, Onex Direct Lending BDC Blocker LLC, which holds certain of our portfolio equity investments. On September 21, 2021, we formed a wholly-owned, special-purpose, bankruptcy-remote subsidiary, Onex Direct Lending BDC SPV, LLC, which holds certain of our portfolio loan investments that are used as collateral for the debt financing facility with Société Générale. On December 13, 2022, we formed a wholly-owned entity, Connect America OFDL BDC Holdings, LLC, which holds certain of our portfolio equity investments.
On October 1, 2021, we closed on our initial private offering and commenced operations. We conduct private offerings of our common shares to accredited investors and non-U.S. persons pursuant to a subscription agreement entered into with us.
We are externally managed by Onex Credit Advisor, LLC, a subsidiary of Onex Corporation, as investment adviser. The Adviser also serves as our administrator and provides administrative services necessary for us to operate.
Key Components of Our Results of Operations
Investments
Our level of investment activity can and does vary substantially from period to period depending on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment, the amount of capital we have available to us and the competitive environment for the type of investments we make.
Revenues
The principal measure of our financial performance is the net increase or decrease in net assets resulting from operations, which includes net investment income or loss and net realized and unrealized gain or loss on investments. Net investment income or loss is the difference between our income from interest, distributions, fees, and other investment income and our operating expenses, including interest expense. Net realized gain or loss on investments is the difference between the proceeds received from dispositions of portfolio investments and their amortized cost, including the respective realized gain or loss on foreign currency for any non-U.S. dollar denominated investment transactions. Net change in unrealized appreciation or depreciation on investments is the net change in the fair value of our investment portfolio, including the respective unrealized appreciation or depreciation on foreign currency for any non-U.S. dollar denominated investments.
32
We primarily generate revenue in the form of interest income from our investments in debt investments that consist primarily of senior and junior secured loans. Our debt investments are spread across multiple industries and geographic locations and, as such, we are broadly exposed to market conditions and business environments. As a result, although our investments are exposed to market risks, we continuously seek to limit concentration of exposure in any particular sector or issuer. Our debt investments typically have a term of five to 10 years, but the expected average life of such securities is generally between three and five years. The loans in which we invest will generally bear interest at a floating rate usually determined on the basis of a benchmark, such as SOFR, or an alternate base rate. In addition, some of our investments may provide for PIK interest. Such amounts of accrued PIK interest are added to the cost of the investment on the respective capitalization dates and generally become due at maturity of the investment or upon the investment being called by the issuer. To a lesser extent, we may also generate revenues in the form of dividends and other distributions on the equity or other securities we anticipate holding. In addition, we may generate revenues in the form of non-recurring commitment, closing, origination, structuring or diligence fees, fees for providing managerial assistance, consulting fees, prepayment fees and performance-based fees. Any such fees generated in connection with our investments will be recognized when earned.
Expenses
Our primary operating expenses include the payment of management and incentive fees, if any, and other expenses under the Investment Advisory Agreement, interest expense from financing arrangements, and other expenses necessary for our operations. The management and incentive fees will compensate the Adviser for its work in identifying, evaluating, negotiating, executing, monitoring and servicing our investments.
We reimburse the Administrator for expenses necessary to perform services related to our administration and operations, including the Adviser’s portion of the compensation and related expenses for certain personnel who provide administrative services. Such services include, among other things, clerical, bookkeeping and recordkeeping services, investor relations, performing or overseeing the performance of our corporate operations (which includes being responsible for the financial records that we are required to maintain and preparing reports for our shareholders and reports filed with the SEC), assisting us in calculating the net asset value per share, overseeing the preparation and filing of tax returns and the printing and dissemination of reports to our shareholders, compliance monitoring and generally overseeing the payment of our expenses and the performance of administrative and professional services rendered to us by others.
We will also bear all other costs and expenses of our operations, administration and transactions, including but not limited to:
33
We are obligated to reimburse the Adviser for expense payments made by the Adviser to us in connection with the Expense Support Agreement following any calendar quarter in which we have available operating funds. The amount of the reimbursement payment for any calendar quarter will be equal to the lesser of (i) the excess operating funds in such calendar quarter, and (ii) the aggregate amount of all expense payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser.
In addition, we and our Administrator have contracted with U.S. Bank N.A. to provide custodial and various accounting and administrative services, including but not limited to, preparing preliminary financial information for review by the Adviser, maintaining accounting and corporate books and records, processing trade information provided by us and performing testing in respect to RIC compliance.
We expect that our general and administrative expenses will increase in dollar terms during periods of asset growth, but will decline as a percentage of total assets during such periods.
Leverage
The amount of leverage we intend to use in any period depends on a number of factors, including cash on-hand available for investing, the cost of financing, general economic and market conditions. We are permitted to incur indebtedness as long as immediately after such incurrence we have an asset coverage ratio of at least 150%.
Portfolio and Investment Activity
As of March 31, 2024, we had investments in 29 portfolio companies with an aggregate fair value of $490.5 million. As of March 31, 2024 and December 31, 2023, the total amount of non-qualifying assets to total assets was approximately 6.4% and 5.8%, respectively.
Our investment activity for the three months ended March 31, 2024 and 2023 was as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Investments made in portfolio companies |
|
$ |
16,026,952 |
|
|
$ |
24,846,991 |
|
Investments repayments |
|
|
(59,389,830 |
) |
|
|
(3,268,069 |
) |
Net investment activity |
|
$ |
(43,362,878 |
) |
|
$ |
21,578,922 |
|
Portfolio companies at beginning of year or period |
|
|
30 |
|
|
|
28 |
|
Number of investments in new portfolio companies |
|
|
2 |
|
|
|
1 |
|
Number of exited portfolio companies |
|
|
3 |
|
|
|
— |
|
Portfolio companies at end of year or period |
|
|
29 |
|
|
|
29 |
|
Percentage of investment commitments at floating rates |
|
|
100.0 |
% |
|
|
100.0 |
% |
Percentage of investment commitments at fixed rates |
|
|
— |
|
|
|
— |
|
Weighted average contractual interest rate of investments based on par |
|
|
12.02 |
% |
|
|
11.43 |
% |
34
The following table summarizes our top ten portfolio companies and industries based on fair value as of March 31, 2024:
Portfolio Company |
|
% of Portfolio |
|
Industry |
|
% of Portfolio |
Foundation Risk Partners, Corp. |
|
5.9% |
|
Healthcare & Pharmaceuticals |
|
19.2% |
Medallia, Inc. |
|
5.2% |
|
High Tech Industries |
|
16.5% |
MIS Acquisition, LLC |
|
5.2% |
|
Business Services |
|
14.9% |
Connect America.com, LLC |
|
5.1% |
|
Consumer Goods: Durable |
|
10.1% |
Hy Cite Enterprises, LLC |
|
5.0% |
|
Consumer Goods: Non-durable |
|
8.5% |
MMS Bidco LLC |
|
5.0% |
|
Sovereign & Public Finance |
|
6.7% |
BCDI Meteor Acquisition, LLC |
|
5.0% |
|
Insurance |
|
5.9% |
SailPoint Technologies Holdings Inc. |
|
4.7% |
|
Transportation: Cargo |
|
4.2% |
Montana Buyer Inc. |
|
4.4% |
|
Wholesale |
|
2.7% |
APT Opco, LLC |
|
4.3% |
|
Construction & Building |
|
2.7% |
The following table summarizes our top ten portfolio companies and industries based on fair value as of December 31, 2023:
Portfolio Company |
|
% of Portfolio |
|
Industry |
|
% of Portfolio |
Foundation Risk Partners, Corp. |
|
5.5% |
|
Healthcare & Pharmaceuticals |
|
17.8% |
Hy Cite Enterprises, LLC |
|
5.0% |
|
High Tech Industries |
|
17.1% |
MIS Acquisition, LLC |
|
4.7% |
|
Business Services |
|
16.4% |
Connect America.com, LLC |
|
4.7% |
|
Consumer Goods: Durable |
|
9.6% |
Medallia, Inc. |
|
4.7% |
|
Consumer Goods: Non-durable |
|
7.9% |
MMS Bidco LLC |
|
4.6% |
|
Sovereign & Public Finance |
|
6.2% |
BCDI Meteor Acquisition, LLC |
|
4.6% |
|
Insurance |
|
5.5% |
SailPoint Technologies Holdings Inc. |
|
4.3% |
|
Transportation: Cargo |
|
3.8% |
Montana Buyer Inc. |
|
4.1% |
|
Automotive |
|
3.6% |
APT Opco, LLC |
|
4.0% |
|
Beverage, Food & Tobacco |
|
3.2% |
The industry composition of our portfolio at fair value at March 31, 2024 and December 31, 2023 was as follows:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Automotive |
|
|
— |
% |
|
|
3.6 |
% |
Beverage, Food & Tobacco |
|
|
2.4 |
% |
|
|
3.2 |
% |
Business Services |
|
|
14.9 |
% |
|
|
16.4 |
% |
Construction & Building |
|
|
2.7 |
% |
|
|
2.5 |
% |
Consumer Goods: Durable |
|
|
10.1 |
% |
|
|
9.6 |
% |
Consumer Goods: Non-durable |
|
|
8.5 |
% |
|
|
7.9 |
% |
Consumer Services |
|
|
2.4 |
% |
|
|
1.6 |
% |
Financial Services |
|
|
1.6 |
% |
|
|
— |
% |
Forest Products & Paper |
|
|
2.2 |
% |
|
|
2.0 |
% |
Healthcare & Pharmaceuticals |
|
|
19.2 |
% |
|
|
17.8 |
% |
High Tech Industries |
|
|
16.5 |
% |
|
|
17.1 |
% |
Insurance |
|
|
5.9 |
% |
|
|
5.5 |
% |
Sovereign & Public Finance |
|
|
6.7 |
% |
|
|
6.2 |
% |
Transportation: Cargo |
|
|
4.2 |
% |
|
|
3.8 |
% |
Wholesale |
|
|
2.7 |
% |
|
|
2.8 |
% |
Total Investments |
|
|
100.0 |
% |
|
|
100.0 |
% |
As of March 31, 2024 and December 31, 2023, our investments consisted of the following:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Amortized Cost |
|
|
Fair Value |
|
|
Amortized Cost |
|
|
Fair Value |
|
||||
Senior Secured Loans |
|
$ |
491,031,626 |
|
|
$ |
483,893,506 |
|
|
$ |
532,378,544 |
|
|
$ |
526,032,489 |
|
Equity |
|
|
9,585,173 |
|
|
|
6,620,994 |
|
|
|
9,585,173 |
|
|
|
7,033,311 |
|
Total Investments |
|
$ |
500,616,799 |
|
|
$ |
490,514,500 |
|
|
$ |
541,963,717 |
|
|
$ |
533,065,800 |
|
35
The following table shows the fair value of our performing and non-accrual investments as of March 31, 2024 and December 31, 2023:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||||||||||
|
|
Fair Value |
|
|
Percentage |
|
|
Fair Value |
|
|
Percentage |
|
||||
Performing |
|
$ |
490,514,500 |
|
|
|
100.0 |
% |
|
$ |
533,065,800 |
|
|
|
100.0 |
% |
Non-accrual |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Total Investments |
|
$ |
490,514,500 |
|
|
|
100.0 |
% |
|
$ |
533,065,800 |
|
|
|
100.0 |
% |
Results of Operations
Our operating results for the three months ended March 31, 2024 and 2023 were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Total investment income |
|
$ |
17,292,275 |
|
|
$ |
15,559,129 |
|
Net expenses |
|
|
9,052,289 |
|
|
|
8,359,104 |
|
Net investment income |
|
|
8,239,986 |
|
|
|
7,200,025 |
|
Net realized and unrealized gain (loss) |
|
|
(93,412 |
) |
|
|
(1,318,389 |
) |
Net increase in net assets resulting from operations |
|
$ |
8,146,574 |
|
|
$ |
5,881,636 |
|
Net investment income per common share—basic and diluted |
|
$ |
0.76 |
|
|
$ |
0.59 |
|
Net increase in net assets resulting from operations per common share—basic and diluted |
|
$ |
0.75 |
|
|
$ |
0.48 |
|
Net income can vary substantially from period-to-period due to various factors, including the level of new investment commitments, the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, comparisons of net increase in net assets resulting from operations may not be meaningful.
Investment Income
Investment income is primarily dependent on the composition and credit quality of our investment portfolio. Generally, we expect our debt investments to generate predictable, recurring interest income in accordance with the contractual terms of each loan. Corporate equity securities may pay a dividend and may increase in value for which a gain may be recognized; generally, such dividend payments and gains are less predictable than interest income on our loan portfolio.
Investment income for the three months ended March 31, 2024 and 2023 were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Interest income |
|
$ |
16,105,033 |
|
|
$ |
14,872,222 |
|
Payment-in-kind interest income |
|
|
602,748 |
|
|
|
340,667 |
|
Other income |
|
|
584,494 |
|
|
|
346,240 |
|
Total investment income |
|
$ |
17,292,275 |
|
|
$ |
15,559,129 |
|
Weighted average contractual interest rate on performing interest bearing investments |
|
|
12.02 |
% |
|
|
11.43 |
% |
Weighted average contractual interest rate on all interest bearing investments |
|
|
12.02 |
% |
|
|
11.43 |
% |
For the three months ended March 31, 2024 and 2023, we have generated interest income, including PIK, of $16.7 million and $15.2 million, respectively. Such revenues represent cash interest earned as well as non-cash income consisting of accretion of original issue discounts and PIK. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized. The level of interest income we receive is generally related to the principal balance of income-producing investments, multiplied by the contractual interest rates of our investments. Interest income increased primarily as a result of the increase in the size of our portfolio and increase in the weighted average yield of our portfolio. The average position size of our portfolio and weighted average yield of our portfolio at par at March 31, 2024 and 2023 were as follows:
|
|
March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Average position size of portfolio (in millions) |
|
$ |
12.2 |
|
|
$ |
14.1 |
|
Weighted average contractual interest rate of investments based on par |
|
|
12.02 |
% |
|
|
11.43 |
% |
Fee income, included in other income, is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and other non-recurring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees. Any such fees generated will be recognized as
36
earned. We expect the dollar amount of interest and any dividend income that we earn to increase as the size of our investment portfolio increases.
Expenses
Expenses for the three months ended March 31, 2024 and 2023 were as follows:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Management fee |
|
$ |
810,205 |
|
|
$ |
1,646,178 |
|
Incentive fee |
|
|
1,177,141 |
|
|
|
2,329,914 |
|
Administration fee |
|
|
250,000 |
|
|
|
278,000 |
|
Professional fees |
|
|
433,073 |
|
|
|
336,487 |
|
Trustees’ fees |
|
|
43,000 |
|
|
|
43,000 |
|
Interest and credit facility expense |
|
|
5,706,692 |
|
|
|
4,404,196 |
|
Other general and administrative expense |
|
|
132,178 |
|
|
|
221,329 |
|
Total Expenses |
|
|
8,552,289 |
|
|
|
9,259,104 |
|
Reimbursement of expense support |
|
|
500,000 |
|
|
|
— |
|
Incentive fee waiver |
|
|
— |
|
|
|
(900,000 |
) |
Net Expenses |
|
$ |
9,052,289 |
|
|
$ |
8,359,104 |
|
Total expenses, including reimbursement of expense support to the Adviser, were $9.1 million and $9.3 million for the three months ended March 31, 2024 and 2023, respectively. Prior to July 1, 2023, we paid our Adviser a management fee quarterly in arrears at an annual rate of 1.25% of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter. Beginning on July 1, 2023, we pay our Adviser a management fee quarterly in arrears at an annual rate of 1.25% of our net assets as of the end of the most recently completed calendar quarter; provided that the management fee shall not be greater than 1.25% of our total assets (excluding cash and cash equivalents) at the end of the most recently completed calendar quarter. We also pay our Adviser an incentive fee that consists of two components that are independent of each other, with the result that one component may be payable even if the other is not. The income component of the incentive fee will be the amount, if positive, equal to 15.0%, with respect to each Legacy Fee Quarter, and 12.5%, with respect to each Current Fee Quarter, of the aggregate net investment income before incentive compensation earned for the most recent calendar quarter and the preceding eleven calendar quarters (or if shorter, the number of calendar quarters that have occurred since commencement of operations), less aggregate income incentive compensation previously paid and/or waived with respect to the first eleven calendar quarters (or the portion thereof) included in the relevant trailing twelve quarters. The income component of the incentive fee is subject to a 7.0% hurdle on our net assets at the beginning of each applicable calendar quarter and subject to a cap of 15.0% during the relevant Legacy Fee Quarters and 12.5% during the relevant Current Fee Quarters of the cumulative net return comprising the relevant trailing twelve quarters. The capital gains component of the incentive fee will be the amount, if positive, equal to 15.0%, prior to October 1, 2023, and 12.5%, beginning October 1, 2023, of the aggregate realized capital gains (computed net of realized capital losses and unrealized capital depreciation, if any) for the most recent calendar quarter and the preceding eleven calendar quarters (or if shorter, the number of calendar quarters that have occurred since commencement of the fund), less capital gains incentive compensation previously paid in respect of the first eleven calendar quarters (or the portion thereof) included in the relevant trailing twelve quarters. We reimburse our Administrator for the allocable portion of the Adviser’s overhead and other expenses incurred by the Adviser and requested to be reimbursed by the Adviser in performing its obligations under the Administration Agreement, including rent and the allocable portion of the cost of our Chief Compliance Officer and Chief Financial Officer and their respective staffs.
Interest expense under the SPV Facility is based on the average debt outstanding. Interest expense increased primarily due to the increase in average principal amount of debt outstanding and weighted average interest rate as a result of the increase in SOFR.
On September 15, 2021, we entered into the Expense Support Agreement with the former adviser. Commencing with the fourth quarter of 2021 and on a quarterly basis thereafter, the Adviser may elect to pay certain of our expenses from time to time, which we will be obligated to reimburse to the Adviser at a later date if certain conditions are met. For the three months ended March 31, 2024, we reimbursed the adviser $0.5 million and the remaining balance of $0.9 million was permanently waived by the Adviser.
For the three months ended March 31, 2024 and 2023, the Adviser voluntarily waived incentive fees totaling $0 and $0.9 million, respectively.
We expect our operating expenses related to our ongoing operations to increase in the next several quarters because of the anticipated growth in the size of our asset base. We expect operating expenses as a percentage of our total assets to decrease during periods of asset growth.
37
Net Realized Gains or Losses
Our investments are generally purchased at a discount to par. We received principal repayments of $59.4 million and $3.3 million during the three months ended March 31, 2024 and 2023, from which we realized net gains totaling $1.1 million and $0.1 million, respectively. We recognized gains on partial principal repayments we received at par value.
The net realized gains (losses) from the sales, repayments or exits of investments for the three months ended March 31, 2024 and 2023 consisted of the following:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Sales, repayments or exits of investments |
|
$ |
59,389,830 |
|
|
$ |
3,268,069 |
|
Net realized gains (losses) on investments: |
|
|
|
|
|
|
||
Gross realized gains |
|
$ |
1,110,970 |
|
|
$ |
57,035 |
|
Gross realized losses |
|
|
— |
|
|
|
(1,003 |
) |
Net realized gains (losses) on investments |
|
$ |
1,110,970 |
|
|
$ |
56,032 |
|
The net realized gains on investments for the three months ended March 31, 2024 consisted of the following:
Portfolio Company |
|
Net Realized |
|
|
Crash Champions Intermediate, LLC |
|
$ |
515,255 |
|
Kelso Industries LLC |
|
|
317,799 |
|
Project Cloud Holdings, LLC |
|
|
145,620 |
|
Zips Car Wash, LLC |
|
|
62,308 |
|
Other |
|
|
69,988 |
|
Net realized gain (loss) on investments |
|
$ |
1,110,970 |
|
The net realized gains on investments for the three months ended March 31, 2023 consisted of the following:
Portfolio Company |
|
Net Realized |
|
|
Other, net |
|
$ |
56,032 |
|
Net realized gain (loss) on investments |
|
$ |
56,032 |
|
Net Change in Unrealized Appreciation or Depreciation
We value our portfolio investments quarterly and the changes in value are recorded as the change in unrealized appreciation or depreciation in our consolidated statements of operations. Net change in unrealized appreciation or depreciation on investments for the three months ended March 31, 2024 and 2023 consisted of the following:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Unrealized appreciation |
|
$ |
2,670,031 |
|
|
$ |
2,125,233 |
|
Unrealized depreciation |
|
|
(3,874,413 |
) |
|
|
(3,499,654 |
) |
Net change in unrealized appreciation (depreciation) on investments |
|
$ |
(1,204,382 |
) |
|
$ |
(1,374,421 |
) |
For the three months ended March 31, 2024, the net change in unrealized depreciation on investments was $1.2 million primarily driven by a net depreciation in loans and equity, compared to net change in unrealized depreciation on investments of $1.4 million for the three months ended March 31, 2023 primarily due to fair market depreciation of one equity investment.
38
The change in unrealized appreciation or depreciation on investments for the three months ended March 31, 2024 and 2023 consisted of the following:
|
|
Three Months Ended March 31, |
|
|||||
Portfolio Company |
|
2024 |
|
|
2023 |
|
||
Amplity Parent, Inc. |
|
$ |
(444,400 |
) |
|
$ |
(418,718 |
) |
Apryse Software Corp (fka PDFTron US Acquisition Corp.) |
|
|
23,774 |
|
|
|
32,452 |
|
APT Opco, LLC |
|
|
21,465 |
|
|
|
201,857 |
|
Atlas Intermediate III, L.L.C. |
|
|
— |
|
|
|
(42,948 |
) |
BCDI Meteor Acquisition, LLC |
|
|
143,456 |
|
|
|
22,671 |
|
BCP V Everise Acquisition LLC |
|
|
(23,826 |
) |
|
|
46,502 |
|
Bullhorn, Inc. |
|
|
51,692 |
|
|
|
122,433 |
|
Celerion Buyer, Inc. |
|
|
(20,622 |
) |
|
|
97,079 |
|
Connect America.com, LLC |
|
|
182,381 |
|
|
|
(173,846 |
) |
Crash Champions Intermediate, LLC |
|
|
(495,791 |
) |
|
|
55,046 |
|
Foundation Risk Partners, Corp. |
|
|
91,437 |
|
|
|
(152,415 |
) |
GS AcquisitionCo, Inc. |
|
|
109,437 |
|
|
|
76,056 |
|
Hy Cite Enterprises, LLC |
|
|
(76,987 |
) |
|
|
23,035 |
|
IEC Corporation |
|
|
— |
|
|
|
194,012 |
|
IMB Midco LLC (formerly, WSP Midco LLC) |
|
|
(1,970,788 |
) |
|
|
(1,587,628 |
) |
Jackson Paper Manufacturing Company |
|
|
(318,794 |
) |
|
|
98,278 |
|
Kelso Industries LLC |
|
|
7,955 |
|
|
|
— |
|
KeyData Associates Inc. |
|
|
155,377 |
|
|
|
(17,277 |
) |
Keystone Purchaser, LLC |
|
|
302,606 |
|
|
|
(26,049 |
) |
KUEHG Corp. |
|
|
(937 |
) |
|
|
— |
|
Medallia, Inc. |
|
|
159,678 |
|
|
|
(66,478 |
) |
Milestone Technologies, Inc. |
|
|
50,589 |
|
|
|
234,299 |
|
MIS Acquisition, LLC |
|
|
248,417 |
|
|
|
— |
|
MMS Bidco LLC |
|
|
36,164 |
|
|
|
220,586 |
|
Montana Buyer Inc. |
|
|
107,118 |
|
|
|
(19,840 |
) |
Pansophic Learning Ltd. |
|
|
(27,374 |
) |
|
|
(60,902 |
) |
Project Cloud Holdings, LLC |
|
|
157,377 |
|
|
|
— |
|
S4T Holdings Corp. |
|
|
16,884 |
|
|
|
246,267 |
|
SailPoint Technologies Holdings Inc. |
|
|
(20,773 |
) |
|
|
341,976 |
|
Spark DSO, LLC |
|
|
47,300 |
|
|
|
(11,825 |
) |
Steele Solutions, Inc. |
|
|
(271,348 |
) |
|
|
112,684 |
|
The Ultimus Group Midco, LLC |
|
|
(6,570 |
) |
|
|
— |
|
Wellful Inc. |
|
|
(196,203 |
) |
|
|
(507,272 |
) |
Zips Car Wash, LLC |
|
|
756,924 |
|
|
|
(414,456 |
) |
Net change in unrealized appreciation (depreciation) on investments |
|
$ |
(1,204,382 |
) |
|
$ |
(1,374,421 |
) |
During the three months ended March 31, 2024 and 2023, we recognized net unrealized gains (losses) on foreign currency of $(20.7) thousand and $32.7 thousand, respectively.
Net Increase in Net Assets Resulting from Operations
For the three months ended March 31, 2024 and 2023, the net increase in net assets resulting from operations was $8.1 million and $5.9 million or $0.75 and $0.48 per share, respectively.
Financial Condition, Liquidity and Capital Resources
Our liquidity and capital resources are generated from the net proceeds received from the issuance of our common shares from private placement offerings, as well as from proceeds from principal repayments, income earned on investments and cash equivalents, and borrowings from the credit facilities. We intend to continue to generate cash primarily from future offerings of shares of our common shares, future borrowings and cash flows from operations. We may from time to time enter into additional debt facilities or increase the size of existing facilities to borrow funds to make investments, including before we have fully invested the net proceeds from our private placement offering, to the extent we determine that additional capital would allow us to take advantage of additional investment opportunities, if the market for debt financing presents attractively priced debt financing opportunities, or if our Board determines that leveraging our portfolio would be in our best interests and the best interests of our shareholders. In accordance with the 1940 Act, with certain limited exceptions, we are allowed to incur borrowings, issue debt securities or issue preferred shares if immediately after the borrowing or issuance our ratio of total assets (less total liabilities other than indebtedness) to total indebtedness plus preferred shares, is at least 150%. As of March 31, 2024, our asset coverage ratio was 198.7%. We seek to carefully consider our unfunded commitments for the purpose of planning our capital resources and ongoing liquidity including our financial leverage.
39
Further, we maintain sufficient borrowing capacity within the 150% asset coverage limitation under the 1940 Act and the asset coverage limitation under our credit facility to cover any outstanding unfunded commitments we are required to fund.
The primary uses of cash, including the net proceeds from our issuance and sale of our common shares, are for investments in portfolio companies, repayment of indebtedness, if any, cash distributions to our shareholders, and the cost of operations.
As of March 31, 2024 we had $20.5 million in cash and cash equivalents on hand, plus $78.0 million and $80.0 million available to us under our borrowing facilities with Société Générale and Onex Credit Finance II Corporation, a subsidiary of the ultimate parent entity of the Adviser, respectively, which is expected to be sufficient for our investing activities and to conduct our operations in the foreseeable future. However, as the impact of current inflationary pressure on the economy and our business evolves, we will continue to assess our liquidity needs. A continued worldwide disruption due to inflationary pressures could materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments. In the event of a sustained market deterioration, we may need additional liquidity, which would require us to evaluate available alternatives and take appropriate actions.
Equity
We are authorized to issue an unlimited number of common shares at $0.001 par value per share.
The following table summarizes the total shares issued and proceeds received related to the placement of our common shares for the three months ended March 31, 2024:
Period Ended |
|
Shares Issued |
|
|
Proceeds Received |
|
||
March 31, 2024 |
|
|
21,853 |
|
|
$ |
532,335 |
|
|
|
|
21,853 |
|
|
$ |
532,335 |
|
The following table summarizes the total shares issued and proceeds received related to the placement of our common shares for the three months ended March 31, 2023:
Period Ended |
|
Shares Issued |
|
|
Proceeds Received |
|
||
March 31, 2023 |
|
|
44,339 |
|
|
$ |
1,088,965 |
|
|
|
|
44,339 |
|
|
$ |
1,088,965 |
|
In the first quarter of 2023, we began offering, and on a quarterly basis, intend to continue offering, to repurchase common shares on such terms as may be determined by the Board in its discretion. The Board has complete discretion to determine whether we will engage in any share repurchase, and if so, the terms of such repurchase. At the discretion of the Board, we may use cash on hand, cash available from borrowings, and cash from the sale of investments as of the end of the applicable period to repurchase shares.
All shares purchased by us pursuant to the terms of each offer to repurchase will be retired and thereafter will be authorized and unissued shares.
Any periodic repurchase offers are subject in part to our available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively. While we intend to continue to conduct quarterly tender offers as described above, we are not required to do so and may suspend or terminate the share repurchase program at any time.
The following table presents the share repurchases completed during the three months ended March 31, 2024:
Tender Offer |
|
Tender Offer Expiration |
|
Tender Offer |
|
|
Price Paid per Share |
|
|
Total Number of Shares Repurchased |
|
|
Maximum Number of Shares that may yet be purchased under the repurchase plan (1) |
|
||||
January 12, 2024 |
|
February 9, 2024 |
|
|
736,400 |
|
|
$ |
24.36 |
|
|
|
677,139 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
677,139 |
|
|
|
|
|||
40
The following table presents the share repurchases completed during the three months ended March 31, 2023:
Tender Offer |
|
Tender Offer Expiration |
|
Tender Offer |
|
|
Price Paid per Share |
|
|
Total Number of Shares Repurchased |
|
|
Maximum Number of Shares that may yet be purchased under the repurchase plan (1) |
|
||||
January 13, 2023 |
|
February 10, 2023 |
|
|
622,786 |
|
|
$ |
24.56 |
|
|
|
418,189 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
418,189 |
|
|
|
|
|||
Distributions and Dividend Reinvestment
We intend to continue to make quarterly distributions to our shareholders. To maintain our RIC status and avoid certain excise taxes imposed on RICs, we generally endeavor to distribute during each calendar year an amount at least equal to the sum of:
We may choose to carry forward taxable income in excess of current year distributions into the next tax year and pay a 4% excise tax on such income, to the extent required.
The amount of our declared distributions, as evaluated by management and approved by our Board, is based primarily on our evaluation of our net investment income and distributable taxable income.
The following table reflects the distributions declared on common shares and common shares issued pursuant to our distribution reinvestment plan for the three months ended March 31, 2024:
Date Declared |
|
Record Date |
|
Payment Date |
|
Amount Per Share |
|
|
Distribution Declared |
|
|
DRP Shares Issued |
|
|||
March 1, 2024 |
|
March 5, 2024 |
|
March 21, 2024 |
|
$ |
0.77 |
|
|
$ |
8,116,595 |
|
|
|
79,402 |
|
|
|
|
|
|
|
$ |
0.77 |
|
|
$ |
8,116,595 |
|
|
|
79,402 |
|
The following table reflects the distributions declared on common shares and common shares issued pursuant to our distribution reinvestment plan for the three months ended March 31, 2023:
Date Declared |
|
Record Date |
|
Payment Date |
|
Amount Per Share |
|
|
Distribution Declared |
|
|
DRP Shares Issued |
|
|||
March 2, 2023 |
|
March 2, 2023 |
|
March 23, 2023 |
|
$ |
0.58 |
|
|
$ |
7,007,486 |
|
|
|
178,875 |
|
|
|
|
|
|
|
$ |
0.58 |
|
|
$ |
7,007,486 |
|
|
|
178,875 |
|
Borrowings
We use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our shareholders by reducing our overall cost of capital. As a BDC, we are limited in the amount of leverage we can incur under the 1940 Act. We are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing. As of March 31, 2024 and December 31, 2023, our asset coverage ratio was 198.7% and 203.7%, respectively.
We expect to maintain adequate liquidity and compliance with regulatory and contractual asset coverage requirements.
41
Contractual Obligations
The following table shows the contractual maturities of our outstanding debt obligations as of March 31, 2024:
|
|
Payments due by Period |
|
|||||||||||||||||
Contractual Obligations |
|
Total |
|
|
Less than |
|
|
1 to 3 |
|
|
3 to 5 |
|
|
More than |
|
|||||
SPV Facility |
|
$ |
262,000,000 |
|
|
$ |
— |
|
|
$ |
262,000,000 |
|
|
$ |
— |
|
|
$ |
— |
|
Revolving OCF II Loan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
262,000,000 |
|
|
$ |
— |
|
|
$ |
262,000,000 |
|
|
$ |
— |
|
|
$ |
— |
|
The following table shows the contractual maturities of our outstanding debt obligations as of December 31, 2023:
|
|
Payments due by Period |
|
|||||||||||||||||
Contractual Obligations |
|
Total |
|
|
Less than |
|
|
1 to 3 |
|
|
3 to 5 |
|
|
More than |
|
|||||
SPV Facility |
|
$ |
263,000,000 |
|
|
$ |
— |
|
|
$ |
263,000,000 |
|
|
$ |
— |
|
|
$ |
— |
|
Revolving OCF II Loan |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total |
|
$ |
263,000,000 |
|
|
$ |
— |
|
|
$ |
263,000,000 |
|
|
$ |
— |
|
|
$ |
— |
|
The weighted average interest rate on the aggregate principal amount outstanding was 7.4% for the three months ended March 31, 2024 and 7.1% for the year ended December 31, 2023.
The ratio of total principal amount of debt outstanding to shareholders' equity as of March 31, 2024 was 1.01:1.00 compared to 0.96:1.00 as of December 31, 2023.
SPV Facility
We and our consolidated subsidiary, ODL SPV, are party to the “SPV Facility” with Société Générale, as initial lender and agent, and certain financial institutions that allows ODL SPV to borrow up to $340.0 million. Borrowings under the SPV Facility will bear interest at SOFR plus a spread of 1.75% or 2.40% based on certain conditions (or an alternative rate of interest for certain loans denominated in Canadian Dollars, Euros or Sterling). ODL SPV will also pay an unused commitment fee on the unused commitment amount at rate of (1) 1.00% if the amount drawn under the SPV Facility is less than the minimum commitment usage (the “Minimum Commitment Usage”) and (2) 0.40% if the amount drawn under the SPV Facility is greater than or equal to the Minimum Commitment Usage. The Minimum Commitment Usage is equal to (1) 0.0% for the first six months ended April 4, 2022; (2) 37.5% for the period from April 5, 2022 through June 27, 2022; (3) 75% for the period from June 28, 2022 through July 13, 2022; (4) $150.0 million for the period from July 14, 2022 through January 13, 2023; and (5) $255.0 million thereafter. The Company also pays a fee of 0.20% per annum on the outstanding balance under the SPV Facility beginning on July 14, 2022. The SPV Facility is secured by a lien on assets held by the ODL SPV and on any payments received by ODL SPV in respect of those assets. The SPV Facility terminates on October 2, 2026.
Revolving Loan Agreement
On September 8, 2022, we entered into the Revolving Onex Loan with the Onex Entity, whereby the Onex Entity could advance an Onex Loan to us with a maximum aggregate outstanding principal amount of $80.0 million and a maturity date with respect to each Onex Loan of the day falling two years after the funding of such Onex Loan. On May 5, 2023, we terminated the Revolving Onex Loan and entered into the Revolving OCF II Loan, whereby OCF II may advance an Onex Loan II to us with a maximum aggregate outstanding principal amount of $80.0 million and a maturity date with respect to each OCF II Loan of the day falling two years after the funding of such OCF II Loan. We are required to meet certain criteria, including a leverage ratio threshold, before OCF II is obligated to make a loan to us. The Revolving OCF II Loan is intended to provide us with the ability to fund investments, pay related costs and expenses, and for general corporate purposes. Amounts drawn under an OCF II Loan will bear interest at SOFR plus a spread of 2.60%.
Related Party Transactions
We have entered into certain contracts with affiliated or related parties. In particular, we entered into (1) an Investment Advisory Agreement with the Adviser to provide us with investment advisory services under which we pay our Adviser an annual base management fee based on our total assets, excluding cash and cash equivalents, and incentive fees based on our performance and (2) an administrative agreement with the Administrator to perform (or oversee, or arrange for, the performance of) the administrative services necessary to enable us to operate and under which we reimburse the Administrator for administrative expenses incurred on our behalf. See “Note 3. Related Party Transactions – Administration Agreement” and “– Investment Advisory Agreement” for a description of our obligations under these agreements. We also entered into an Expense Support Agreement with the Adviser, whereby the Adviser may elect to pay certain of our expenses from time to time, which we will be obligated to reimburse to the Adviser if certain conditions are met. We are obligated to reimburse the Adviser for expense payments made by the Adviser to us in connection
42
with the Expense Support Agreement following any calendar quarter in which we have available operating funds. The amount of the reimbursement payment for any calendar quarter will be equal to the lesser of (i) the excess operating funds in such calendar quarter, and (ii) the aggregate amount of all expense payments made by the Adviser to us within three years prior to the last business day of such calendar quarter that have not been previously reimbursed by us to the Adviser. See “Note 3. Related Party Transactions – Expense Support Agreement” for a description of our obligations under this agreement. We also entered into the Revolving Onex Loan with the Onex Entity, whereby the Onex Entity could advance amounts to us with a maximum aggregate outstanding principal amount of $80.0 million and a maturity date with respect to each Onex Loan of the day falling two years after the funding of such Onex Loan. On May 5, 2023, we terminated the Revolving Onex Loan and entered into the Revolving OCF II Loan, whereby OCF II may advance an Onex Loan II to us with a maximum aggregate outstanding principal amount of $80.0 million and a maturity date with respect to each OCF II Loan of the day falling two years after the funding of such OCF II Loan. We are required to meet certain criteria, including a leverage ratio threshold, before OCF II is obligated to make a loan to us. The Revolving OCF II Loan is intended to provide us with the ability to fund investments, pay related costs and expenses, and for general corporate purposes. Amounts drawn under the OCF II Loan will bear interest at SOFR plus a spread of 2.60%.
Off-Balance Sheet Arrangements
From time-to-time we are a party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the needs of our investment in portfolio companies. Such instruments include commitments to extend credit and may involve, in varying degrees, elements of credit risk in excess of amounts recognized on our balance sheet. Prior to extending such credit, we attempt to limit our credit risk by conducting extensive due diligence, obtaining collateral where necessary and negotiating appropriate financial covenants.
As of March 31, 2024 and December 31, 2023, the Company had the following outstanding commitments to fund investments in current portfolio companies:
|
|
March 31, 2024 |
|
|
December 31, 2023 |
|
||
Unfunded delayed draw term loan commitments |
|
$ |
3,494,159 |
|
|
$ |
3,926,790 |
|
Unfunded revolver obligations |
|
|
15,788,991 |
|
|
|
15,736,196 |
|
|
|
$ |
19,283,150 |
|
|
$ |
19,662,986 |
|
Recent Developments
On April 1, 2024, we issued, in connection with our private placement of our common shares, 158,415 common shares for an aggregate amount of $3.9 million.
On May 9, 2024, the Board declared a quarterly dividend of $0.70 per share for the Company’s shareholders of record as of May 14, 2024, payable on June 20, 2024.
Critical Accounting Estimates
The preparation of our consolidated financial statements in conformity with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Critical accounting policies are those that are both important to the presentation of our financial condition and results of operations and require management’s most difficult, complex, or subjective judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. Our critical accounting policies are those applicable to the basis of presentation, valuation of investments, and certain revenue recognition matters as discussed below. See Note 2 to our consolidated financial statements, “Significant Accounting Policies—Investments”, contained elsewhere herein.
Valuation of Portfolio Investments
The most significant estimate inherent in the preparation of our consolidated financial statements is the valuation of investments and the related amounts of unrealized appreciation and depreciation of investments recorded.
Value, as defined in Section 2(a)(41) of the 1940 Act, is (1) the market price for those securities for which a market quotation is readily available and (2) for all other securities and assets, fair value as determined in good faith by our Adviser, as “valuation designee,” pursuant to procedures approved by our Board. The Board has designated the Adviser as its “valuation designee” pursuant to Rule 2a-5 under the 1940 Act, and in that role the Adviser is responsible for performing fair value determinations relating to all of
43
our investments, including periodically assessing and managing any material valuation risks and establishing and applying fair value methodologies, in accordance with valuation policies and procedures that have been approved by the Board. Although the Board designated our Adviser as “valuation designee,” the Board ultimately is responsible for fair value determinations under the 1940 Act.
Our valuation policy is intended to provide a consistent basis for determining the fair value of the portfolio based on the nature of the security, the market for the security and other considerations including the financial performance and enterprise value of the portfolio company. Because of the inherent uncertainty of valuation, the Adviser determined values may differ significantly from the values that would have been used had a ready market existed for the investments, and the differences could be material.
Pursuant to ASC 946: Financial Services—Investment Companies (“ASC 946”), we reflect our investments on our balance sheet at their determined fair value with unrealized gains and losses resulting from changes in fair value reflected as a component of unrealized gains or losses on our statements of operations. Fair value is the amount that would be received to sell the investments in an orderly transaction between market participants at the measurement date (i.e., the exit price).
See Note 2 to the consolidated financial statements for the additional information about the level of market observability associated with investments carried at fair value.
We follow the provisions of ASC 820, which among other matters, requires enhanced disclosures about investments that are measured and reported at fair value. This standard defines fair value and establishes a hierarchal disclosure framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value and expands disclosures about assets and liabilities measured at fair value. ASC 820 defines “fair value” as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This fair value definition focuses on an exit price in the principle, or most advantageous market, and prioritizes, within a measurement of fair value, the use of market-based inputs (which may be weighted or adjusted for relevance, reliability and specific attributes relative to the subject investment) over entity-specific inputs. Market price observability is affected by a number of factors, including the type of investment and the characteristics specific to the investment. Investments with readily available active quoted prices or for which fair value can be measured from actively quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. Subsequent to the adoption of ASC 820, the FASB has issued various staff positions clarifying the initial standard (see Note 2 to the consolidated financial statements: “Significant Accounting Policies—Investments”).
We classify the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:
Investments for which market quotations are readily available are typically valued at the average bid and ask prices of such market quotes, which are generally obtained from independent pricing services, broker-dealers or market makers. To validate market quotes, we will utilize a number of factors to determine if the quotations are representative of fair value, including the source and number of the quotations. Debt and equity securities for which market quotations are not readily available or are deemed not to represent fair value, are valued at fair value as determined in good faith by the Adviser, in accordance with a valuation policy approved by the Board and a consistently applied valuation process. Accordingly, such investments go through our multi-step valuation process as described below. Investments purchased within the quarter before the valuation date and debt investments with remaining maturities of 60 days or less may each be valued at cost with interest accrued or discount accreted/premium amortized to the date of maturity (although they are typically valued at available market quotations), unless such valuation, in the judgment of the Adviser, does not represent fair value.
The Adviser undertakes a multi-step valuation process, which includes, among other procedures, the following:
44
As part of the valuation process, the Adviser may consider other information and may use valuation methods including but not limited to (i) market quotes for similar investments, (ii) recent trading activity, (iii) discounting forecasted cash flows of the investment, (iv) models that consider the implied yields from comparable debt, (v) third party appraisals, (vi) sale negotiations and purchase offers received from independent parties and (vii) estimated value of underlying assets to be received in any liquidation or restructuring.
As part of the valuation process, we will primarily use the “income approach” by using a present value technique that discounts the estimated contractual cash flows. Discount rates applied to estimated contractual cash flows for an underlying asset vary by specific investment, industry, priority and nature of the debt security and are assessed relative to leveraged loan and high-yield bond indices at the valuation date. The use of market indices as part of the valuation methodology is subject to adjustment for many factors, including priority, collateral used as security, structure, performance and other quantitative and qualitative attributes of the asset being valued. When an external event such as a purchase transaction, public offering or subsequent equity or debt sale occurs, the Board or its delegates will consider whether the pricing indicated by the external event corroborates its valuation.
When we determine our NAV as of the last day of a month that is not also the last day of a calendar quarter, we intend to update the value of securities with reliable market quotations to the most recent market quotation. For securities without reliable market quotations, the Adviser’s valuation team will generally value such assets at the most recent quarterly valuation unless the Adviser determines that a significant observable change has occurred since the most recent quarter end with respect to the investment (which determination may be as a result of a material event at a portfolio company, material change in market spreads, secondary market transaction in the securities of an investment or otherwise). If the Adviser’s valuation team determines such a change has occurred with respect to one or more investments, the Adviser’s valuation team will determine whether to update the value for each relevant investment, using positive assurance from an independent valuation firm where applicable in accordance with our valuation policy, pursuant to authority delegated by the Board.
A determination of fair value involves subjective judgments and estimates and depends on the facts and circumstances present at each valuation date. Due to the inherent uncertainty of determining fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of such investment may differ significantly from the values that would have been used had a readily available market value existed for such investments, and the differences could be material from the values that may ultimately be realized. Further, such investments are generally less liquid than publicly traded securities and may be subject to contractual and other restrictions on resale. If we were required to liquidate a portfolio investment in a forced or liquidation sale, it could realize amounts that are different from the amounts presented and such differences could be material.
In addition, changes in the market environment, including the impact of changes in broader market indices and credit spreads, and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected herein.
Revenue Recognition
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt securities with contractual PIK interest, which represents contractual interest accrued and added to the loan balance that generally becomes due at maturity, we will not accrue PIK interest if management determines that the PIK interest is not collectible. We do not accrue as a receivable interest on loans and debt securities if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, and market discount are capitalized and then we amortize such amounts as interest income. Upon the prepayment of a loan or debt security, any unamortized loan origination fees are recorded as interest income. We further record prepayment premiums on loans and debt securities as interest income when we receive such amounts.
Income Taxes
We elected to be treated for U.S. federal income tax purposes, and to qualify annually, as a RIC under the Code. To qualify for and maintain qualification as a RIC, we must, among other things, meet certain source-of-income and asset diversification
45
requirements, and make certain minimum distributions to shareholders. We will be subject to a 4% nondeductible U.S. federal excise tax on undistributed income. See “Note 2. Significant Accounting Policies – Income Taxes.”
46
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our business activities contain elements of market risks. We consider our principal market risks to be fluctuations in interest rates and the valuations of our investment portfolio. Managing these risks is essential to our business. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor these risks and thresholds by means of administrative and information technology systems and other policies and processes.
Uncertainty with respect to the economic effects of interest rates, inflation, the war between Russia and Ukraine, the war between Israel and Hamas, the lingering effects of the COVID-19 pandemic and other geopolitical events has introduced significant volatility in the financial markets, and the effect of the volatility could materially impact our market risks, including those listed below. For additional information concerning these risks and their potential impact on our business and our operating results, see “Risk Factors—Risks Related to Our Business and Structure—General economic conditions could adversely affect the performance of our investments,” “Risk Factors—Risks Related to Our Business and Structure—The failure of major financial institutions, namely banks, or sustained financial market illiquidity, could adversely affect our and/or our portfolio companies’ businesses and results of operations” and “Risk Factors—Risks Related to Our Business and Structure—The ongoing armed conflicts as a result of the Russian invasion of Ukraine and the war between Israel and Hamas may have a material adverse impact on us and our portfolio companies.” in our annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 6, 2024. We are subject to financial market risks, including interest rate risk and valuation risk. Accordingly, we have systems and procedures designed to identify and analyze our risks, to establish appropriate policies and thresholds and to continually monitor these risks and thresholds by means of administrative and information technology systems and other policies and processes.
Interest Rate Risk
Interest rate risk is defined as the sensitivity of our current and future earnings to interest rate volatility, variability of spread relationships, the difference in re-pricing intervals between our assets and liabilities and the effect that interest rates may have on our cash flows. Changes in the general level of interest rates can affect our net interest income, which is the difference between the interest income earned on interest earning assets and our interest expense incurred in connection with our interest-bearing debt and liabilities. Changes in interest rates can also affect, among other things, our ability to acquire and originate loans and securities and the value of our investment portfolio.
We intend to continue to fund portions of our investments with borrowings, and at such time, our net investment income will be affected by the difference between the rate at which we invest and the rate at which we borrow. Accordingly, we cannot assure you that a significant change in market interest rates will not have a material adverse effect on our net investment income. As of March 31, 2024 and December 31, 2023, 100% of the debt investments based on par value in our portfolio were at floating rates indexed to SOFR or PRIME, as was our outstanding debt.
The following table shows the estimated annualized impact on net investment income based on hypothetical base rate changes in interest rates on our loan portfolio and outstanding debt as of March 31, 2024 (considering interest rate floors and ceilings for floating rate instruments and assuming no changes in our investment and borrowing structure).
Basis Point Change |
|
Interest |
|
|
Interest |
|
|
Net |
|
|||
Up 300 Basis Points |
|
$ |
14,974,101 |
|
|
$ |
7,860,000 |
|
|
$ |
7,114,101 |
|
Up 200 Basis Points |
|
|
9,982,734 |
|
|
|
5,240,000 |
|
|
|
4,742,734 |
|
Up 100 Basis Points |
|
|
4,991,367 |
|
|
|
2,620,000 |
|
|
|
2,371,367 |
|
Down 100 Basis Points |
|
|
(4,991,367 |
) |
|
|
(2,620,000 |
) |
|
|
(2,371,367 |
) |
Down 200 Basis Points |
|
|
(9,982,734 |
) |
|
|
(5,240,000 |
) |
|
|
(4,742,734 |
) |
Down 300 Basis points |
|
|
(14,974,101 |
) |
|
|
(7,860,000 |
) |
|
|
(7,114,101 |
) |
The following table shows the estimated annualized impact on net investment income based on hypothetical base rate changes in interest rates on our loan portfolio and outstanding debt as of December 31, 2023 (considering interest rate floors and ceilings for floating rate instruments and assuming no changes in our investment and borrowing structure).
47
Basis Point Change |
|
Interest |
|
|
Interest |
|
|
Net |
|
|||
Up 300 Basis Points |
|
$ |
16,252,906 |
|
|
$ |
7,890,000 |
|
|
$ |
8,362,906 |
|
Up 200 Basis Points |
|
|
10,835,271 |
|
|
|
5,260,000 |
|
|
|
5,575,271 |
|
Up 100 Basis Points |
|
|
5,417,635 |
|
|
|
2,630,000 |
|
|
|
2,787,635 |
|
Down 100 Basis Points |
|
|
(5,417,635 |
) |
|
|
(2,630,000 |
) |
|
|
(2,787,635 |
) |
Down 200 Basis Points |
|
|
(10,835,271 |
) |
|
|
(5,260,000 |
) |
|
|
(5,575,271 |
) |
Down 300 Basis points |
|
|
(16,252,906 |
) |
|
|
(7,890,000 |
) |
|
|
(8,362,906 |
) |
Although we believe that this analysis is indicative of our existing sensitivity to interest rate changes, it does not adjust for potential changes in credit market, credit quality, the size and composition of the assets in our portfolio and other business developments that could affect our net income. Accordingly, no assurances can be given that actual results would not differ materially from the analysis above.
Valuation Risk
We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and we value these investments at fair value as determined in good faith by the Adviser under supervision of the Board in accordance with our valuation policy. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.
Inflation Risk
Certain of our portfolio companies are in industries that have been impacted by inflation. Recent inflationary pressures have increased the costs of labor, energy and raw materials and have adversely affected consumer spending, economic growth and our portfolio companies’ operations. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net assets resulting from operations. Additionally, the Federal Reserve has raised, and may in the future continue to raise, certain benchmark interest rates in an effort to combat inflation.
Item 4. Controls and Procedures.
Evaluation of disclosure controls and procedures
The Company’s management, under the supervision and with the participation of various members of management, including its Chief Executive Officer (“CEO”) and its Chief Financial Officer (“CFO”), has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) of the Securities Exchange Act of 1934 (the “Exchange Act”) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO have concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Acts recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosures as of the end of the period covered by this report.
Changes in internal control over financial reporting
There have been no changes in our internal control over financial reporting during the first quarter of 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
48
PART II – OTHER INFORMATION
Item 1. Legal Proceedings.
We are not currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of any such future legal or regulatory proceedings cannot be predicted with certainty, we do not expect that any such future proceedings will have a material effect upon our financial condition or results of operations.
Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed under Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. The risks described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 are not the only risks facing us. 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Refer to our Current Report on Form 8-K filed with the SEC on April 23, 2024 for information about unregistered sales of our equity securities during the quarter. Such issuances were part of a private offering pursuant to Section 4(a)(2) of the 1933 Act and Regulation D thereunder.
In the first quarter of 2023, the Company began offering, and on a quarterly basis, intends to continue offering, to repurchase up to 5% of the Company’s outstanding shares as of the close of the previous calendar quarter. Although the Company intends to offer to repurchase up to 5% of its common shares outstanding in each quarter, the Board has in the past, and may in the future, increase the size of the tender offer, if the Board determines such an increase to be in the best interest of the Company and its shareholders. The Board has complete discretion to determine whether we will offer to repurchase any of our common shares, and if so, the terms of such repurchase. At the discretion of the Board, we may use cash on hand, cash available from borrowings, and cash from the sale of investments as of the end of the applicable period to repurchase shares.
All shares purchased by us pursuant to the terms of each offer to repurchase will be retired and thereafter will be authorized and unissued shares.
Any periodic repurchase offers are subject in part to our available cash and compliance with the BDC and RIC qualification and diversification rules promulgated under the 1940 Act and the Code, respectively. While we intend to continue to conduct quarterly tender offers as described above, we are not required to do so and may suspend or terminate the share repurchase program at any time.
The following table presents the share repurchases completed during the three months ended March 31, 2024:
Tender Offer |
|
Tender Offer Expiration |
|
Tender Offer |
|
|
Price Paid per Share |
|
|
Total Number of Shares Repurchased |
|
|
Maximum Number of Shares that may yet be purchased under the repurchase plan (1) |
|
||||
January 12, 2024 |
|
February 9, 2024 |
|
|
736,400 |
|
|
$ |
24.36 |
|
|
|
677,139 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
677,139 |
|
|
|
|
|||
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
49
Item 5. Other Information.
During the three months ended March 31, 2024,
Item 6. Exhibits
The following exhibits are filed as part of this report or hereby incorporated by reference to exhibits previously filed with the SEC (and are numbered in accordance with Item 601 of Regulation S-K):
3.1 |
|
|
|
3.2 |
Amended and Restated Bylaws (incorporated by reference to the Exhibit 3.2(b) to the Company’s Form 10-K filed on March 6, 2024) |
|
|
10.1 |
Second Amended and Restated Investment Advisory Agreement, dated March 5, 2024 (incorporated by reference to the Exhibit 3.2(b) to the Company’s Form 10-K filed on March 6, 2024) |
|
|
10.2 |
Amended and Restated Administration Agreement, dated March 5, 2024 (incorporated by reference to the Exhibit 3.2(b) to the Company’s Form 10-K filed on March 6, 2024) |
|
|
10.3 |
Amendment No. 1 to Sub-Administration Agreement, dated March 6, 2024 (incorporated by reference to the Exhibit 3.2(b) to the Company’s Form 10-K filed on March 6, 2024) |
|
|
14.1 |
|
|
|
31.1 |
|
|
|
31.2 |
|
|
|
|
|
32.1 |
|
|
|
32.2 |
* Filed herewith.
50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
ONEX DIRECT LENDING BDC FUND |
|
|
|
|
|
May 9, 2024 |
|
By: |
/s/ Ronnie Jaber
|
|
|
Name: |
Ronnie Jaber |
|
|
Title: |
President, Chief Executive Officer and Chairperson of the Board of Trustees (Principal Executive Officer) |
|
|
|
|
May 9, 2024 |
|
By: |
/s/ Edward U. Gilpin
|
|
|
Name: |
Edward U. Gilpin |
|
|
Title: |
Chief Financial Officer and Treasurer (Principal Financial Officer) |
51