11. Risks and Uncertainties

In the ordinary course of business, the Company may encounter significant credit, market and liquidity risks. Credit risk is the risk of default of investments including loans, securities or derivatives, as applicable, which result from a borrower’s or counterparty’s inability or unwillingness to make required or expected payments.

Market risk reflects adverse changes in the value of investments loans, securities or derivatives, as applicable, due to changes in interest rates, prevailing credit spreads, foreign currency exchange rates, general economic conditions, financial market conditions, domestic or international economic or political events (including wars, terrorist acts or security operations), developments or trends in any particular industry, natural disasters, pandemics or health crises and the financial condition of the obligors on the Company’s assets.

The Company’s borrowing capacity is subject to the ability of the financial institutions in the banking syndicate to fulfill their respective obligations under the revolving credit facilities.

Liquidity risk is the risk that the Company may not be able to sell assets when it desires to do so or to realize what it estimates to be their fair value in the event of a sale. Due to the nature of the Company’s strategy, the Company’s portfolio includes relatively illiquid investments having a greater amount of both market and credit risk than other investments. These investments trade in a limited market, may not be able to be immediately liquidated and can be involved in litigation or have regulatory restrictions. The value assigned to these investments may differ from the values that would have been used had a broader market for such investments existed or had such legal and regulatory circumstances not existed. The sale of illiquid assets and restricted securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or on the over-the-counter markets. Restricted securities may sell at a price lower than similar securities that are not subject to restriction on resale.

The Company invests in fixed income financial instruments. Until such investments are sold or matured, the Company is exposed to credit risk relating to whether the issuer will meet its obligation when it becomes due.

The Company may also invest in securities of companies and assets located outside of the United States (considered non-qualifying investments under Section 55(a) of the 1940 Act). The Company’s international investments are subject to the same risks associated with its United States investments as well as additional risks, such as fluctuations in foreign currency exchange rates, potentially adverse tax consequences and the burden of complying with foreign laws. The Company is subject to the risk of restrictions imposed by foreign governments on the repatriation of cash and to political or economic uncertainties as a result of investing in financial instruments issued in foreign countries. As a BDC, to remain in compliance with BDC regulatory requirements the Company will invest no more than 30% of the portfolio in non-qualifying assets.

There is no clearing house for bank loans and other interests, nor is there a depository for custody of any such interests. The processes by which these interests are cleared, settled and held in custody are individually negotiated between the parties to the transaction. This subjects the Company to operational risk to the extent that there are delays and failure in these processes. The Company invests in loans, including loans issued by or related to companies that are experiencing various forms of financial, operational, legal, and/or other distress or impairment. The Company’s investments may be noninterest bearing, unsecured, and/or subordinated to other claimants. Until the investments are sold or mature, the Company is exposed to credit risk relating to whether the obligor will meet its obligation when it comes due. The terms of the bank loans may require the Company to extend to a borrower additional credit, or provide funding for any undrawn amount of such bank loans at the request of the borrower. This exposes the Company to potential liabilities that are not reflected in the Consolidated Statement of Changes in Net Assets. Refer to Note 11 - "Commitments and Contingencies" for additional disclosure.