v3.26.1
Fair Value Measurements
 6 Months Ended
Mar. 31, 2026
Fair Value Measurements [Abstract]  
Fair Value Measurements

Note 4. Fair Value Measurements

 

The Company follows ASC 820 for measuring the fair value of portfolio investments. Fair value is the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation models involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity.

 

The Company’s fair value analysis includes an analysis of the value of any unfunded loan commitments. Financial investments recorded at fair value in the consolidated financial statements are categorized for disclosure purposes based upon the level of judgment associated with the inputs used to measure their value. The valuation hierarchical levels are based upon the transparency of the inputs to the valuation of the investment as of the measurement date. Investments which are valued using NAV as a practical expedient are excluded from this hierarchy, and certain prior period amounts have been reclassified to conform to the current period presentation. The three levels are defined below: 

 

  ● Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities at the measurement date.

 

  ● Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

 

  ● Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

  

In addition to using the above inputs in investment valuations, the Company continues to employ a valuation policy approved by the board of directors that is consistent with ASC 820 (see Note 2). Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. 

 

The following table presents the fair value measurements of our investments, by major class according to the fair value hierarchy, as of March 31, 2026 (dollars in thousands): 

 

    Fair Value Hierarchy as of March 31, 2026  
Investments:   Level 1     Level 2     Level 3     Total  
Senior Secured First Lien Term Loans   $
-
     $ 18,485     $ 95,006     $ 113,491  
Senior Secured Notes    
-
       6,402       6,997       13,399  
Equity/Warrants     27,946      
-
       138,655       166,601  
Total   $ 27,946     $ 24,887     $ 240,658     $ 293,491  
Investments measured at net asset value(1)                             2,320  
Total Investments, at fair value                           $ 295,811  

 

(1) Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

The following table presents the fair value measurements of our investments, by major class according to the fair value hierarchy, as of September 30, 2025 (dollars in thousands): 

 

    Fair Value Hierarchy as of September 30, 2025  
Investments:   Level 1     Level 2     Level 3     Total  
Senior Secured First Lien Term Loans   $
-
     $ 27,586     $ 88,981     $ 116,567  
Senior Secured Notes    
-
       10,460       6,997       17,457  
Equity/Warrants     37,812      
-
       128,209       166,021  
Total   $ 37,812     $ 38,046     $ 224,187     $ 300,045  
Investments measured at net asset value(1)                             2,227  
Total Investments, at fair value                           $ 302,272  

 

(1) Certain investments that are measured at fair value using NAV have not been categorized in the fair value hierarchy. The fair value amounts presented in the table are intended to permit reconciliation of the fair value hierarchy to the amount presented in the Consolidated Statements of Assets and Liabilities.

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended March 31, 2026 (dollars in thousands):  

 

    Senior
Secured
First Lien
Term Loans		     Senior
Secured
Notes		     Equities/
Warrants		     Total  
Balance as of September 30, 2025   $ 88,981     $ 6,997     $ 128,209     $ 224,187  
Purchases and other adjustments to cost     14,574      
-
       12,989       27,509  
Sales (including repayments or maturities)     (3,835 )    
-
       (2,666 )     (6,501 )
Net realized gains/(losses) from investments     16      
-
       (66 )     (50 )
Net unrealized gains/(losses)     (4,730 )    
-
       189       (4,487 )
Transfer in/(out)    
-
      
-
      
-
      
-
  
Balance as of March 31, 2026   $ 95,006     $ 6,997     $ 138,655     $ 240,658  

 

The following table provides a reconciliation of the beginning and ending balances for investments that use Level 3 inputs for the six months ended March 31, 2025 (dollars in thousands): 

 

    Senior
Secured
First Lien
Term Loans		     Senior
Secured
Notes		     Equities/
Warrants		     Total  
Balance as of September 30, 2024   $ 68,987     $ 7,422     $ 63,881     $ 140,290  
Purchases and other adjustments to cost     46,455      
-
       75,473       121,928  
Sales (including repayments or maturities)     (19,625 )    
-
       (11,467 )     (31,092 )
Net realized gains/(losses) from investments     (1,388 )    
-
      
-
       (1,388 )
Net unrealized gains/(losses)     1,410      
-
       (1,736 )     (326 )
Transfer in/(out)    
-
      
-
      
-
      
-
  
Balance as of March 31, 2025   $ 95,839     $ 7,422     $ 126,151     $ 229,412  

 

Net change in unrealized gain (loss) for the six months ended March 31, 2026 and 2025 included in earnings related to Level 3 investments still held as of March 31, 2026 and 2025 was approximately $(4.4) million and $(0.1) million, respectively.

 

Purchases and other adjustments to cost include purchases of new investments at cost, effects of refinancing/restructuring, accretion/amortization of income from discount/premium on debt securities, and PIK.

 

Sales represent net proceeds received from investments sold, including any repayments or maturities.

 

A review of the fair value hierarchy classifications is conducted on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. Reclassifications impacting Level 3 of the fair value hierarchy are reported as transfers in/out of the Level 3 category as of the beginning of the quarter in which the reclassifications occur. During the six months ended March 31, 2026 and March 31, 2025, no investments were transferred in or out of Level 3.

The following table presents the quantitative information about Level 3 fair value measurements of our investments, as of March 31, 2026 (dollars in thousands): 

 

    Fair Value     Valuation
Methodology		   Unobservable
Input		   Range
(Weighted Average)		   Impact to
Valuation From
An Increase In
Input
Senior Secured First Lien Term Loans   $ 85,193     Income Approach   Market Yield   4.5% - 21.0% (11.3%)   Decrease
Senior Secured First Lien Term Loans     9,742     Market Approach   EBITDA Multiple   2.8x - 3.8x (3.3x)   Increase
Senior Secured First Lien Term Loans     71     Recent Transaction   Purchase Price   N/A   N/A
Senior Secured Notes     6,997     Cost Approach   Collateral Value   N/A   N/A
Equity/Warrants     85,199     Market Approach   EBITDA Multiple   1.1x - 14.0x (4.5x)   Increase
Equity/Warrants     36,796     Cost Approach   Replacement Cost   N/A   N/A
Equity/Warrants     6,655     Market Approach   Revenue Multiple   4.0x-5.0x (4.5x)   Increase
Equity/Warrants     9,905     Income Approach   Market Yield   7.6%-28.8% (16.5%)   Decrease
Equity/Warrants     100     Cost Approach   Collateral Value   N/A   N/A
Total   $ 240,658                  

 

The following table presents the quantitative information about Level 3 fair value measurements of our investments, as of September 30, 2025 (dollars in thousands):

 

    Fair Value     Valuation
Methodology		   Unobservable
Input		   Range
(Weighted Average)		   Impact to
Valuation From
An Increase In
Input
Senior Secured First Lien Term Loans   $ 74,485     Income Approach   Market Yield   3.3% - 14.5% (10.0%)   Decrease
Senior Secured First Lien Term Loans     13,428     Market Approach   EBITDA Multiple    1.8x - 2.8x (2.3x)   Increase
Senior Secured First Lien Term Loans     997     Market Approach   Market Spread   4.8% - 5.5% (5.1%)   Increase
Senior Secured First Lien Term Loans     71     Recent Transaction   Purchase Price   N/A   N/A
Senior Secured Notes     6,997     Cost Approach   Collateral Value   N/A   N/A
Equity/Warrants     78,255     Market Approach   EBITDA Multiple   1.3x - 13.0x (11.0x)   Increase
Equity/Warrants     37,181     Cost Approach   Replacement Cost   N/A   N/A
Equity/Warrants     3,948     Market Approach   Market Quote   N/A   N/A
Equity/Warrants     6,000     Market Approach   Revenue Multiple   2.5x-3.0x (2.8x)   Increase
Equity/Warrants     2,725     Income Approach   Market Yield   28.3% - 28.8% (28.5%)   Decrease
Equity/Warrants     100     Cost Approach   Collateral Value   N/A   N/A
Total   $ 224,187                  

 

The significant unobservable inputs used in the fair value measurement of the Company’s debt and derivative investments are market yields. Increases in market yields would result in lower fair value measurements.

 

The significant unobservable inputs used in the fair value measurement of the Company’s equity/warrants investments are comparable company multiples of revenue or EBITDA for the latest twelve months (“LTM”), next twelve months (“NTM”) or a reasonable period a market participant would consider. Increases in EBITDA multiples in isolation would result in higher fair value measurement.