Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2026

6. Fair Value of Financial Instruments

Investments

The following tables present fair value measurements of investments as of March 31, 2026 and December 31, 2025:


	Fair Value Hierarchy at March 31, 2026
	Level 1		Level 2		Level 3		Total
First-lien debt investments	$	—	$	16,067	$	2,942,965	$	2,959,032
Second-lien debt investments		—		122		31,073		31,195
Mezzanine debt investments		—		—		63,752		63,752
Equity investments		14,826		10,767		125,399		150,992
Structured credit investments		—		93,805		—		93,805
Joint venture investments		—		—		14,665		14,665
Total investments at fair value	$	14,826	$	120,761	$	3,177,854	$	3,313,441
Interest rate swaps		—		4,728		—		4,728
Total	$	14,826	$	125,489	$	3,177,854	$	3,318,169


	Fair Value Hierarchy at December 31, 2025
	Level 1		Level 2		Level 3		Total
First-lien debt investments	$	—	$	28,204	$	2,956,297	$	2,984,501
Second-lien debt investments		—		222		30,456		30,678
Mezzanine debt investments		—		—		61,684		61,684
Equity investments		28,169		11,016		133,397		172,582
Structured credit investments		—		97,872		—		97,872
Total investments at fair value	$	28,169	$	137,314	$	3,181,834	$	3,347,317
Interest rate swaps		—		10,301		—		10,301
Total	$	28,169	$	147,615	$	3,181,834	$	3,357,618

Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfers occur.

The following tables present the changes in the fair value of investments for which Level 3 inputs were used to determine the fair value as of and for the three months ended March 31, 2026 and 2025:


	As of and for the Three Months Ended
	March 31, 2026
	First-lien debt investments			Second-lien debt investments			Mezzanine debt investments		Equity and structured credit investments			Joint venture investments		Total
Balance, beginning of period	$	2,956,297		$	30,456		$	61,684	$	133,397		$	—	$	3,181,834
Purchases or originations		148,095			—			—		9			14,665		162,769
Repayments / redemptions		(116,146	)		—			—		—			—		(116,146	)
Sales Proceeds		10			—			—		—			—		10
Paid-in-kind interest		3,873			1,136			1,667		—			—		6,676
Net change in unrealized gains (losses)		(53,390	)		38,849			367		(4,470	)		—		(18,644	)
Net realized gains (losses)		5			(39,489	)		—		(3,255	)		—		(42,739	)
Net amortization of discount on securities		4,221			121			34		—			—		4,376
Transfers within Level 3		—			—			—		—			—		—
Transfers into (out of) Level 3		—			—			—		(282	)		—		(282	)
Balance, End of Period	$	2,942,965		$	31,073		$	63,752	$	125,399		$	14,665	$	3,177,854

Dye & Durham, Ltd. was transferred out of Level 3 into Level 1 for fair value measurement purposes during the three months ended March 31, 2026, as a result of changes in the observability of inputs into the security valuation for these portfolio companies.


	As of and for the Three Months Ended
	March 31, 2025
	First-lien debt investments			Second-lien debt investments			Mezzanine debt investments			Equity and other investments			Total
Balance, beginning of period	$	3,287,829		$	18,535		$	39,091		$	139,586		$	3,485,041
Purchases or originations		143,772			15,357			12,740			2,721			174,590
Repayments / redemptions		(287,890	)		—			—			—			(287,890	)
Sales Proceeds		—			—			—			(1,557	)		(1,557	)
Paid-in-kind interest		3,292			805			1,055			81			5,233
Net change in unrealized gains (losses)		(8,324	)		(2,486	)		(728	)		746			(10,792	)
Net realized gains (losses)		24			—			—			375			399
Net amortization of discount on securities		6,095			89			21			—			6,205
Transfers within Level 3		—			—			—			—			—
Transfers into (out of) Level 3		—			—			—			—			—
Balance, End of Period	$	3,144,798		$	32,300		$	52,179		$	141,952		$	3,371,229

The following table presents information with respect to the net change in unrealized gains or losses on investments for which Level 3 inputs were used in determining fair value that are still held by the Company at March 31, 2026 and 2025:


	Net Change in Unrealized			Net Change in Unrealized
	Gains or (Losses)			Gains or (Losses)
	for the Three Months Ended			for the Three Months Ended
	March 31, 2026 on			March 31, 2025 on
	Investments Held at			Investments Held at
	March 31, 2026			March 31, 2025
First-lien debt investments	$	(50,872	)	$	(2,959	)
Second-lien debt investments		(640	)		(2,486	)
Mezzanine debt investments		367			(728	)
Equity and other investments		(4,470	)		746
Joint venture investments		—			—
Total	$	(55,615	)	$	(5,427	)

The following tables present the fair value of Level 3 Investments and the significant unobservable inputs used in the valuations as of March 31, 2026 and December 31, 2025. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair values.

          
         March 31, 2026

          
         Valuation

         Unobservable

         Range (Weighted

         Impact to Valuation
from an

          
         Fair Value

         Technique

         Input

         Average)

         Increase to Input

First-lien debt investments

2,942,965

Income approach (1)

Discount rate

7.1% — 25.0% (12.2%)

Decrease

Second-lien debt investments

31,073

Income approach

Discount rate

12.4% — 15.7% (14.8%)

Decrease

Mezzanine debt investments

63,752

Income approach (2)

Discount rate

8.0% — 12.1% (11.4%)

Decrease

Equity investments

125,399

Market Multiple (3)

Comparable multiple

1.5x — 20.0x (10.9x)

Increase

Joint venture investments

14,665

Income approach (4)

Discount rate

—

Decrease

Total

3,177,854

(1)

Includes $105.6 million of debt investments which were valued using an asset valuation waterfall.

(2)

Includes $0.1 million of debt investments which were valued using an asset valuation waterfall.

(3)

Includes $15.1 million of equity investments which were valued using an asset valuation waterfall and $20.4 million of equity investments which were valued using a discounted cash flow analysis.

(4)

Includes $14.7 million of joint venture investments which, due to the proximity of the transactions relative to the measurement date, were valued using the cost of the investments.

          
         December 31, 2025

          
         Valuation

         Unobservable

         Range (Weighted

         Impact to Valuation
from an

          
         Fair Value

         Technique

         Input

         Average)

         Increase to Input

First-lien debt investments

2,956,297

Income approach (1)

Discount rate

6.6% — 17.5% (11.0%)

Decrease

Second-lien debt investments

30,456

Income approach

Discount rate

12.5% — 15.3% (14.2%)

Decrease

Mezzanine debt investments

61,684

Income approach (2)

Discount rate

10.8% — 20.0% (11.1%)

Decrease

Equity and other investments

133,397

Market Multiple (3)

Comparable multiple

1.8x — 25.0x (10.4x)

Increase

Total

3,181,834

(1)

Includes $105.9 million of debt investments which were valued using an asset valuation waterfall.

(2)

Includes $0.1 million of debt investments which were valued using an asset valuation waterfall.

(3)

Includes $13.1 million of equity investments which were valued using an asset valuation waterfall and $20.1 million of equity investments using a discounted cash flow analysis.

The Company typically determines the fair value of its performing Level 3 debt investments utilizing a yield analysis. In a yield analysis, a price is ascribed for each investment based upon an assessment of current and expected market yields for similar investments and risk profiles. Additional consideration is given to the expected life, portfolio company performance since close, and other terms and risks associated with an investment. Among other factors, a determinant of risk is the amount of leverage used by the portfolio company relative to the total enterprise value of the company, and the rights and remedies of our investment within each portfolio company’s capital structure.

Significant unobservable quantitative inputs typically considered in the fair value measurement of the Company’s Level 3 debt investments primarily include current market yields, including relevant market indices, but may also include quotes from brokers, dealers, and pricing services as indicated by comparable investments. If debt investments are credit impaired, an enterprise value analysis may be used to value such debt investments; however, in addition to the methods outlined above, other methods such as a liquidation or wind-down analysis may be utilized to estimate enterprise value. For the Company’s Level 3 equity investments, multiples of similar companies’ revenues, earnings before income taxes, depreciation and amortization (“EBITDA”) or some combination thereof and comparable market transactions are typically used.

Structured Credit Partners JV, LLC (“SCP”)

On December 23, 2025, affiliates of Sixth Street, including us, and affiliates of Carlyle entered into the Limited Liability Company Agreement to co-manage SCP, a joint venture focused on investing in broadly syndicated first lien senior secured loans, financed with long-term, non-mark-to-market, and predominantly investment grade rated CLO debt managed by affiliates of Sixth Street or Carlyle on a no-fee basis.

Sixth Street affiliates own 50.0% of the equity interests in SCP and Carlyle affiliates own 50.0%, with investment decisions requiring approval by representatives of both the Sixth Street affiliates and the Carlyle affiliates. Equity contributions will be called from each member on a pro-rata basis, based on their equity commitments. Funding of such commitments requires the approval of

SCP’s board of managers, including the board members appointed by the Company. SCP’s board of managers consists of an equal number of representatives appointed by the Sixth Street-affiliated members of SCP and the Carlyle-affiliated members of SCP. Portfolio construction and investment decisions must be unanimously approved by SCP’s investment committee, as delegated by the board of managers of SCP. Our investment in SCP is made with certain of our affiliates in accordance with the terms of the exemptive relief that we received from the SEC. Because the Company does not own more than 25% of the voting interests of SCP, the Company does not believe that it has control over SCP for accounting purposes under U.S. GAAP or for purposes of the 1940 Act and therefore, does not consolidate SCP.

As of March 31, 2026 SCP had total capital commitments of $600.0 million comprised of $200.0 million of capital commitments from Sixth Street Specialty Lending, Inc., $100.0 million of capital commitments from Sixth Street Lending Partners, $150.0 million of capital commitments from Carlyle Secured Lending, Inc., and $150.0 million of capital commitments from Carlyle Credit Solutions, Inc., with all members of SCP having equal voting control.

As of March 31, 2026, SCP had the following contributed capital and unfunded commitments from its members:


	March 31, 2026
Total contributed capital by Sixth Street Specialty Lending Inc.	$	14,665
Total contributed capital by Sixth Street Lending Partners		7,335
Total contributed capital by Carlyle		22,000
Total contributed capital	$	44,000
Total unfunded commitments by Sixth Street Specialty Lending Inc.		185,336
Total unfunded commitments by Sixth Street Lending Partners		92,666
Total unfunded commitments by Carlyle		278,002
Total unfunded commitments	$	556,004

As of March 31, 2026, SCP had three wholly owned subsidiaries: (i) Carlyle US CLO 2026-A, Ltd., a Cayman Islands corporation, formed on December 23, 2025; (ii) Carlyle US CLO 2026-B, Ltd., a Cayman Islands corporation, formed on January 5, 2026 and (iii) Sixth Street SCP Warehouse 2, Ltd., a Cayman Islands corporation, formed on January 14, 2026. Each subsidiary primarily invests in broadly syndicated loans. As the subsidiaries are wholly owned subsidiaries, they are consolidated in SCP’s unaudited consolidated financial statements commencing from the date of their respective formation.

Below is selected consolidated balance sheet information for SCP as of March 31, 2026:


	March 31, 2026
Selected Consolidated Balance Sheet Information:
Assets
Investments at fair value (amortized cost of $1,033,006)	$	1,028,239
Cash and cash equivalents (1)		12,389
Prepaid expenses and other assets		4,042
Total Assets	$	1,044,670
Liabilities and Members' Equity
Secured borrowings	$	320,581
Dividend payable		670
Accrued expenses and other liabilities		684,707
Members equity (2)		38,712
Total Liabilities and Members' Equity	$	1,044,670

(1)

As of March 31, 2026, none of SCP’s cash and cash equivalents was restricted.

(2)

As of March 31, 2026, the fair value of the Company’s ownership interest in the members’ equity was $14,665.

Below is selected consolidated statement of operations information for SCP for the three months ended March 31, 2026:


	Three Months Ended
	March 31, 2026
Selected Consolidated Statement of Operations Information:
Total Investment Income	$	1,450
Expenses
Interest expense		531
Other expenses		800
Total expenses		1,331
Net Investment Income		119
Net change in unrealized gains (losses) on investments		(4,767	)
Net realized gains (losses) on investments		30
Increase (Decrease) in Net Assets Resulting from Operations	$	(4,618	)

For the three months ended March 31, 2026, SCP declared $0.7 million in distributions, of which $0.2 million was recognized as dividend income in the Company’s Unaudited Statements of Operations. As of March 31, 2026, the daily weighted average yield on our investment in Structured Credit Partners JV, LLC was 10.7%.

Below is a summary of SCP’s portfolio as of March 31, 2026:


	March 31, 2026
Senior secured loans (1)	$	1,044,693
Weighted average yield on senior secured loans at amortized cost		6.92	%
Weighted average yield on senior secured loans at fair value		6.95	%
Weighted average spread on senior secured loans		2.89	%
Number of portfolio companies in SCP		334
Percentage of loans at floating interest rates		100.0	%

(1)

At par amount

The industry composition of SCP’s portfolio at fair value as of March 31, 2026 is as follows:


	March 31, 2026
	Amortized Cost		Fair Value		% of Fair Value
Aerospace & Defense	$	40,712	$	40,659		3.9	%
Auto Aftermarket & Services		30,623		30,497		3.0	%
Beverage & Food		32,615		32,606		3.2	%
Business Services		130,746		130,199		12.6	%
Capital Equipment		59,961		59,813		5.8	%
Chemicals, Plastics & Rubber		21,009		20,809		2.0	%
Construction & Building		41,280		40,894		4.0	%
Consumer goods: Durable		16,495		16,416		1.6	%
Consumer goods: Non-durable		13,240		13,156		1.3	%
Consumer Services		84,546		84,303		8.2	%
Containers, Packaging & Glass		30,493		30,035		2.9	%
Diversified Financial Services		121,301		120,611		11.7	%
Energy: Electricity		5,451		5,436		0.5	%
Energy: Oil & Gas		15,418		15,414		1.5	%
Environmental Industries		8,720		8,742		0.9	%
Forest Products & Paper		5,386		5,130		0.5	%
Healthcare & Pharmaceuticals		60,156		60,096		5.8	%
High Tech Industries		72,970		72,589		7.1	%
Leisure Products & Services		66,587		66,372		6.5	%
Media: Advertising, Printing & Publishing		12,110		12,118		1.2	%
Media: Broadcasting & Subscription		2,723		2,717		0.3	%
Media: Diversified & Production		21,050		21,072		2.0	%
Metals & Mining		3,981		3,975		0.4	%
Retail		22,661		22,493		2.2	%
Telecommunications		10,481		10,454		1.0	%
Transportation: Cargo		5,198		5,184		0.5	%
Transportation: Consumer		19,309		19,194		1.9	%
Utilities: Electric		3,187		3,202		0.3	%
Utilities: Oil & Gas		1,954		1,948		0.2	%
Wholesale		72,643		72,105		7.0	%
Total	$	1,033,006	$	1,028,239		100.0	%

The geographic composition of SCP’s portfolio at fair value as of March 31, 2026 is as follows:


	March 31, 2026
	Amortized Cost		Fair Value		% of Fair Value
Australia	$	1,855	$	1,849		0.2	%
Bermuda		1,359		1,386		0.1	%
Canada		11,106		11,021		1.1	%
Denmark		589		587		0.1	%
Germany		15,050		15,048		1.4	%
Hong Kong		3,210		3,174		0.3	%
Luxembourg		19,525		19,446		1.9	%
Netherlands		13,418		13,314		1.3	%
United Kingdom		15,189		15,126		1.5	%
United States		951,705		947,288		92.1	%
Total	$	1,033,006	$	1,028,239		100.0	%

Financial Instruments Not Carried at Fair Value

Debt

The fair value of the Company’s Revolving Credit Facility, which is categorized as Level 3 within the fair value hierarchy, as of March 31, 2026 and December 31, 2025, approximates its carrying value as the outstanding balance is callable at carrying value.

The following table presents the fair value of the Company’s 2026 Notes, 2028 Notes, 2029 Notes and 2030 Notes as of March 31, 2026 and December 31, 2025.


	March 31, 2026				December 31, 2025
	Outstanding Principal		Fair Value (1)		Outstanding Principal		Fair Value (1)
2026 Notes	$	300,000	$	297,152	$	300,000	$	296,659
2028 Notes		300,000		306,794		300,000		314,473
2029 Notes		350,000		351,822		350,000		361,359
2030 Notes		300,000		294,065		300,000		303,186
Total	$	1,250,000	$	1,249,833	$	1,250,000	$	1,275,677

(1)

The fair value is based on broker quotes received by the Company and is categorized as Level 2 within the fair value hierarchy.

Other Financial Assets and Liabilities

The carrying amounts of the Company’s assets and liabilities, other than investments at fair value and the 2026 Notes, 2028 Notes, 2029 Notes and 2030 Notes, approximate fair value due to their short maturities or their close proximity of the originations to the measurement date. Under the fair value hierarchy, cash and cash equivalents are classified as Level 1 while the Company’s other assets and liabilities, other than investments at fair value and Revolving Credit Facility, are classified as Level 2.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 820
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-Topic 820
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Reference 11: http://www.xbrl.org/2003/role/disclosureRef
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 940
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-Paragraph 1
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+ Details