v3.26.1
DERIVATIVES
 6 Months Ended
Jun. 30, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVES
3.
DERIVATIVES

The Company enters into derivatives from time to time to help mitigate its interest rate risk exposure.

Interest Rate Swaps


In connection with the 2025 Notes (as defined in Note 6. Borrowings), the Class A-2 Notes and the Class B-2 Notes issued in the ABS V Securitization (as defined in Note 6. Borrowings), the Company entered into interest rate swap agreements with ING Capital Markets LLC (“ING”) to more closely align the interest rate of these liabilities with the Company's investment portfolio, which consists primarily of variable rate loans. The Company designated these interest rate swaps and the 2025 Notes, the Class A-2 Notes and the Class B-2 Notes as a qualifying fair value hedge accounting relationship. See Note 6. Borrowings for more information on the 2025 Notes, the Class A-2 Notes and the Class B-2 Notes. The outstanding interest rate swap contracts as of June 30, 2026 and December 31, 2025 were as follows:

 

As of June 30, 2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty

 

Hedged item

 

Company receives

 

Company pays

 

Maturity date

 

Notional amount

 

 

Unrealized appreciation

 

 

Unrealized depreciation

 

ING

 

Tranche A Notes

 

5.85%

 

3M SOFR+

 

2.512%

 

10/2/2028

 

$

62,500

 

 

$

-

 

 

$

(1,016

)

ING

 

Tranche B Notes

 

6.22%

 

3M SOFR+

 

2.8155%

 

10/2/2030

 

 

37,500

 

 

 

-

 

 

 

(911

)

ING

 

Tranche C Notes

 

5.85%

 

3M SOFR+

 

2.448%

 

10/2/2028

 

 

62,500

 

 

 

-

 

 

 

(929

)

ING

 

Tranche D Notes

 

6.22%

 

3M SOFR+

 

2.736%

 

10/2/2030

 

 

37,500

 

 

 

-

 

 

 

(793

)

ING

 

Class A-2 Notes

 

5.49%

 

3M SOFR+

 

1.974%

 

1/20/2029

 

 

179,350

 

 

 

-

 

 

 

(2,329

)

ING

 

Class B-2 Notes

 

7.24%

 

3M SOFR+

 

3.692%

 

1/20/2029

 

 

21,541

 

 

 

-

 

 

 

(279

)

 

 

 

 

 

 

 

 

 

 

 

 

$

400,891

 

 

$

-

 

 

$

(6,257

)

 

As of December 31, 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty

 

Hedged item

 

Company receives

 

Company pays

 

Maturity date

 

Notional amount

 

 

Unrealized appreciation

 

 

Unrealized depreciation

 

ING

 

Tranche A Notes

 

5.85%

 

3M SOFR+

 

2.512%

 

10/2/2028

 

$

62,500

 

 

$

-

 

 

$

(128

)

ING

 

Tranche B Notes

 

6.22%

 

3M SOFR+

 

2.8155%

 

10/2/2030

 

 

37,500

 

 

 

-

 

 

 

(230

)

ING

 

Tranche C Notes

 

5.85%

 

3M SOFR+

 

2.448%

 

10/2/2028

 

 

62,500

 

 

 

-

 

 

 

(23

)

ING

 

Tranche D Notes

 

6.22%

 

3M SOFR+

 

2.736%

 

10/2/2030

 

 

37,500

 

 

 

-

 

 

 

(99

)

 

 

 

 

 

 

 

 

 

 

 

 

$

200,000

 

 

$

-

 

 

$

(480

)

As a result of the Company’s designation as a hedging instrument in a qualifying fair value hedge accounting relationship, the Company is required to fair value the hedging instrument and the related hedged item, with the changes in the fair value of each being recorded in interest expense. For the three and six months ended June 30, 2026, the net unrealized gain (loss) related to the fair value hedge were $(12) and $22, respectively, which are included in interest expense and credit facility fees in the Consolidated Statements of Operations. There were no derivatives designated in a qualifying hedge accounting relationship for the three and six months ended June 30, 2025. The table below presents the components of the net unrealized gain (loss) related to the fair value hedge recognized for the hedging instrument, the interest rate swaps, the hedged items, the 2025 Notes, the Class A-2 Notes and the Class B-2 Notes, from derivatives designated in a qualifying hedge accounting relationship for the three and six months ended June 30, 2026 and 2025.

 

 

 

 

 

 

 

 

For the Three Months Ended June 30,

 

 

For the Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

Hedging instruments (Interest rate swaps)

 

$

(3,778

)

 

$

-

 

 

$

(5,777

)

 

$

-

 

Hedged items (2025 Notes, Class A-2 Notes and Class B-2 Notes)

 

 

3,766

 

 

 

-

 

 

 

5,799

 

 

 

-

 

Fair market value adjustments for hedge accounting recognized in interest expense

 

$

(12

)

 

$

-

 

 

$

22

 

 

$

-

 

The table below presents the carrying value of the 2025 Notes, the Class A-2 Notes and the Class B-2 Notes as of June 30, 2026 and December 31, 2025 that are designated in qualifying hedging relationships and the related cumulative hedging adjustment (increase (decrease)) from the current hedging relationships included in such carrying value:

 

 

 

As of June 30, 2026

 

 

As of December 31, 2025

 

 

 

Carrying Value

 

 

Cumulative Hedging Adjustment

 

 

Carrying Value

 

 

Cumulative Hedging Adjustment

 

Tranche A Notes

 

$

61,558

 

 

$

942

 

 

$

62,444

 

 

$

56

 

Tranche B Notes

 

 

36,664

 

 

 

836

 

 

 

37,359

 

 

 

141

 

Tranche C Notes

 

 

61,637

 

 

 

863

 

 

 

62,538

 

 

 

(38

)

Tranche D Notes

 

 

36,772

 

 

 

728

 

 

 

37,478

 

 

 

22

 

Class A-2 Notes

 

 

177,018

 

 

 

2,332

 

 

 

-

 

 

 

-

 

Class B-2 Notes

 

 

21,262

 

 

 

279

 

 

 

-

 

 

 

-

 

 

 

$

394,911

 

 

$

5,980

 

 

$

199,819

 

 

$

181

 

Offsetting Derivatives

In order to better define its contractual rights and to secure rights that will help the Company mitigate its counterparty risk, the Company has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) with its derivative counterparty, ING. The ISDA Master Agreement is a bilateral agreement between the Company and ING that governs over the counter derivatives, including interest rate swaps, and contains, among other things, collateral posting terms and netting provisions in the event of a default and/or termination event. The provisions of the ISDA Master Agreement with ING permits a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of ING.

For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Company and cash collateral received from ING, if any, is included in the Consolidated Statements of Assets and Liabilities as restricted cash. As of June 30, 2026 and December 31, 2025, there was $7,101 and $501, respectively, of collateral pledged for derivatives which is included in restricted cash and cash equivalents on the Consolidated Statements of Assets and Liabilities. The Company minimizes counterparty credit risk by only entering into agreements with counterparties that it believes to be of good standing and by monitoring the financial stability of those counterparties.

The following table is intended to provide additional information about the effect of the offsetting derivative contracts on the consolidated financial statements of the Company including: the location of those fair values on the Consolidated Statements of Assets and Liabilities, and the Company’s gross and net amount of assets and liabilities available for offset under netting arrangements as well as any related collateral received or pledged by the Company as of June 30, 2026 and December 31, 2025.

 

As of June 30, 2026

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty

 

Statement of Assets and Liabilities Location of
Amounts

 

Gross Amount of
Recognized Assets

 

 

Gross Amount of
Recognized
(Liabilities)

 

 

Net amounts presented
in the Consolidated
Statements of Assets and
Liabilities

 

 

Collateral
(Received) /
Pledged (1)

 

 

Net Amounts (2)

 

ING

 

Net unrealized depreciation on derivatives

 

$

-

 

 

$

(6,257

)

 

$

 

 

(6,257

)

 

$

7,101

 

 

$

-

 

 

 

As of December 31, 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Counterparty

 

Statement of Assets and Liabilities Location of
Amounts

 

Gross Amount of
Recognized Assets

 

 

Gross Amount of
Recognized
(Liabilities)

 

 

Net amounts presented
in the Consolidated
Statements of Assets and
Liabilities

 

 

Collateral
(Received) /
Pledged (1)

 

 

Net Amounts (2)

 

ING

 

Net unrealized depreciation on derivatives

 

$

-

 

 

$

(480

)

 

$

 

 

(480

)

 

$

501

 

 

$

-

 

 

(1)
The actual collateral pledged could be more than the amount shown due to over collateralization.
(2)
Represents the net amount due from/(to) counterparties in the event of default.

Exclusion of the Adviser from Commodity Pool Operator Definition

Engaging in commodity interest transactions such as swap transactions for the Company could cause the Adviser to fall within the definition of “commodity pool operator” under the Commodity Exchange Act (the “CEA”) and related Commodity Futures Trading Commission (“CFTC”) regulations. The Adviser has claimed an exclusion from the definition of the term “commodity pool operator” under the CEA and the CFTC regulations in connection with its management of the Company and, therefore, is not subject to CFTC registration or regulation under the CEA as a commodity pool operator with respect to its management of the Company.