| Derivatives |
Note 5. Derivatives
The Company enters into derivatives from time to time to help mitigate its foreign currency and interest rate risk exposures. Forward Currency Contracts The outstanding forward currency contracts as of June 30, 2026 and September 30, 2025 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of June 30, 2026 | | | | | | | | | | | | | | Counterparty | | Currency to be sold | | Currency to be purchased | | Settlement date | | Unrealized appreciation | | Unrealized depreciation | | Macquarie Bank Limited | | € | 33,000 | | EUR | | $ | 38,801 | | USD | | 4/19/2027 | | $ | 605 | | | $ | — | | | | | | | | | | | | $ | 605 | | | $ | — | | | | | | | | | | | | | | | | Morgan Stanley Capital Services LLC | | € | 14,700 | | EUR | | $ | 16,580 | | USD | | 4/9/2027 | | $ | — | | | $ | (405) | | | Morgan Stanley Capital Services LLC | | £ | 33,200 | | GBP | | $ | 42,765 | | USD | | 4/15/2027 | | — | | | (1,236) | | | | | | | | | | | | $ | — | | | $ | (1,641) | | | | | | | | | | | | | | | | Regions Bank | | £ | 14,000 | | GBP | | $ | 18,623 | | USD | | 10/28/2026 | | $ | 57 | | | $ | — | | | Regions Bank | | £ | 3,500 | | GBP | | $ | 4,426 | | USD | | 11/16/2026 | | — | | | (213) | | | Regions Bank | | € | 22,000 | | EUR | | $ | 24,053 | | USD | | 12/16/2026 | | — | | | (1,233) | | | Regions Bank | | € | 6,400 | | EUR | | $ | 6,936 | | USD | | 12/24/2026 | | — | | | (421) | | | Regions Bank | | € | 24,300 | | EUR | | $ | 27,574 | | USD | | 4/14/2027 | | — | | | (515) | | | Regions Bank | | € | 37,000 | | EUR | | $ | 43,453 | | USD | | 5/27/2027 | | 554 | | | — | | | Regions Bank | | £ | 16,900 | | GBP | | $ | 22,980 | | USD | | 6/16/2027 | | 539 | | | — | | | Regions Bank | | € | 11,200 | | EUR | | $ | 13,483 | | USD | | 6/16/2027 | | 473 | | | — | | | | | | | | | | | | $ | 1,623 | | | $ | (2,382) | | | | | | | | | | | | | | | | SMBC Capital Markets, Inc. | | A$ | 4,000 | | AUD | | $ | 2,796 | | USD | | 6/15/2028 | | $ | 49 | | | $ | — | | | | | | | | | | | | $ | 49 | | | $ | — | | | | | | | | | | | | | | | As of September 30, 2025 | | | | | | | | | | | | | | Counterparty | | Currency to be sold | | Currency to be purchased | | Settlement date | | Unrealized appreciation | | Unrealized depreciation | | Macquarie Bank Limited | | € | 33,000 | | EUR | | $ | 38,801 | | USD | | 4/19/2027 | | $ | — | | | $ | (853) | | | | | | | | | | | | $ | — | | | $ | (853) | | | | | | | | | | | | | | | | Morgan Stanley Capital Services LLC | | € | 14,700 | | EUR | | $ | 16,580 | | USD | | 4/9/2027 | | $ | — | | | $ | (1,045) | | | Morgan Stanley Capital Services LLC | | £ | 33,200 | | GBP | | $ | 42,765 | | USD | | 4/15/2027 | | — | | | (1,590) | | | | | | | | | | | | $ | — | | | $ | (2,635) | | | | | | | | | | | | | | | | Regions Bank | | £ | 3,500 | | GBP | | $ | 4,426 | | USD | | 11/16/2026 | | $ | — | | | $ | (267) | | | Regions Bank | | € | 22,000 | | EUR | | $ | 24,053 | | USD | | 12/16/2026 | | — | | | (2,288) | | | Regions Bank | | € | 6,400 | | EUR | | $ | 6,936 | | USD | | 12/24/2026 | | — | | | (729) | | | Regions Bank | | € | 24,300 | | EUR | | $ | 27,574 | | USD | | 4/14/2027 | | — | | | (1,637) | | | Regions Bank | | € | 37,000 | | EUR | | $ | 43,453 | | USD | | 5/27/2027 | | — | | | (1,089) | | | Regions Bank | | £ | 16,900 | | GBP | | $ | 22,980 | | USD | | 6/16/2027 | | 388 | | | — | | | Regions Bank | | € | 11,200 | | EUR | | $ | 13,483 | | USD | | 6/16/2027 | | — | | | (9) | | | | | | | | | | | | $ | 388 | | | $ | (6,019) | |
The impact of forward currency contracts not designated as an effective hedge accounting relationship for the three and nine months ended June 30, 2026 and 2025 on the Consolidated Statements of Operations, including realized and unrealized gains (losses) is summarized in the table below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Realized gain (loss) on forward currency contracts recognized in income | | | | Risk exposure category | | Three months ended June 30, | | | | Nine months ended June 30, | | | | | 2026 | | 2025 | | | | | | 2026 | | 2025 | | | | Foreign exchange | | $ | — | | | $ | — | | | | | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | Change in unrealized appreciation (depreciation) on forward currency contracts recognized in income | | | | Risk exposure category | | Three months ended June 30, | | | | Nine months ended June 30, | | | | | 2026 | | 2025 | | | | | | 2026 | | 2025 | | | | Foreign exchange | | $ | 1,515 | | | $ | (12,446) | | | | | | | $ | 7,373 | | | $ | (12,744) | | | |
The following table is a summary of the average outstanding daily volume for forward currency contracts for the three and nine months ended June 30, 2026 and 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Average U.S. Dollar notional outstanding | | Three months ended June 30, | | Nine months ended June 30, | | | | | 2026 | | 2025 | | 2026 | | 2025 | | | | Forward currency contracts | | $ | 260,165 | | | $ | 179,933 | | | $ | 258,064 | | | $ | 92,670 | | | |
Interest Rate Swaps
In connection with the 2027 Tranche A Notes, 2028 Notes, 2029 Notes, 2030 Notes and 2031 Notes (each as defined in Note 7), the Company entered into interest rate swap agreements with Macquarie Bank Limited (“Macquarie”), SMBC Capital Markets, Inc. (“SMBC”), Regions Bank (“Regions”), Morgan Stanley Capital Services LLC (“Morgan Stanley”) and BNP Paribas (“BNP”) to more closely align the interest rate of such liability with its investment portfolio, which consists primarily of floating rate loans. The Company designated these interest rate swaps and the 2027 Tranche A Notes, 2028 Notes, 2029 Notes, 2030 Notes and 2031 Notes as a qualifying fair value hedge accounting relationship. See Note 7 for more information on the 2027 Tranche A Notes, 2028 Notes, 2029 Notes, 2030 Notes and 2031 Notes. The outstanding interest rate swap contracts as of June 30, 2026 and September 30, 2025 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of June 30, 2026 | | Counterparty | | Hedged Item | | Company Receives | | Company Pays | | Maturity Date | | Notional Amount | | Unrealized Appreciation | | Unrealized Depreciation | | SMBC Capital Markets, Inc. | | 2027 Tranche A Notes | | 7.12% | | 3M SOFR+ | 2.5975% | | 9/18/2027 | | $ | 225,000 | | | $ | 1,088 | | | $ | — | | | SMBC Capital Markets, Inc. | | 2028 Notes | | 5.45% | | D SOFR+ | 1.834% | | 8/15/2028 | | 500,000 | | | — | | | (4,761) | | | SMBC Capital Markets, Inc. | | 2030 Notes | | 5.875% | | D SOFR+ | 1.727% | | 5/1/2030 | | 350,000 | | | 1,637 | | | — | | | SMBC Capital Markets, Inc. | | 2031 Notes | | 5.60% | | D SOFR+ | 1.9485% | | 4/15/2031 | | 300,000 | | | — | | | (4,576) | | | | | | | | | | | | | | | $ | 2,725 | | | $ | (9,337) | | | | | | | | | | | | | | | | | | | Macquarie Bank Limited | | 2027 Tranche A Notes | | 7.12% | | 3M SOFR+ | 2.644% | | 9/20/2027 | | $ | 75,000 | | | $ | 320 | | | $ | — | | | Macquarie Bank Limited | | 2029 Notes | | 6.046% | | 3M SOFR+ | 2.770% | | 8/12/2029 | | 150,000 | | | — | | | (3,352) | | | | | | | | | | | | | | | $ | 320 | | | $ | (3,352) | | | | | | | | | | | | | | | | | | | Regions Bank | | 2029 Notes | | 6.046% | | 3M SOFR+ | 2.7875% | | 8/12/2029 | | $ | 350,000 | | | $ | — | | | $ | (8,003) | | | | | | | | | | | | | | | $ | — | | | $ | (8,003) | | | | | | | | | | | | | | | | | | | Morgan Stanley Capital Services LLC | | 2030 Notes | | 5.875% | | D SOFR+ | 1.745% | | 5/1/2030 | | $ | 150,000 | | | $ | 606 | | | $ | — | | | | | | | | | | | | | | | $ | 606 | | | $ | — | | | | | | | | | | | | | | | | | | | BNP Paribas | | 2031 Notes | | 5.60% | | D SOFR+ | 1.955% | | 4/15/2031 | | $ | 200,000 | | | $ | — | | | $ | (3,107) | | | | | | | | | | | | | | | $ | — | | | $ | (3,107) | | | | | | | | | | | | | | | | | | As of September 30, 2025 | | Counterparty | | Hedged Item | | Company Receives | | Company Pays | | Maturity Date | | Notional Amount | | Unrealized Appreciation | | Unrealized Depreciation | | SMBC Capital Markets, Inc. | | 2027 Tranche A Notes | | 7.12% | | 3M SOFR+ | 2.5975% | | 9/18/2027 | | $ | 225,000 | | | $ | 4,466 | | | $ | — | | | SMBC Capital Markets, Inc. | | 2028 Notes | | 5.45% | | D SOFR+ | 1.834% | | 8/15/2028 | | 500,000 | | | 2,569 | | | — | | | SMBC Capital Markets, Inc. | | 2030 Notes | | 5.875% | | D SOFR+ | 1.727% | | 5/1/2030 | | 350,000 | | | 10,267 | | | — | | | | | | | | | | | | | | | $ | 17,302 | | | $ | — | | | | | | | | | | | | | | | | | | | Macquarie Bank Limited | | 2027 Tranche A Notes | | 7.12% | | 3M SOFR+ | 2.644% | | 9/20/2027 | | $ | 75,000 | | | $ | 1,425 | | | $ | — | | | Macquarie Bank Limited | | 2029 Notes | | 6.046% | | 3M SOFR+ | 2.770% | | 8/12/2029 | | 150,000 | | | — | | | (869) | | | | | | | | | | | | | | | $ | 1,425 | | | $ | (869) | | | | | | | | | | | | | | | | | | | Regions Bank | | 2029 Notes | | 6.046% | | 3M SOFR+ | 2.7875% | | 8/12/2029 | | $ | 350,000 | | | $ | — | | | $ | (2,252) | | | | | | | | | | | | | | | $ | — | | | $ | (2,252) | | | | | | | | | | | | | | | | | | | Morgan Stanley Capital Services LLC | | 2030 Notes | | 5.875% | | D SOFR+ | 1.745% | | 5/1/2030 | | $ | 150,000 | | | $ | 4,286 | | | $ | — | | | | | | | | | | | | | | | $ | 4,286 | | | $ | — | |
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 and other debt financing expenses. For the three and nine months ended June 30, 2026, the net unrealized gain/(loss) related to the fair value hedge was $(131) and $(216), respectively, which is included in “Interest and other debt financing expenses” in the Company’s Consolidated Statements of Operations. For the three and nine months ended June 30, 2025, the net unrealized gain/(loss) related to the fair value hedge was $260 and $(2,487), respectively, which is included in “Interest and other debt financing expenses” in the Company’s Consolidated Statements of Operations. 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, and the hedged items, the 2027 Tranche A Notes, 2028 Notes, 2029 Notes, 2030 Notes and 2031 Notes, from derivatives designated in a qualifying hedge accounting relationship for the three and nine months ended June 30, 2026 and 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three months ended June 30, | | Nine months ended June 30, | | | 2026 | | 2025 | | 2026 | | 2025 | | Hedging instruments (Interest rate swaps) | | $ | (24,094) | | | $ | 10,402 | | | $ | (40,040) | | | $ | 5,453 | | | Hedged items (Unsecured notes) | | 23,963 | | | (10,142) | | | 39,824 | | | (7,940) | | | Fair market value adjustments for hedge accounting recognized in interest and other debt financing expenses | | $ | (131) | | | $ | 260 | | | $ | (216) | | | $ | (2,487) | |
The table below presents the carrying value, which is inclusive of (i) unamortized premium and/or unaccreted original issue discount and (ii) the cumulative adjustment for the change in fair value of an effective hedge accounting relationship, of the 2027 Tranche A Notes, 2028 Notes, 2029 Notes, 2030 Notes and 2031 Notes as of June 30, 2026 and September 30, 2025 that are designated in a qualifying hedging relationship and the related cumulative hedging adjustment (increase/(decrease)) from the current hedging relationship included in such carrying value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of June 30, 2026 | | As of September 30, 2025 | | Description | | Carrying Value | | Cumulative Hedging Adjustment | | Carrying Value | | Cumulative Hedging Adjustment | | 2027 Tranche A Notes | | $ | 301,315 | | | $ | 1,315 | | | $ | 305,326 | | | $ | 5,326 | | | 2028 Notes | | 492,933 | | | (4,761) | | | 499,452 | | | 2,569 | | | 2029 Notes | | 486,352 | | | (10,294) | | | 494,058 | | | (1,804) | | | 2030 Notes | | 497,930 | | | 2,243 | | | 509,398 | | | 14,553 | | | 2031 Notes | | 487,089 | | | (7,683) | | | — | | | — | |
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 each of its derivative counterparties, Macquarie, SMBC, Regions, Morgan Stanley and BNP (together with Macquarie, SMBC, Regions, Morgan Stanley and BNP, the “Counterparties” and each a “Counterparty”). Each ISDA Master Agreement is a bilateral agreement between the Company and each Counterparty that governs over-the-counter (“OTC”) derivatives, including forward currency contracts and 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 each ISDA Master Agreement with each of the Counterparties permit a single net payment in the event of a default (close-out netting) or similar event, including the bankruptcy or insolvency of the counterparty.
For financial reporting purposes, cash collateral that has been pledged to cover obligations of the Company and cash collateral received from the Counterparty, if any, is included in the Consolidated Statements of Financial Condition as other assets or accounts payable and other liabilities. As of June 30, 2026 and September 30, 2025, there was no collateral pledged for derivatives included in other assets on the Consolidated Statements of Financial Condition. 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 Financial Condition, 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 September 30, 2025: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of June 30, 2026 | | Counterparty | | Instrument | | Statement of Financial Condition Location of Amounts | | Gross Amount of Recognized Assets | | Gross Amount of Recognized (Liabilities) | | Net amounts presented in the Consolidated Statements of Financial Condition | | Collateral (Received) / Pledged (1) | | Net Amounts(2) | | Regions Bank | | Interest rate swaps | | Net unrealized depreciation on derivatives | | $ | — | | | $ | (8,003) | | | $ | (8,003) | | | $ | — | | | $ | (8,003) | | | Regions Bank | | Foreign currency forward contracts | | Net unrealized depreciation on derivatives | | 1,623 | | | (2,382) | | | (759) | | | — | | | (759) | | | SMBC Capital Markets, Inc. | | Interest rate swaps | | Net unrealized depreciation on derivatives | | 2,725 | | | (9,337) | | | (6,612) | | | — | | | (6,612) | | | SMBC Capital Markets, Inc. | | Foreign currency forward contracts | | Net unrealized appreciation on derivatives | | 49 | | | — | | | 49 | | | — | | | 49 | | | Macquarie Bank Limited | | Interest rate swaps | | Net unrealized depreciation on derivatives | | 320 | | | (3,352) | | | (3,032) | | | — | | | (3,032) | | | Macquarie Bank Limited | | Foreign currency forward contracts | | Net unrealized appreciation on derivatives | | 605 | | | — | | | 605 | | | — | | | 605 | | Morgan Stanley Capital Services LLC | | Interest rate swaps | | Net unrealized appreciation on derivatives | | 606 | | | — | | | 606 | | | — | | | 606 | | Morgan Stanley Capital Services LLC | | Foreign currency forward contracts | | Net unrealized depreciation on derivatives | | — | | | (1,641) | | | (1,641) | | | — | | | (1,641) | | BNP Paribas | | Interest rate swaps | | Net unrealized depreciation on derivatives | | — | | | (3,107) | | | (3,107) | | | — | | | (3,107) | | | | | | | | | | | | | | | | | | As of September 30, 2025 | | Counterparty | | Instrument | | Statement of Financial Condition Location of Amounts | | Gross Amount of Recognized Assets | | Gross Amount of Recognized (Liabilities) | | Net amounts presented in the Consolidated Statements of Financial Condition | | Collateral (Received) / Pledged (1) | | Net Amounts(2) | | Regions Bank | | Interest rate swaps | | Net unrealized depreciation on derivatives | | $ | — | | | $ | (2,252) | | | $ | (2,252) | | | $ | — | | | $ | (2,252) | | | Regions Bank | | Foreign currency forward contracts | | Net unrealized depreciation on derivatives | | 388 | | | (6,019) | | | (5,631) | | | — | | | (5,631) | | | SMBC Capital Markets, Inc. | | Interest rate swaps | | Net unrealized appreciation on derivatives | | 17,302 | | | — | | | 17,302 | | | — | | | 17,302 | | | Macquarie Bank Limited | | Interest rate swaps | | Net unrealized appreciation on derivatives | | 1,425 | | | (869) | | | 556 | | | — | | | 556 | | | Macquarie Bank Limited | | Foreign currency forward contracts | | Net unrealized depreciation on derivatives | | — | | | (853) | | | (853) | | | — | | | (853) | | | Morgan Stanley Capital Services LLC | | Interest rate swaps | | Net unrealized appreciation on derivatives | | 4,286 | | | — | | | 4,286 | | | — | | | 4,286 | | | Morgan Stanley Capital Services LLC | | Foreign currency forward contracts | | Net unrealized depreciation on derivatives | | — | | | (2,635) | | | (2,635) | | | — | | | (2,635) | |
(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 Investment Adviser from Commodity Pool Operator Definition
Engaging in commodity interest transactions such as swap transactions or futures contracts for the Company could cause the Investment Adviser to fall within the definition of “commodity pool operator” under the Commodity Exchange Act (the “CEA”) and related Commodity Futures Trading Commission (the “CFTC”) regulations. The Investment 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.
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