DERIVATIVES AND HEDGING |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DERIVATIVES AND HEDGING | DERIVATIVES AND HEDGING The Company enters into economic hedges, including exchange-traded interest rate futures, to hedge a portion of its interest rate risk exposure on its floating-rate secured financings. Interest rate risk is sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, as well as other factors. The Company’s credit risk with respect to economic hedges is the risk of default by its counterparty resulting from the counterparty’s inability or unwillingness to make contractually required payments. The Company's futures positions are intended to hedge a portion of the interest rate risk on its floating-rate secured financings, which bear interest at a spread over SOFR and had an aggregate outstanding principal amount of $512.9 million as of September 30, 2026. The aggregate notional amount of the positions as of September 30, 2026 was $203.0 million, or approximately 40% of outstanding floating-rate secured financings. The Company uses derivative instruments, including exchange-traded interest rate futures, as economic hedges to hedge a portion of its interest rate risk exposure on its floating-rate financings. These instruments are not designated as hedges for accounting purposes. The Company does not use derivative instruments for speculative purposes or to hedge its investments in loans. The futures contracts mature in September 2029 and December 2029. The Company expects to continue to hold the positions against its floating-rate secured financings as those financings are repaid, refinanced or replaced. Amounts or obligations owed by or to the Company are subject to the right of setoff with the counterparty. As part of executing these trades, the Company has entered into agreements with its clearing broker that govern the transactions made, including margin maintenance, payment and transfer, events of default, settlements and various other provisions. The Company’s futures positions are transacted through a futures commission merchant and cleared through a registered derivatives clearing organization. Trading authority over the Company’s futures account is held by the Adviser, which has been appointed as advisor and attorney-in-fact with respect to the account. See Notes 5, 7 and 10. The Company's derivative instruments are carried at the full fair value of the open positions. Daily changes in value are reflected as open trade equity at the Company's clearing broker and are not settled in cash until a position is closed. The following tables summarize derivative assets, at fair value and the unrealized gain on derivatives:
(1)Represents $203 million notional of Eris SOFR swap futures with weighted average maturities of 38 months as of September 30, 2026.
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