UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
FOR THE FISCAL YEAR ENDED
OR
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER:
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Securities registered pursuant to Section 12(b) of the Act:
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Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b).
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
The aggregate market value of common stock held by non-affiliates of the Registrant on March 31, 2024 based on the closing price on that date of $11.38 on The New York Stock Exchange was approximately $
Documents Incorporated by Reference: Portions of the Registrant’s Proxy Statement relating to the Registrant’s 2025 Annual Meeting of Stockholders to be filed not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K are incorporated by reference into Part III of this Report.
PENNANTPARK FLOATING RATE CAPITAL LTD.
FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2024
TABLE OF CONTENTS
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Item 1 |
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2 |
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Item 1A. |
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18 |
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Item 1B. |
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39 |
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Item 1C. |
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Item 2. |
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39 |
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Item 3. |
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39 |
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39 |
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Item 5. |
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40 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure |
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Item 9B. |
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Item 9C. |
Disclosure Regarding Foreign Jurisdiction that Prevent Inspections |
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106 |
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Item 10. |
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107 |
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Item 11. |
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107 |
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
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107 |
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Certain Relationships and Related Transactions, and Director Independence |
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108 |
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111 |
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PART I
In this annual report on Form 10-K, or the Report, except where the context suggests otherwise, the terms “Company,” “we,” “our” or “us” refer to PennantPark Floating Rate Capital Ltd. and its wholly-owned consolidated subsidiaries; “1940 Act” refers to the Investment Company Act of 1940, as amended; “2023 Notes” refers to our 4.3% Series A notes due 2023; “2026 Notes” refers to our 4.25% Notes due 2026; “2031 Asset-Backed Debt” refers to (i) the issuance of the Class A-1 Senior Secured Floating Rate Notes due 2031, the Class A-2 Senior Secured Fixed Rate Notes due 2031, the Class B-1 Senior Secured Floating Rate Notes due 2031, the Class B-2 Senior Secured Fixed Rate Notes due 2031, the Class C-1 Secured Deferrable Floating Rate Notes due 2031, the Class C-2 Notes Secured Deferrable Fixed Rate Notes due 2031, and the Class D Secured Deferrable Floating Notes due 2031 and (ii) the borrowing of the Class A‑1 Senior Secured Floating Rate Notes due 2031 by the Securitization Issuers in connection with the Debt Securitization; "2036 Asset-Backed Debt" refers to the issuance of the AAA(sf) Class A-1 Notes, AAA(sf) Class A-2 Notes, AA(sf) Class B Notes, A(sf) Class C Notes, BBB-(sf) Class D Notes, and the borrowing issuance of AAA(sf) Class A-1 floating rate loans, or the "Class A-1 Loans" with the 2036-Secured Notes; “2036-R Asset-Backed Debt” refers to the issuance by the 2036-R Securitization Issuers of the following classes of notes pursuant the 2036-R Indenture (i) $203 million of A-1-R Notes, which bear interest at the three-month secured overnight financing rate (“SOFR”) plus 1.75%, (ii) $10.5 million of A-2-R Notes, which bear interest at three-month SOFR plus 1.90%, (iii) $12 million of Class B-R Notes, which bear interest at three-month SOFR plus 2.05%, (iv) $28 million of C-R Notes, which bear interest at three-month SOFR plus 2.75% and (v) $21 million of D-R Notes, which bear interest at three-month SOFR plus 4.30% (collectively, the “Secured Notes”), (B) the issuance by a 2036-R Securitization Issuer of $64 million of subordinated notes pursuant to the 2036-R Indenture (the “Subordinated Notes”) and (C) the borrowing by the Securitization Issuer of $12.5 million of Class B-R Loans, which bear interest at three-month SOFR plus 2.05% (the “Class B-R Loans”; 2036 Debt Securitization" refers to the $350.6 million term debt securitization completed by the "2036 Securitization Issuers"; “2036 Indenture” refers to that certain indenture, dated as of February 22, 2024, by and 2036 Securitization Issuer and Wilmington Trust, National Association, as trustee and as collateral agent; “2036-R Indenture” refers to that certain Second Supplemental Indenture, dated July 25, 2024, by and between the Securitization Issuer, PennantPark CLO I, LLC and U.S. Bank Trust Company, National Association;“2036 Financing Subsidiary” refers to refers to PennantPark Floating Rate Funding I, LLC, a wholly-owned subsidiary of the Company; "2036 Securitization Issuer" refers to PennantPark CLO VIII, LLC; “2036-R Securitization” refers to the $351.0 million term debt securitization completed by the 2036-R Securitization Issuers; “2036-R Securitization Issuers” refer to PennantPark CLO I, Ltd., our wholly-owned and consolidated subsidiary, and PennantPark CLO I LLC, a wholly-owned subsidiary of PennantPark CLO I LLC; “BDC” refers to a business development company under the 1940 Act; “Code” refers to the Internal Revenue Code of 1986, as amended; “Credit Facility” refers to our multi-currency senior secured revolving credit facility, as amended from time to time, with Truist Bank and other lenders, or the “Lenders,” entered into on August 12, 2021; “Depositor” refers to PennantPark CLO I Depositor, LLC; “Debt Securitization” refers to the $301.4 million term debt securitization completed by the Securitization Issuers; “Funding I” refers to PennantPark Floating Rate Funding I, LLC; “PSSL” refers to PennantPark Senior Secured Loan Fund I LLC, an unconsolidated joint venture; “PTSF” refers to PennantPark-TSO Senior Loan Fund, LP, an unconsolidated limited partnership; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; “PennantPark Investment Advisers” or “Investment Adviser” refer to PennantPark Investment Advisers, LLC; “Prior Credit Facility” refers to our multi-currency senior secured revolving credit facility, as amended and restated, with Truist Bank (formerly SunTrust Bank) and other lenders, originally entered into on June 23, 2011 and terminated on August 12, 2021; “RIC” refers to a regulated investment company under the Code; “SBCAA” refers to the Small Business Credit Availability Act; “Securitization Issuer” refers to PennantPark CLO I, Ltd.; “Securitization Issuers” refers to the Securitization Issuer and PennantPark CLO I, LLC; “Taxable Subsidiary”1 refers, collectively, to our consolidated subsidiaries PFLT Investment Holdings II, LLC and PFLT Investment Holdings, LLC. References to our portfolio, our investments, our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility, and our business include investments we make through our subsidiaries. Some of the statements in this annual report constitute forward-looking statements, which apply to us and relate to future events, future performance or future financial condition. The forward-looking statements involve risks and uncertainties for us and actual results could differ materially from those projected in the forward-looking statements for any reason, including those factors discussed in “Risk Factors” and elsewhere in this Report.
Summary of Risk Factors
Investing in our common stock involves a high degree of risk. Some, but not all, of the risks and uncertainties that we face are related to:
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Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition and/or operating results. For a more detailed discussion of the risks that you should consider prior to investing in our securities, see Item “1A. Risk Factors” below.
Item 1. Business
General Business of PennantPark Floating Rate Capital Ltd.
PennantPark Floating Rate Capital Ltd. is a BDC whose objectives are to generate both current income and capital appreciation while seeking to preserve capital by investing primarily in floating rate loans, and other investments made to U.S. middle-market companies.
We believe that floating rate loans to U.S. middle-market companies offer attractive risk-reward to investors due to a limited amount of capital available for such companies. We use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion. Our investments are typically rated below investment grade. Securities rated below investment grade are often referred to as “leveraged loans,” “high yield” securities or “junk bonds” and are often higher risk compared to debt instruments that are rated above investment grade and have speculative characteristics. However, when compared to junk bonds and other non-investment grade debt, senior secured floating rate loans typically have more robust capital-preserving qualities, such as historically lower default rates than junk bonds, represent the senior source of capital in a borrower’s capital structure and often have certain of the borrower’s assets pledged as collateral. Our debt investments may generally range in maturity from three to ten years and are made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions.
Under normal market conditions, we generally expect that at least 80% of the value of our managed assets, which means our net assets plus any borrowings for investment purposes, will be invested in floating rate loans and other investments bearing a variable-rate of interest. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We also generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt and subordinated debt and, to a lesser extent, equity investments. We seek to create a diversified portfolio by generally targeting an investment size between $5 million and $30 million, on average, although we expect that this investment size will vary proportionately with the size of our capital base.
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Our investment activity depends on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.
Organization and Structure of PennantPark Floating Rate Capital Ltd.
PennantPark Floating Rate Capital Ltd., a Maryland corporation organized in October 2010, is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we have elected to be treated, and intend to qualify annually, as a RIC under the Code.
We execute our investment strategy directly and through our wholly owned subsidiaries, our unconsolidated joint venture and unconsolidated limited partnership. The term "subsidiary" means entities that primarily engage in investments activities in securities or other assets that are wholly owned by us. The Company does not intend to create or acquire primary control of an entity which primarily engages in investment activities of securities or other assets other than entities wholly owned by the Company. We comply with the provisions of Section 17 of the 1940 Act related to affiliated transactions and custody. To the extent that the Company forms a subsidiary advised by an investment adviser other than the Investment Adviser, the investment adviser to such subsidiaries will comply with the provisions of the 1940 Act relating to investment advisory contracts, including but not limited to, Section 15, as if it were an investment adviser to the Company under Section 2(a)(20) of the 1940 Act.
Our Investment Adviser and Administrator
We utilize the investing experience and contacts of PennantPark Investment Advisers in developing what we believe is an attractive and diversified portfolio. The senior investment professionals of the Investment Adviser have worked together for many years and average over 25 years of experience in the senior lending, mezzanine lending, leveraged finance, distressed debt and private equity businesses. In addition, our senior investment professionals have been involved in originating, structuring, negotiating, managing and monitoring investments in each of these businesses across changing economic and market cycles. We believe this experience and history have resulted in a strong reputation with financial sponsors, management teams, investment bankers, attorneys and accountants, which provides us with access to substantial investment opportunities across the capital markets. Our Investment Adviser has a rigorous investment approach, which is based upon intensive financial analysis with a focus on capital preservation, diversification and active management. Since our Investment Adviser’s inception in 2007, it has invested through its managed funds $22.4 billion in 704 companies with more than 200 different financial sponsors through its managed funds, which includes investments by the Company totaling $6.3 billion in 512 companies.
Our Administrator has experienced professionals with substantial backgrounds in finance and administration of registered investment companies. In addition to furnishing us with clerical, bookkeeping and record keeping services, the Administrator also oversees our financial records as well as the preparation of our reports to stockholders and reports filed with the Securities and Exchange Commission, or the SEC. The Administrator assists in the determination and publication of our net asset value, or NAV, oversees the preparation and filing of our tax returns, and monitors the payment of our expenses as well as the performance of administrative and professional services rendered to us by others. Furthermore, our Administrator offers, on our behalf, significant managerial assistance to those portfolio companies to which we are required to offer such assistance. See “Risk Factors—Risks Relating to our Business and Structure—There are significant potential conflicts of interest which could impact our investment returns” for more information.
Market Opportunity
We believe that the limited amount of capital available to middle-market companies, coupled with the desire of these companies for flexible sources of capital, creates an attractive investment environment for us.
Competitive Advantages
We believe that we have the following competitive advantages over other capital providers to middle-market companies:
The senior investment professionals of our Investment Adviser have worked together for many years and average over 25 years of experience in senior lending, mezzanine lending, leveraged finance, distressed debt and private equity businesses. These senior investment professionals have been involved in originating, structuring, negotiating, managing and monitoring investments in each of these businesses across changing economic and market cycles. We believe this extensive experience and history have resulted in a strong reputation across the capital markets.
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Lending to middle-market companies requires in-depth diligence, credit expertise, restructuring experience and active portfolio management. For example, lending to middle-market companies in the United States is generally more labor intensive than lending to larger companies due to the smaller size of each investment and the fragmented nature of the information available with respect to such companies. We are able to provide value-added customized financial solutions to middle-market companies as a result of specialized due diligence, underwriting capabilities and more extensive ongoing monitoring required as lenders.
We employ a disciplined approach in selecting investments that meet the long-standing, consistent value-oriented investment selection criteria employed by our Investment Adviser. Our value-oriented investment philosophy focuses on preserving capital and ensuring that our investments have an appropriate return profile in relation to risk. When market conditions make it difficult for us to invest according to our criteria, we are highly selective in deploying our capital. We believe this approach continues to enable us to build an attractive investment portfolio that meets our return and value criteria over the long-term.
We believe it is critical to conduct extensive due diligence on investment targets. In evaluating new investments we, through our Investment Adviser, conduct a rigorous due diligence process that draws from our Investment Adviser’s experience, industry expertise and network of contacts. Among other things, our due diligence is designed to ensure that each prospective portfolio company will be able to meet its debt service obligations. See “Investment Selection Criteria” for more information.
In addition to engaging in extensive due diligence, our Investment Adviser seeks to reduce risk by focusing on businesses with:
The management team of our Investment Adviser has long-term relationships with financial sponsors, management consultants and management teams that we believe enable us to evaluate investment opportunities effectively in numerous industries, as well as provide us access to substantial information concerning those industries. We identify potential investments both through active origination and through dialogue with numerous financial sponsors, management teams, members of the financial community and corporate partners with whom the professionals of our Investment Adviser have long-term relationships.
We are flexible in structuring investments and tailor investments to meet the needs of a portfolio company while also generating attractive risk-adjusted returns. We can invest in all parts of a capital structure and our Investment Adviser has extensive experience in a wide variety of securities for leveraged companies throughout economic and market cycles.
Our Investment Adviser seeks to minimize the risk of capital loss without foregoing potential for capital appreciation. In making investment decisions, we seek to invest in companies that we believe can generate consistent positive risk-adjusted returns.
We believe that the in-depth experience of our Investment Adviser will enable us to invest throughout various stages of the economic and market cycles and to provide us with ongoing market insights in addition to a significant investment opportunity.
Competition
Our primary competitors provide financing to middle-market companies and include other BDCs, commercial and investment banks, commercial finance companies, CLO funds, private direct lending funds and, to the extent they provide an alternative form of financing, private equity funds. Additionally, alternative investment vehicles, such as hedge funds, frequently invest in middle-market companies. As a result, competition for investment opportunities in middle-market companies can be intense. However, we believe that from time to time there has been a reduction in the amount of debt capital available to middle-market companies, which we believe has resulted in a less competitive environment for making new investments.
Many of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, we believe some competitors have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. See “Risk Factors—Risks Relating to our Business and Structure—We operate in a highly competitive market for investment opportunities” for more information.
Leverage
As of September 30, 2024, we maintained a $636.0 million Credit Facility, which matures in August 2029, with the Lenders. The Credit Facility currently bears interest at SOFR (or an alternative risk-free floating interest rate index) plus 225 basis points and, after the revolving period ends in August 2027, the rate will reset to Base Rate (or an alternative risk-free floating interest rate index) plus 250 basis points. The Credit Facility is secured by all of the assets held by Funding I, under which we had $443.9 million outstanding as of September 30, 2024. The Credit Facility had a weighted average interest rate of 7.5%, exclusive of the fee on undrawn commitments as of September 30, 2024. The Credit Facility had a weighted average interest rate of 7.7%, exclusive of the fee on undrawn commitments as of September 30, 2023. As of September 30, 2024 and 2023, we had $192.1 million and $376.6 million of unused borrowing capacity under our Credit Facility, respectively, subject to the regulatory restrictions. We believe that our capital resources will provide us with the flexibility to take advantage of market opportunities when they arise. Our use of leverage, as calculated under the asset coverage requirements of the 1940 Act, may generally range between 140% and 170% of our net assets, or approximately 60% to 65% of our managed assets. We cannot assure investors that our leverage will remain within the range. The amount of leverage that we employ will depend on our assessment of the market and other factors at the time of any proposed borrowing.
In November 2017, we issued $138.6 million aggregate principal amount of our 2023 Notes that matured on December 15, 2023. The 2023 Notes were issued pursuant to a deed of trust between the Company and Mishmeret Trust Company, Ltd. as trustee, in November 2017. In connection with this offering, we dual listed our common stock on the TASE. On February 7, 2024, the Company filed a notice with the Israel Securities Authority and the Tel Aviv Stock Exchange Ltd (the "TASE")
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voluntarily requesting to delist the Company's common stock from trading on the TASE. The last day of trading on the TASE was May 6, 2024 and the delisting of the Company's common stock form the TASE took effect on May 8, 2024.
The 2023 Notes paid interest at a rate of 4.3% per year. Interest on the 2023 Notes was payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2018. The principal on the 2023 Notes was payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% of the original principal amount on December 15, 2023. On December 15, 2023, the remaining outstanding 2023 Notes were repaid in full.
In March 2021, and in October 2021, we issued $100.0 million and $85.0 million, respectively, in aggregate principal amount of our 2026 Notes at a public offering price per note of 99.4% and 101.5%, respectively. As of September 30, 2024 and 2023, we had $185.0 million and $185.0 million in aggregate principal amount of 2026 Notes outstanding, respectively. The 2026 Notes were issued pursuant to the base Indenture, dated March 23, 2021, between the Company and American Stock Transfer & Trust Company, LLC (the “Trustee”), as supplemented by the First Supplemental Indenture, dated March 23, 2021, between the Company and the Trustee. The 2026 Notes are due on April 1, 2026 and may be redeemed in whole or in part at the Company’s option. The 2026 Notes bear interest at a rate of 4.25% per year payable semi-annually on April 1 and October 1 of each year. The 2026 Notes are the Company’s direct unsecured obligations and rank pari passu in right of payment with the Company’s current and future unsecured unsubordinated indebtedness, senior to any of the Company’s future indebtedness that expressly states it is subordinated in right of payment to the 2026 Notes, effectively subordinated in right of payment to all of the Company’s existing and future secured indebtedness (including indebtedness that is initially unsecured, but to which the Company subsequently grant security) to the extent of the value of the assets securing such indebtedness, and structurally subordinated to all existing and future indebtedness and other obligations of any of the Company’s subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.
In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the Securitization Issuer. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031. On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly owned subsidiaries, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. As of both September 30, 2024 and 2023, the Company had zero and $228.0 million of 2031 Asset-Backed Debt outstanding with a weighted average interest rate of zero and 7.1%, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for more information.
In July 2024, the 2031 Asset-Backed Debt was refinanced through a $351.0 million debt securitization in the form of a collateralized loan obligation, or the "2036-R Asset-Backed Debt". The 2036-R Asset-Backed Debt was executed through: (A) the issuance by the 2036-R Securitization Issuers of the following classes of notes pursuant that certain indenture, dated September 19, 2019, by and among the 2036-R Securitization Issuers and U.S. Bank Trust Company, National Association, as amended by the second supplemental indenture, dated June 25, 2024): (i) $203 million of A-1-R Notes, which bear interest at the three-month SOFR plus 1.75%, (ii) $10.5 million of A-2-R Notes, which bear interest at three-month SOFR plus 1.90%, (iii) $12 million of Class B-R Notes, which bear interest at three-month SOFR plus 2.05%, (iv) $28 million of C-R Notes, which bear interest at three-month SOFR plus 2.75% and (v) $21 million of D-R Notes, which bear interest at three-month SOFR plus 4.30%, (B) the issuance by the issuer of $64 million of subordinated notes pursuant to the Indenture and (C) the borrowing by one of the 2036-R Securitization Issuers of $12.5 million of Class B-R Loans, which bear interest at three-month SOFR plus 2.05%, pursuant to a credit agreement, by and among the 2036-R Securitization Issuers, the various financial institutions and other persons party thereto, as lenders and U.S. Bank Trust Company, National Association, as loan agent and as trustee. The 2036-R Asset-Backed Debt matures in July 2036. As of September 30, 2024, the Company had $266.0 million of 2036-R Asset-Backed Debt outstanding with a weighted average interest rate of 7.2%. As of September 30, 2024, the unamortized fees on the 2036-R Asset-Backed Debt were $0.8 million.
In February 2024, the 2036 Asset-Backed Debt was issued by the 2036 Securitization Issuer. The 2036 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the 2036 Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $139.5 million of AAA(sf) Class A-1 Notes, which bear interest at the three-month secured overnight financing rate published by the Federal Reserve Bank of New York (“SOFR”) plus 2.30%, (ii) $14 million of AAA(sf) Class A-2 Notes, which bear interest at three-month SOFR plus 2.70%, (iii) $24.5 million of AA(sf) Class B Notes, which bear interest at three-month SOFR plus 2.90%, (iv) $28 million of A(sf) Class C Notes, which bear interest at three-month SOFR plus 3.90%, (v) $21 million of BBB-(sf) Class D Notes, which bear interest at three-month SOFR plus 5.90%, (together, the “Secured Notes”), and (vi) $63.6 million of subordinated notes (“Subordinated Notes”) and (B) the borrowing of $60.0 million AAA(sf) Class A-1 Senior Secured Floating Rate Loans (the “Class A-1 Loans” and together with the Secured Notes and Subordinated Notes, the “Debt”), which bear interest at three-month SOFR plus 2.30%, under a credit agreement (the “Credit Agreement”), dated as of the Closing Date, by and among the Issuer, as borrower, various financial institutions, as lenders, and Wilmington Trust, National Association, as collateral agent and as loan agent. The annualized interest on the 2036 Asset-Backed Debt will be paid, to the extent of funds available. The Debt is scheduled to mature on April 18, 2036. The 2036 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Subordinated Notes of the 2036-Securitization Issuer were eliminated in consolidation. As of September 30, 2024, the Company had $287.0 million of 2036 Asset-Backed Debt outstanding with a weighted average interest rate of 8.1%. As of September 30, 2024, the unamortized fees on the 2036 Asset-Backed Debt were $2.9 million.
In April 2021, we formed PTSF, an unconsolidated limited partnership, organized as a Delaware limited liability partnership. We sold $81.4 million in investments to a wholly-owned subsidiary of PTSF in exchange for cash in the amount of $69.5 million and an $11.9 million equity interest in PTSF representing 23.08% of the total outstanding Class A Units of PTSF. We recognized $0.4 million of realized gain upon the formation of PTSF. As of September 30, 2024, our capital commitment of $15.3 million is fully funded and we hold 23.08% of the total outstanding Class A Units of PTSF and a 4.99% voting interest in the general partner which manages PTSF.
On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the Small Business Credit Availability Act). As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), effective as of April 5, 2019, subject to compliance with certain disclosure requirements. As of September 30, 2024 and 2023, our asset coverage ratio, as computed in accordance with the 1940 Act, was 174% and 230%, respectively. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for more information.
Investment Policy Overview
We seek to create a diversified portfolio primarily of floating rate loans by generally targeting an investment size of $5 million to $30 million in securities, on average, of middle-market companies. We expect this investment size to vary proportionately with the size of our capital base. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We also generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt, subordinated debt and, to a lesser extent, equity investments. The companies in which we invest are typically highly leveraged, and, in most cases, are not rated by national rating agencies. If such unrated companies were rated, we believe that they would typically receive a rating below investment grade (between BB and CCC under the Standard & Poor’s system) from the national rating agencies. Securities rated below investment grade are often referred to as “leveraged
5
loans,” “high yield” securities or “junk bonds” and are often higher risk compared to debt instruments that are rated above investment grade and have speculative characteristics. In addition, we expect our debt investments to range in maturity from three to ten years.
Over time, we expect that our portfolio will continue to consist primarily of floating rate loans in qualifying assets such as private, or thinly traded or small market-capitalization, U.S. middle-market public companies. In addition, we may invest up to 30% of our portfolio in non-qualifying assets. These non-qualifying assets may include investments in public companies whose securities are not thinly traded or have a market capitalization of greater than $250 million, securities of middle-market companies located outside of the United States and investment companies as defined in the 1940 Act. We may acquire investments in the secondary markets. See “Regulation—Qualifying Assets” and “Investment Selection Criteria” for more information.
Our board of directors has the authority to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval (except as required by the 1940 Act). However, absent stockholder approval, under the 1940 Act we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our common stock. Nevertheless, the effects of changes to our operating policies and strategies may adversely affect our business, our ability to make distributions and the value of our common stock.
First Lien Secured Debt
Structurally, first lien secured debt ranks senior in priority of payment to second lien secured debt, subordinated debt and equity and benefits from a senior security interest in the assets of the borrower. As such, other creditors rank junior to our investments in these securities in the event of insolvency. Due to its lower risk profile and often more restrictive covenants as compared to second lien secured debt and subordinated debt, first lien secured debt generally earns a lower return than second lien secured debt and subordinated debt. In some cases first lien secured debt lenders receive opportunities to invest directly in the equity securities of borrowers and from time to time may also receive warrants to purchase equity securities. We evaluate these investment opportunities on a case-by-case basis.
Second Lien Secured Debt
Second lien secured debt usually ranks junior in priority of payment to first lien secured debt. Second lien secured debt holds a second priority with regard to right of payment in the event of insolvency. Second lien secured debt ranks senior to subordinated debt and common and preferred equity in borrowers’ capital structures. Due to its higher risk profile and often less restrictive covenants as compared to first lien secured debt, second lien secured debt generally earns a higher return than first lien secured debt. In many cases, second lien secured debt investors receive opportunities to invest directly in the equity securities of borrowers and from time to time may also receive warrants to purchase equity securities. We evaluate these investment opportunities on a case-by-case basis.
Subordinated Debt
Structurally, subordinated debt usually ranks junior in priority of payment to first lien secured debt and second lien secured debt, and is often unsecured. As such, other creditors may rank senior to us in the event of insolvency. Subordinated debt ranks senior to common and preferred equity in borrowers’ capital structures. Due to its higher risk profile and often less restrictive covenants as compared to first lien secured debt and second lien secured debt, subordinated debt generally earns a higher return than first lien secured debt and second lien secured debt. In many cases, subordinated debt investors receive opportunities to invest directly in the equity securities of borrowers, and from time to time, may also receive warrants to purchase equity securities. We evaluate these investment opportunities on a case-by-case basis.
Investment Selection Criteria
We are committed to a value-oriented philosophy used by the senior investment professionals of our Investment Adviser who manage our portfolio and seek to minimize the risk of capital loss without foregoing potential for capital appreciation.
We have identified several criteria, discussed below, that we believe are important in identifying and investing in prospective portfolio companies. These criteria provide general guidelines for our investment decisions. However, we caution that not all of these criteria will be met by each prospective portfolio company in which we choose to invest. Generally, we seek to use our experience and access to market information to identify investment opportunities and to structure investments efficiently and effectively.
The Investment Adviser invests in portfolio companies that it believes have developed strong positions within their markets. The Investment Adviser also seeks to invest in portfolio companies that it believes possess competitive advantages in, for example, scale, scope, customer loyalty, product pricing or product quality as compared to their competitors to protect their market position.
Our investment philosophy places a premium on fundamental analysis and has a distinct value-orientation. The Investment Adviser invests in portfolio companies it believes to be stable and well-established, with strong cash flows and profitability. The Investment Adviser believes these attributes indicate portfolio companies that may be well-positioned to maintain consistent cash flow to service and repay their liabilities and maintain growth in their businesses or their relative market share. The Investment Adviser currently does not expect to invest significantly in start-up companies, companies in turnaround situations or companies with speculative business plans, although we are permitted to do so.
The Investment Adviser focuses on investments in which the portfolio company has an experienced management team with an established track record of success. The Investment Adviser typically requires that portfolio companies have in place proper incentives to align management’s goals with our goals, including having equity interests.
The Investment Adviser may seek to cause us to participate in transactions sponsored by what it believes to be trusted financial sponsors. The Investment Adviser believes that a financial sponsor’s willingness to invest significant equity capital in a portfolio company is an implicit endorsement of the quality of that portfolio company. Further, financial sponsors of portfolio companies with significant investments at risk may have the ability, and a strong incentive, to contribute additional capital in difficult economic times should financial or operational issues arise so as to maintain their ownership position.
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The Investment Adviser seeks to invest our assets broadly among portfolio companies, across industries and geographical regions. The Investment Adviser believes that this approach may reduce the risk that a downturn in any one portfolio company, industry or geographical region will have a disproportionate impact on the value of our portfolio, although we are permitted to be non-diversified under the 1940 Act.
The Investment Adviser seeks to invest in portfolio companies that it believes will provide a steady stream of cash flow to repay our loans while also reinvesting in their respective businesses. The Investment Adviser expects that such internally generated cash flow, leading to the payment of interest on, and the repayment of the principal of, our investments in portfolio companies to be a key means by which we will exit from our investments over time. In addition, the Investment Adviser also seeks to invest in portfolio companies whose business models and expected future cash flows offer attractive exit possibilities. These companies include candidates for strategic acquisition by other industry participants and companies that may repay our investments through an initial public offering of common stock, refinancing or other capital markets transaction.
Due Diligence
We believe it is critical to conduct extensive due diligence in evaluating new investment targets. Our Investment Adviser conducts a rigorous due diligence process that is applied to prospective portfolio companies and draws from our Investment Adviser’s experience, industry expertise and network of contacts. In conducting due diligence, our Investment Adviser uses information provided by companies, financial sponsors and publicly available information as well as information from relationships with former and current management teams, consultants, competitors and investment bankers.
Our due diligence may include:
Additional due diligence with respect to any investment may be conducted on our behalf by attorneys and accountants prior to the closing of the investment, as well as other outside advisers, as appropriate.
Upon the completion of due diligence on a portfolio company, the team leading the investment presents the investment opportunity to our Investment Adviser’s investment committee. This committee determines whether to pursue the potential investment. All new investments are required to be reviewed by the investment committee of our Investment Adviser. The members of the investment committee receive no compensation from us. Rather, they are employees of and receive compensation from our Investment Adviser.
Investment Structure
Once we determine that a prospective portfolio company is suitable for investment, we work with the management of that portfolio company and its other capital providers, including senior, junior and equity capital providers, to structure an investment. We negotiate with these parties to agree on how our investment is structured relative to the other capital in the portfolio company’s capital structure.
We expect our floating rate loans to have terms of three to ten years. We generally obtain security interests in the assets of our portfolio companies that will serve as collateral in support of the repayment of these loans. This collateral may take the form of first priority liens on the assets of a portfolio company.
Typically, our second lien secured debt and subordinated debt investments have maturities of three to ten years. Second lien secured debt and subordinated debt may take the form of a second priority lien on the assets of a portfolio company and have interest-only payments in the early years with cash or payment-in-kind, or PIK, payments with amortization of principal deferred to the later years. In some cases, we may invest in debt securities that, by their terms, convert into equity or additional debt securities or defer payments of interest for the first few years after our investment. Also, in some cases, our second lien secured debt and subordinated debt may be collateralized by a subordinated lien on some or all of the assets of the borrower.
We seek to tailor the terms of the investment to the facts and circumstances of the transaction and the prospective portfolio company, negotiating a structure that protects our rights and manages our risk while creating incentives for the portfolio company to achieve its business plan and improve its profitability. For example, in addition to seeking a senior position in the capital structure of our portfolio companies, we seek to limit the downside potential of our investments by:
Our investments may include equity features, such as direct investments in the equity securities of borrowers or warrants or options to buy a minority interest in a portfolio company. Any warrants we may receive with our debt securities generally require only a nominal cost to exercise, so as a portfolio company appreciates in value, we may achieve additional investment return from these equity investments. We may structure the warrants to provide provisions protecting our rights as a minority-interest holder, as well as puts, or rights to sell such securities back to the portfolio company, upon the occurrence of specified events. In many cases, we may also obtain registration rights in connection with these equity investments, which may include demand and “piggyback” registration rights.
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We expect to hold most of our investments to maturity or repayment, but we may exit certain investments earlier when a liquidity event, such as the sale or refinancing of a portfolio company, takes place. We also may turn over investments to better position the portfolio in light of market conditions.
Ongoing Relationships with Portfolio Companies
Monitoring
The Investment Adviser monitors our portfolio companies on an ongoing basis. The Investment Adviser also monitors the financial trends of each portfolio company to determine if it is meeting its respective business plans and to assess the appropriate course of action for each portfolio company.
The Investment Adviser has several methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:
The Investment Adviser monitors credit risk of each portfolio company regularly with a goal toward identifying early, and when able and appropriate, exiting investments with potential credit problems. This monitoring process may include reviewing: (1) a portfolio company’s financial resources and operating history; (2) comparing a portfolio company’s current operating results with the Investment Adviser’s initial thesis for the investment and its expectations for the performance of the investment; (3) a portfolio company’s sensitivity to economic conditions; (4) the performance of a portfolio company’s management; (5) a portfolio company’s debt maturities and capital requirements; (6) a portfolio company’s interest and asset coverage; and (7) the relative value of an investment based on a portfolio company’s anticipated cash flow.
Managerial Assistance
We offer significant managerial assistance to our portfolio companies. As a BDC, we are required to make available such significant managerial assistance within the meaning of Section 2(a)(47) of the 1940 Act. See “Regulation” for more information.
Staffing
We do not currently have any employees. Our Investment Adviser and Administrator have hired and expect to continue to hire professionals with skills applicable to our business plan, including experience in middle-market investing, senior lending, mezzanine lending, leveraged finance, distressed debt and private equity businesses.
Our Corporate Information
Our administrative and principal executive offices are located at 1691 Michigan Avenue, Miami Beach, Florida. Our common stock is quoted on The New York Stock Exchange, under the symbol “PFLT.” Our phone number is (786) 297-9500, and our Internet website address is www.pennantpark.com. Information contained on our website is not incorporated by reference into this Report and you should not consider information contained on our website to be part of this Report. We file periodic reports, proxy statements and other information with the SEC and make such reports available on our website free of charge as soon as reasonably practicable. In addition, the SEC maintains an Internet website at www.sec.gov that contains material that we file with the SEC on the Electronic Data Gathering, Analysis and Retrieval, or EDGAR, Database.
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Our Portfolio
Our principal investment focus is to invest in floating rate loans to U.S. middle-market companies in a variety of industries. We generally seek to target companies that generate positive cash flows from the broad variety of industries in which our Investment Adviser has direct expertise. The following is an illustrative list of the industries in which the Investment Adviser has invested:
• Aerospace and Defense |
|
• Energy/Utilities |
• Auto Sector |
|
• Environmental Services |
• Beverage, Food and Tobacco |
|
• Financial Services |
• Broadcasting and Entertainment |
|
• Grocery |
• Buildings and Real Estate |
|
• Healthcare, Education and Childcare |
• Building Materials |
|
• High Tech Industries |
• Business Services |
|
• Home & Office Furnishings, Housewares & Durable Consumer Products |
• Cable Television |
|
• Hotels, Motels, Inns and Gaming |
• Capital Equipment |
|
• Insurance |
• Cargo Transportation |
|
• Leisure, Amusement, Motion Picture, Entertainment |
• Chemicals, Plastics and Rubber |
|
• Logistics |
• Communications |
|
• Manufacturing/Basic Industries |
• Consumer Products |
|
• Media |
• Consumer Services |
|
• Mining, Steel, Iron and Non-Precious Metals |
• Containers Packaging & Glass |
|
• Oil and Gas |
• Distribution |
|
• Other Media |
• Diversified/Conglomerate Manufacturing |
|
• Personal, Food and Miscellaneous Services |
• Diversified/Conglomerate Services |
|
• Printing and Publishing |
• Diversified Natural Resources, Precious Metals and Minerals |
|
• Retail |
• Education |
|
• Wholesale |
• Electronics |
|
|
Listed below are our top ten portfolio companies and industries represented as a percentage of our consolidated portfolio assets (excluding cash and cash equivalents) as of September 30:
Portfolio Company |
|
2024 (1) |
|
|
Portfolio Company |
|
2023 (1) |
|
||
By Light Professional IT Services, LLC |
|
|
4 |
% |
|
NORA Acquisition, LLC |
|
|
5 |
% |
Marketplace Events LLC |
|
|
3 |
|
|
By Light Professional IT Services, LLC |
|
|
5 |
|
Loving Tan Intermediate II, Inc. |
|
|
3 |
|
|
Marketplace Events LLC |
|
|
4 |
|
C5MI Holdco, LLC |
|
|
3 |
|
|
Lightspeed Buyer Inc. |
|
|
3 |
|
RTIC Parent Holdings, LLC |
|
|
3 |
|
|
Loving Tan Intermediate II, Inc. |
|
|
3 |
|
NFS - CFP Holdings LLC |
|
|
2 |
|
|
Ox Two, LLC |
|
|
3 |
|
ARGANO, LLC |
|
|
2 |
|
|
Lash Opco, LLC |
|
|
3 |
|
Big Top Holdings, LLC |
|
|
2 |
|
|
Apex Service Partners, LLC |
|
|
3 |
|
Aeronix, Inc. |
|
|
2 |
|
|
Kinetic Purchaser, LLC |
|
|
2 |
|
Carnegie Dartlet, LLC |
|
|
2 |
|
|
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
|
2 |
|
Industry |
|
2024 (1) |
|
|
Industry |
|
2023 (1) |
|
||
Professional Services |
|
|
8 |
% |
|
Media |
|
|
9 |
% |
Aerospace and Defense |
|
|
7 |
|
|
Healthcare Providers and Services |
|
|
9 |
|
Healthcare Providers and Services |
|
|
6 |
|
|
Personal Products |
|
|
8 |
|
IT Services |
|
|
6 |
|
|
Professional Services |
|
|
7 |
|
Personal Products |
|
|
6 |
|
|
Aerospace and Defense |
|
|
6 |
|
Diversified Consumer Services |
|
|
5 |
|
|
Media: Diversified and Production |
|
|
6 |
|
Healthcare Technology |
|
|
5 |
|
|
High Tech Industries |
|
|
5 |
|
Media |
|
|
5 |
|
|
Healthcare Technology |
|
|
4 |
|
Leisure Products |
|
|
4 |
|
|
Commercial Services & Supplies |
|
|
4 |
|
Construction & Engineering |
|
|
4 |
|
|
IT Services |
|
|
4 |
|
Our executive officers and directors, as well as the senior investment professionals of the Investment Adviser and Administrator, may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do. Currently, the executive officers and directors, as well as certain of the current senior investment professionals of the Investment Adviser and Administrator, serve as officers and directors of PennantPark Investment Corporation, a publicly traded BDC, and other managed funds, as applicable. Accordingly, they may have obligations to investors in those entities, the fulfillment of which obligations might not be in the best interest of us or our stockholders. In addition, we note that any affiliated investment vehicle currently existing, or formed in the future, and managed by the Investment Adviser and/or its affiliates may, notwithstanding different stated investment objectives, have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, the Investment Adviser may face conflicts in allocating investment opportunities among us and such other entities. The Investment Adviser will allocate investment opportunities in a fair and equitable manner consistent with our allocation policy, and we have received exemptive relief with respect to certain co-investment transactions. Where co-investment is unavailable or inappropriate, the Investment Adviser will choose which investment fund should receive the allocation. See “Risk Factors—Risks Relating to our Business and Structure—There are significant potential conflicts of interest which could impact our investment returns” for more information.
We may invest, to the extent permitted by law, in the securities and instruments of other investment companies and companies that would be investment companies but are excluded from the definition of an investment company provided in Section 3(c) of the 1940 Act. We may also co-invest in the future on a concurrent basis with our affiliates, subject to compliance with applicable regulations, our trade allocation procedures and, if applicable, the terms of our exemptive relief.
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Investment Management Agreement
We have entered into an agreement with the Investment Adviser, or the Investment Management Agreement, under which the Investment Adviser, subject to the overall supervision of our board of directors, manages the day-to-day operations of, and provides investment advisory services to, us. Mr. Penn, our Chairman and Chief Executive Officer, is the managing member and a senior investment professional of, and has a financial and controlling interest in, PennantPark Investment Advisers. PennantPark Floating Rate Capital Ltd., through the Investment Adviser, provides similar services to Funding I under its collateral management agreement. Funding I’s collateral management agreement does not affect the management or incentive fees that we pay to the Investment Adviser on a consolidated basis. Under the terms of our Investment Management Agreement, the Investment Adviser:
PennantPark Investment Advisers’ services under our Investment Management Agreement are not exclusive, and it is free to furnish similar services, without the prior approval of our stockholders or our board of directors, to other entities so long as its services to us are not impaired. Our board of directors monitors for any potential conflicts that may arise upon such a development. For providing these services, the Investment Adviser receives a fee from us, consisting of two components—a base management fee and an incentive fee or, collectively, Management Fees.
Investment Advisory Fees
The base management fee is calculated at an annual rate of 1.00% of our “average adjusted gross assets,” which equals our gross assets (net of U.S. Treasury Bills, temporary draws under any credit facility, cash and cash equivalents, repurchase agreements or other balance sheet transactions undertaken at the end of a fiscal quarter for purposes of preserving investment flexibility for the next quarter and unfunded commitments, if any) and is payable quarterly in arrears. The base management fee is calculated based on the average adjusted gross assets at the end of the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter. For example, if we sold shares on the 45th day of a quarter and did not use the proceeds from the sale to repay outstanding indebtedness, our gross assets for such quarter would give effect to the net proceeds of the issuance for only 45 days of the quarter during which the additional shares were outstanding. For the years ended September 30, 2024, 2023, and 2022, the Company recorded earned a base management expense of $14.9 million, $11.4 million and $11.9 million, respectively.
The following is a hypothetical example of the calculation of average adjusted gross assets:
Gross assets as of December 31, 20XX = $160 million
U.S. Treasury bills and temporary draws on credit facilities as of December 31, 20XX = $10 million
Adjusted gross assets as of December 31, 20XX = $150 million
Gross assets as of March 31, 20XX = $200 million
U.S. Treasury bills and temporary draws on credit facilities as of March 31, 20XX = $20 million
Adjusted gross assets as of March 31, 20XX = $180 million
Average value of adjusted gross assets as of March 31, 20XX and December 31, 20XX, which are the two most recently completed calendar quarters, and appropriately adjusted for any share issuances or repurchases during the current calendar quarter equals ($150 million + $180 million) / 2 = $165 million.
The incentive fee has two parts, as follows:
One part is calculated and payable quarterly in arrears based on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, Pre-Incentive Fee Net Investment Income means interest income, dividend income and any other income, including any other fees (other than fees for providing managerial assistance), such as amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement (as defined below), and any interest expense or amendment fees under any credit facility and distribution paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as original issue discount, or OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a percentage of the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of 1.75% per quarter (7.00% annualized). We pay the Investment Adviser an incentive fee with respect to our Pre-Incentive Fee Net Investment Income in each calendar quarter as follows: (1) no incentive fee in any calendar quarter in which our Pre-Incentive Fee Net Investment Income does not exceed the hurdle rate of 1.75%, (2) 50% of our Pre-Incentive Fee Net Investment Income with respect to that portion of such Pre-Incentive Fee Net Investment Income, if any, that exceeds the hurdle rate but is less than 2.9167% in any calendar quarter (11.67% annualized) (we refer to this portion of our Pre-Incentive Fee Net Investment Income (which exceeds the hurdle but is less than 2.9167%) as the “catch-up,” which is meant to provide our Investment Adviser with 20% of our Pre-Incentive Fee Net Investment Income, as if a hurdle did not apply, if this net investment income exceeds 2.9167% in any calendar quarter), and (3) 20% of the amount of our Pre-Incentive Fee Net Investment Income, if any, that exceeds 2.9167% in any calendar quarter. These calculations are pro-rated for any share issuances or repurchases during the relevant quarter, if applicable. For the years ended September 30, 2024, 2023, and 2022, the Investment Adviser earned $18.1 million, $16.9 million and $11.6 million, respectively, in incentive fees on net investment income from us.
The following is a graphical representation of the calculation of quarterly incentive fee based on Pre-Incentive Fee Net Investment Income:
Pre-Incentive Fee Net Investment Income
(expressed as a percentage of the value of net assets)
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Percentage of Pre-Incentive Fee Net Investment Income
allocated to income-related portion of incentive fee
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date) and equals 20% of our realized capital gains, if any, on a cumulative basis from inception through the end of each calendar year, computed net of all realized capital losses and unrealized capital depreciation on a cumulative basis, less the aggregate amount of any previously paid capital gain incentive fees. For the years ended September 30, 2024, 2023, and 2022, we accrued an incentive fee on capital gains of zero, respectively, as calculated under the Investment Management Agreement (as described above).
Under U.S. generally accepted accounting principles, or GAAP, we are required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, we considered the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to 20% of such amount, less the aggregate amount of actual capital gains related to incentive fees paid or accrued in all prior years. If such amount is negative, then there is no accrual for such year. There can be no assurance that such unrealized capital appreciation will be realized in the future. The incentive fee accrued for under GAAP on our unrealized and realized capital gains for the years ended September 30, 2024, 2023, and 2022 was zero, respectively.
Examples of Quarterly Incentive Fee Calculation
Example 1: Income Related Portion of Incentive Fee (*):
Alternative 1:
Assumptions
Investment income (including interest, dividends, fees, etc.) = 1.25%
Hurdle (1) = 1.75%
Base management fee (2) = 0.25%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-Incentive Fee Net Investment Income
(investment income—(base management fee + other expenses)) = 0.80%
Pre-Incentive Fee Net Investment Income does not exceed hurdle; therefore, there is no incentive fee.
Alternative 2:
Assumptions
Investment income (including interest, dividends, fees, etc.) = 2.70%
Hurdle (1) = 1.75%
Base management fee (2) = 0.25%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-Incentive Fee Net Investment Income
(investment income—(base management fee + other expenses)) = 2.25%
|
Incentive fee |
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= 50% X Pre-Incentive Fee Net Investment Income, subject to “catch-up” |
|
|
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= 50% X (2.25% - 1.75%) |
|
|
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= 0.25% |
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Alternative 3:
Assumptions
Investment income (including interest, dividends, fees, etc.) = 4.00%
Hurdle (1) = 1.75%
Base management fee (2) = 0.25%
Other expenses (legal, accounting, custodian, transfer agent, etc.) = 0.20%
Pre-Incentive Fee Net Investment Income
(investment income—(base management fee + other expenses)) = 3.55%
|
Incentive fee |
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= 20% X Pre-Incentive Fee Net Investment Income, subject to “catch-up” (3) |
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Incentive fee |
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= 50% X “catch-up” + (20% x (Pre-Incentive Fee Net Investment Income - 2.9167%)) |
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Catch-up |
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= 2.9167% - 1.75% |
|
|
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= 1.1667% |
|
|
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= (50% X 1.1667%) + (20% X (3.55% - 2.9167%)) |
|
|
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= 0.5833% + (20% X 0.6333%) |
|
|
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= 0.5833% + 0.1267% |
|
|
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= 0.71% |
* The hypothetical amount of Pre-Incentive Fee Net Investment Income shown is based on a percentage of total net assets.
Example 2: Capital Gains Portion of Incentive Fee:
Alternative 1:
Assumptions
Year 1: $20 million investment made in Company A (“Investment A”), and $30 million investment made in Company B (“Investment B”)
Year 2: Investment A sold for $50 million and fair market value (“FMV”) of Investment B determined to be $32 million
Year 3: FMV of Investment B determined to be $25 million
Year 4: Investment B sold for $31 million
The capital gains portion of the incentive fee, if any, would be:
Year 1: None
Year 2: $6 million capital gains incentive fee
$30 million realized capital gains on sale of Investment A multiplied by 20%
Year 3: None
$5 million cumulative fee (20% multiplied by $25 million ($30 million cumulative capital gains less $5 million cumulative capital depreciation)) less $6 million (previous capital gains fee paid in Year 2)
Year 4: $200,000 capital gains incentive fee
$6.2 million cumulative fee ($31 million cumulative realized capital gains multiplied by 20%) less $6 million (previous capital gains fee paid in Year 2).
Alternative 2:
Assumptions
Year 1: $20 million investment made in Company A (“Investment A”), $30 million investment made in Company B (“Investment B”) and $25 million investment made in Company C (“Investment C”)
Year 2: Investment A sold for $50 million, FMV of Investment B determined to be $25 million and FMV of Investment C determined to be $25 million
Year 3: FMV of Investment B determined to be $27 million and Investment C sold for $30 million
Year 4: FMV of Investment B determined to be $35 million
Year 5: Investment B sold for $20 million
The capital gains portion of the incentive fee, if any, would be:
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Year 1: None
Year 2: $5 million capital gains incentive fee
20% multiplied by $25 million ($30 million realized capital gains on sale of Investment A less $5 million unrealized capital depreciation on Investment B)
Year 3: $1.4 million capital gains incentive fee (1)
$6.4 million cumulative fee (20% multiplied by $32 million ($35 million cumulative realized capital gains less $3 million unrealized capital depreciation)) less $5 million (previous capital gains fee paid in Year 2)
Year 4: $0.6 million capital gains incentive fee
$7 million cumulative fee (20% multiplied by $35 million ($35 million cumulative realized capital gains without regard to $5 million of unrealized appreciation)) less $6.4 million (previous cumulative capital gains fee paid in Year 2 of $5 million and Year 3 of $1.4 million)
Year 5: None
$7 million cumulative fee (20% multiplied by $35 million ($35 million cumulative realized capital gains without regard to $10 million realized capital losses in subsequent year)) less $7 million (previous cumulative capital gains fee paid in Years 2, 3 and Year 4)
Organization of the Investment Adviser
PennantPark Investment Advisers is a registered investment adviser under the Investment Advisers Act of 1940, as amended, or Advisers Act. The principal executive office of PennantPark Investment Advisers is located at 1691 Michigan Avenue, Miami Beach, Florida 33139.
Duration and Termination of Investment Management Agreement
The Investment Management Agreement was reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in May 2024. Unless terminated earlier as described below, the Investment Management Agreement will continue in effect for a period of one year through May 2025. It will remain in effect if approved annually by our board of directors, or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons of us or the Investment Adviser. In determining to reapprove the Investment Management Agreement, our board of directors requested information from the Investment Adviser that enabled it to evaluate a number of factors relevant to its determination. These factors included the nature, quality and extent of services performed by the Investment Adviser, the Investment Adviser’s ability to manage conflicts of interest effectively, our short and long-term performance, our costs, including as compared to comparable externally and internally managed publicly traded BDCs that engage in similar investing activities, the Investment Adviser’s profitability, any economies of scale, and any other benefits of the relationship for the Investment Adviser. Based on the information reviewed and the considerations detailed above, our board of directors, including all of our directors who are not interested persons of us or the Investment Adviser, concluded that the investment advisory fee rates and terms are fair and reasonable in relation to the services provided and reapproved the Investment Management Agreement as being in the best interests of our stockholders.
The Investment Management Agreement will automatically terminate in the event of its assignment. The Investment Management Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other. See “Risk Factors—Risks Relating to our Business and Structure—We are dependent upon our Investment Adviser’s key personnel for our future success, and if our Investment Adviser is unable to hire and retain qualified personnel or if our Investment Adviser loses any member of its management team, our ability to achieve our investment objectives could be significantly harmed” for more information.
Administration Agreement
We have entered into an agreement, or the Administration Agreement, with the Administrator, under which the Administrator furnishes us with office facilities, equipment and clerical, bookkeeping and record keeping services. Under our Administration Agreement, the Administrator performs, or oversees the performance of, our required administrative services, which include, among other activities, being responsible for the financial records we are required to maintain and preparing reports to our stockholders and reports filed with the SEC. In addition, the Administrator assists us in determining and publishing our NAV, oversees the preparation and filing of our tax returns and generally oversees the payment of our expenses and the performance of administrative and professional services rendered to us by others. For providing these services, facilities and personnel, we have agreed to reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent, technology systems, insurance and our allocable portion of the cost of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer, Corporate Counsel and their respective staffs. The Administrator also offers on our behalf, significant managerial assistance to portfolio companies to which we are required to offer such assistance. To the extent that our Administrator outsources any of its functions, we will pay the fees associated with such functions on a direct basis without profit to the Administrator. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statements of Operations. For the years ended September 30, 2024, 2023 and 2022, we recorded administrative expenses of approximately $2.2 million, $1.0 million and $0.6 million, respectively.
On July 1, 2022, the Administration Agreement with the Administrator was amended to clarify that the Administrator may be reimbursed by the Company for certain (i) tax and general legal advice and/or services provided to the Company by in-house professionals of the Administrator related to ongoing operations of the Company; and (ii) transactional legal advice and/or services provided to the Company or portfolio companies by in-house professionals of the Administrator or its affiliates on matters related to potential or actual investments and transactions, including tax structuring and/or due diligence.
Duration and Termination of Administration Agreement
The Administration Agreement was reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in May 2024. Unless terminated earlier as described below, our Administration Agreement will continue in effect for a period of one year through May 2025. It will remain in effect if approved annually by our board of directors, or by the affirmative vote of the holders of a majority of our outstanding voting securities, including, in either case, approval by a majority of our directors who are not interested persons of us. The Administration Agreement may not be assigned by either party without the consent of the other party. The Administration Agreement may be terminated by either party without penalty upon 60 days’ written notice to the other.
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Indemnification
Our Investment Management Agreement and Administration Agreement provide that, absent willful misfeasance, bad faith or gross negligence in the performance of their duties or by reason of the reckless disregard of their duties and obligations, PennantPark Investment Advisers and PennantPark Investment Administration and their officers, managers, partners, agents, employees, controlling persons, members and any other person or entity affiliated with them are entitled to indemnification from us for any damages, liabilities, costs and expenses (including reasonable attorneys’ fees and amounts reasonably paid in settlement) arising from the rendering of PennantPark Investment Advisers’ and PennantPark Investment Administration’s services under our Investment Management Agreement or Administration Agreement or otherwise as Investment Adviser or Administrator for us.
License Agreement
We have entered into a license agreement, or the License Agreement, with PennantPark Investment Advisers pursuant to which PennantPark Investment Advisers has granted us a royalty-free, non-exclusive license to use the name “PennantPark.” Under this agreement, we have a right to use the PennantPark name, for so long as PennantPark Investment Advisers or one of its affiliates remains our Investment Adviser. Other than with respect to this limited license, we have no legal right to the “PennantPark” name.
PennantPark Senior Secured Loan Fund I LLC
In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. As of September 30, 2024 and 2023, PSSL had total assets of $988.1 million and $869.4 million, respectively. PSSL’s portfolio consisted of investments in 109 portfolio companies as of September 30, 2024. As of September 30, 2024, at fair value, the largest investment in a single portfolio company in PSSL was $21.3 million and the five largest investments totaled $97.3 million. PSSL invests in portfolio companies in the same industries in which we may directly invest. As of September 30, 2023, at fair value, the largest investment in a single portfolio company in PSSL was $18.5 million and the five largest investments totaled $83.4 million.
We provide capital to PSSL in the form of first lien secured debt and equity interests. As of September 30, 2024 and 2023, we and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding first lien secured debt and equity interests. As of September 30, 2024 and 2023, our investment made in PSSL consisted of first lien secured debt of $237.7 million (zero unfunded) and $210.1 million (additional $27.6 million unfunded), respectively, and equity interests of $101.9 million (zero unfunded) and $90.0 million (additional $11.8 million unfunded), respectively.
REGULATION
Business Development Company and Regulated Investment Company Regulations
We are a BDC under the 1940 Act, which has qualified and intends to continue to qualify to maintain an election to be treated as a RIC under Subchapter M of the Code. The 1940 Act contains prohibitions and restrictions relating to transactions between a BDC and its affiliates (including any investment advisers or sub-advisers), principal underwriters and affiliates of those affiliates or underwriters and requires that a majority of the directors be persons other than “interested persons,” as that term is defined in the 1940 Act. In addition, the 1940 Act provides that we may not change the nature of our business so as to cease to be, or to withdraw our election as, a BDC unless approved by holders of a majority of our outstanding voting securities.
We may invest up to 100% of our assets in securities acquired directly from issuers in privately negotiated transactions. With respect to such securities, we may, for the purpose of public resale, be deemed an “underwriter” as that term is defined in the Securities Act of 1933, as amended, or the Securities Act. We may purchase or otherwise receive warrants to purchase the common stock of our portfolio companies in connection with acquisition financing or other investments. Similarly, in connection with an acquisition, we may acquire rights to require the issuers of securities we own or their affiliates to repurchase them under certain circumstances. We do not intend to acquire securities issued by any registered investment company that exceed the limits imposed by the 1940 Act. Under these limits, we generally cannot acquire more than 3% of the voting stock of any registered investment company, invest more than 5% of the value of our total assets in the securities of one registered investment company or invest more than 10% of the value of our total assets in the securities of more than one registered investment company. With regard to that portion of our portfolio invested in securities issued by investment companies, it should be noted that such investments might subject our stockholders to additional expenses. We may enter into hedging transactions to manage the risks associated with interest rate and currency fluctuations. None of these policies are fundamental and they may be changed without stockholder approval.
Qualifying Assets
Under the 1940 Act, a BDC may not acquire any asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as qualifying assets, unless, at the time the acquisition is made, qualifying assets represent at least 70% of the BDC’s total assets. The principal categories of qualifying assets relevant to our business are the following:
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In addition, a BDC must have been organized and have its principal place of business in the United States and must be operated for the purpose of making investments in the types of securities described in (1), (2) or (3) above.
Managerial Assistance to Portfolio Companies
As a BDC, we are required to make available significant managerial assistance to our portfolio companies that constitute a qualifying asset within the meaning of Section 2(a)(47) of the 1940 Act. However, if a BDC purchases securities in conjunction with one or more other persons acting together, one of the other persons in the group may make available such significant managerial assistance. Making available significant managerial assistance means any arrangement whereby the BDC, through its directors, officers or employees, offers to provide, and, if accepted, does provide, significant guidance and counsel concerning the management, operations or business objectives and policies of a portfolio company. Our Administrator may provide such assistance on our behalf to portfolio companies that request such assistance. Officers of our Investment Adviser and Administrator may provide assistance to controlled affiliates.
Temporary Investments
Pending investments in other types of qualifying assets, as described above, may consist of cash, cash equivalents, U.S. government securities or high-quality debt securities maturing in one year or less from the time of investment, which we refer to, collectively, as temporary investments, so that 70% of our assets are qualifying assets. We may invest in U.S. Treasury bills or in repurchase agreements, provided that such agreements are fully collateralized by cash or securities issued by the U.S. government or its agencies. A repurchase agreement involves the purchase by an investor, such as us, of a specified security and the simultaneous agreement by the seller to repurchase it at an agreed-upon future date and at a price which is greater than the purchase price by an amount that reflects an agreed-upon interest rate. There is no percentage restriction on the proportion of our assets that may be invested in such repurchase agreements. However, if more than 25% of our total assets constitute repurchase agreements from a single counterparty, we would not meet the Diversification Tests, as defined below under “Regulation—Election to be Treated as a RIC,” in order to qualify as a RIC for federal income tax purposes. Thus, we do not intend to enter into repurchase agreements with a single counterparty in excess of this limit. Our Investment Adviser will monitor the creditworthiness of the counterparties with which we may enter into repurchase agreement transactions.
Senior Securities
We are permitted, under specified conditions, to issue multiple classes of indebtedness and one class of stock senior to our common stock if our asset coverage, as defined in the 1940 Act and referred to as the asset coverage ratio, is compliant with the 1940 Act, immediately after each such issuance. In addition, while any senior securities remain outstanding, we must make provisions to prohibit any distribution to our stockholders or the repurchase of such securities or shares unless we meet the applicable asset coverage requirement at the time of the distribution or repurchase. We may also borrow amounts up to 5% of the value of our total assets for temporary or emergency purposes without regard to our asset coverage ratio. For a discussion of the risks associated with leverage, see “Risk Factors—Risks Relating to our Business and Structure—Regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital” for more information.
Joint Code of Ethics and Code of Conduct
We and PennantPark Investment Advisers have adopted a joint code of ethics pursuant to Rule 17j-1 under the 1940 Act and a code of conduct that establish procedures for personal immaterial investments and restricts certain personal securities transactions. Personnel subject to each code may invest in securities for their personal investment accounts, including securities that may be purchased or held by us, so long as such investments are made in accordance with the codes’ requirements. Our joint code of ethics and code of conduct are available, free of charge, on our website at www.pennantpark.com. In addition, the joint code of ethics is attached as an exhibit to this Report and is available on the EDGAR Database on the SEC’s Internet website at www.sec.gov.
Proxy Voting Policies and Procedures
We have delegated our proxy voting responsibility to our Investment Adviser. The Proxy Voting Policies and Procedures of our Investment Adviser are set forth below. The guidelines are reviewed periodically by our Investment Adviser and our non-interested directors, and, accordingly, are subject to change. For purposes of these Proxy Voting Policies and Procedures described below, “we,” “our” and “us” refer to our Investment Adviser.
Introduction
As an investment adviser registered under the Advisers Act, we have a fiduciary duty to act solely in the best interests of our clients. As part of this duty, we recognize that we must vote client securities in a timely manner free of conflicts of interest and in the best interests of our clients.
These policies and procedures for voting proxies for our investment advisory clients are intended to comply with Section 206 of, and Rule 206(4)-6 under, the Advisers Act.
Proxy Policies
We vote proxies relating to our portfolio securities in what we perceive to be the best interests of our stockholders. We review on a case-by-case basis each proposal submitted to a stockholder vote to determine its impact on the portfolio securities held by our clients. Although we will generally vote against proposals that may have a negative impact on our clients’ portfolio securities, we may vote for such a proposal if there exists compelling long-term reasons to do so.
Our proxy voting decisions are made by the senior investment professionals who are responsible for monitoring each of our clients’ investments. To ensure that our vote is not the product of a conflict of interest, we require that: (1) anyone involved in the decision making process disclose to our Chief Compliance Officer any potential conflict that he or she is aware of and any contact that he or she has had with any interested party regarding a proxy vote; and (2) employees involved in the decision making process or vote administration are prohibited from revealing how we intend to vote on a proposal in order to reduce any attempted influence from interested parties.
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Proxy Voting Records
You may obtain information about how we voted proxies, free of charge, by calling us collect at (786) 297-9500 or by making a written request for proxy voting information to: Richard T. Allorto Jr., Chief Financial Officer and Treasurer, 1691 Michigan Ave, Miami Beach, Florida 33139.
Privacy Protection Principles
We are committed to maintaining the privacy of our stockholders and to safeguarding their non-public personal information. The following information is provided to help you understand what personal information we collect, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, we do not receive any non-public personal information relating to our stockholders, although certain non-public personal information of our stockholders may become available to us. We do not disclose any non-public personal information about our stockholders or former stockholders to anyone, except as permitted by law or as is necessary in order to service stockholder accounts (for example, to a transfer agent or third party administrator).
We restrict access to non-public personal information about our stockholders to employees of our Investment Adviser and its affiliates with a legitimate business need for the information. We maintain physical, electronic and procedural safeguards designed to protect the non-public personal information of our stockholders.
Our privacy protection policies are available, free of charge, on our website at www.pennantpark.com. In addition, the privacy policy is available on the EDGAR Database on the SEC’s Internet website at www.sec.gov, filed as an exhibit to our annual report on this Form 10-K.
Other
We may also be prohibited under the 1940 Act from knowingly participating in certain transactions with our affiliates without the prior approval of our board of directors, including a majority of our directors who are not interested persons of us, and, in some cases, prior approval by the SEC.
We will be periodically examined by the SEC for compliance with the 1940 Act.
We are required by law to provide and maintain a bond issued by a reputable fidelity insurance company to protect us against larceny and embezzlement. Furthermore, as a BDC, we are prohibited from protecting any director or officer against any liability to us or our stockholders arising from willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of such person’s office.
We and PennantPark Investment Advisers have each adopted and implemented written policies and procedures reasonably designed to prevent violation of the federal securities laws. We review these policies and procedures annually for their adequacy and the effectiveness of their implementation, and we designate a Chief Compliance Officer to be responsible for administering the policies and procedures.
Sarbanes-Oxley Act of 2002
The Sarbanes-Oxley Act of 2002, as amended, or the Sarbanes-Oxley Act, imposes several regulatory requirements on publicly held companies and their insiders. Many of these requirements affect us.
For example:
The Sarbanes-Oxley Act requires us to review our current policies and procedures to determine whether we comply with the Sarbanes-Oxley Act and the regulations promulgated there-under. We continue to monitor our compliance with all regulations that are adopted under the Sarbanes-Oxley Act and continue to take actions necessary to ensure that we are in compliance with that act.
Election to be Treated as a RIC
We have elected to be treated, and intend to qualify annually to maintain our election to be treated, as a RIC under Subchapter M of the Code. To maintain our RIC tax election, we must, among other requirements, meet certain annual source-of-income and quarterly asset diversification requirements (as described below). We also must annually distribute dividends for U.S. federal income tax purposes to our stockholders of an amount generally at least equal to 90% of the sum of our ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, or investment company taxable income, and determined without regard to any deduction for dividends paid, out of the assets legally available for distribution, or the Annual Distribution Requirement.
In order to qualify as a RIC for federal income tax purposes, we must:
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Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute dividends for U.S. federal income tax purposes to our stockholders in respect of each calendar year of an amount at least equal to the sum of (1) 98% of our net ordinary income (subject to certain deferrals and elections) for the calendar year, (2) 98.2% of the excess, if any, of our capital gains over our capital losses, or capital gain net income (adjusted for certain ordinary losses) for the one-year period ending on October 31 of the calendar year plus (3) the sum of any net ordinary income plus capital gain net income for preceding years that was not distributed during such years and on which we did not incur any federal income tax, or the Excise Tax Avoidance Requirement. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, out of the assets legally available for such distributions in the manner described above, we have retained and may continue to retain such net capital gains or investment company taxable income, subject to maintaining our ability to be taxed as a RIC, in order to provide us with additional liquidity.
While we intend to make sufficient distributions each taxable year to avoid incurring any material U.S. federal excise tax on our earnings, we may not be able to, or may choose not to, distribute amounts sufficient to avoid the imposition of the tax entirely. In that event, we generally will be liable for the excise tax only on the amount by which we do not meet the Excise Tax Avoidance Requirement. Under certain circumstances, however, we may, in our sole discretion, determine that it is in our best interests to retain a portion of our income or capital gains rather than distribute such amount as dividends and accordingly cause us to bear the excise tax burden associated therewith.
We may invest in partnerships which may result in our being subject to additional state, local or foreign income, franchise or other tax liabilities. In addition, some of the income and fees that we may recognize will not satisfy the 90% Income Test. In order to mitigate the risk that such income and fees would disqualify us as a RIC as a result of a failure to satisfy the 90% Income Test, we may be required to recognize such income and fees indirectly through the Taxable Subsidiary, which is classified as a corporation for U.S. federal income tax purposes. The Taxable Subsidiary generally will be subject to corporate income taxes on its earnings, which ultimately will reduce our return on such income and fees.
Taxation as a RIC
If we qualify as a RIC, and satisfy the Annual Distribution Requirement, then we will not be subject to federal income tax on the portion of our investment company taxable income and net capital gains, determined without regard to any deduction for dividends paid, we distribute (or are deemed to distribute) as dividends for U.S. federal income tax purposes to stockholders. Additionally, upon satisfying these requirements, we will be subject to U.S. federal income tax at the regular corporate rates on any investment company taxable income or net capital gains, determined without regard to any deduction for dividends paid, that is not distributed (or not deemed to have been distributed) as dividends for U.S. federal income tax purposes to our stockholders.
We may be required to recognize taxable income in circumstances in which we do not receive cash. For example, if we hold a debt instrument that is treated under applicable tax rules as having OID (such as debt instruments with PIK interest or, in certain cases, increasing interest rates or issued with warrants), we must include in income each taxable year a portion of the OID that accrues over the life of the debt instrument, regardless of whether cash representing such income is received by us in the same taxable year. Because any OID accrued will be included in our investment company taxable income in the taxable year of accrual, we may be required to make a distribution to our stockholders in order to satisfy the Annual Distribution Requirement, even though we will not have received any corresponding cash amount.
We invest in below investment grade instruments. Investments in these types of instruments may present special tax issues for us. U.S. federal income tax rules are not entirely clear about issues such as when we may cease to accrue interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless debt instruments, how payments received on obligations in default should be allocated between principal and income and whether exchanges of debt instruments in a bankruptcy or workout context are taxable. We will address these and other issues to the extent necessary in order to continue to maintain our qualification to be subject to tax as a RIC.
Gain or loss realized by us from equity securities and warrants acquired by us, as well as any loss attributable to the lapse of such warrants, generally will be treated as capital gain or loss. Such gain or loss generally will be long-term or short-term, depending on how long we held a particular warrant.
We are authorized to borrow funds and to sell assets in order to satisfy our Annual Distribution Requirement or the Excise Tax Avoidance Requirement. However, under the 1940 Act, we are not permitted to make distributions to our stockholders while our debt instruments and other senior securities are outstanding unless certain asset coverage requirements are met. Moreover, our ability to dispose of assets to meet our distribution requirements may be limited by (1) the illiquid nature of our portfolio and/or (2) other requirements relating to our status as a RIC, including the Diversification Tests. If we dispose of assets in order to meet the Annual Distribution Requirement or the Excise Tax Avoidance Requirement, we may make such dispositions at times that, from an investment standpoint, are not advantageous.
We may distribute our common stock as a dividend from our taxable income and a stockholder could receive a portion of such distributions declared and distributed by us in shares of our common stock with the remaining amount in cash. A stockholder will be considered to have recognized dividend income generally equal to the fair market value of the stock paid by us plus cash received with respect to such dividend. The total dividend declared and distributed by us would be taxable income to a stockholder even though only a small portion of the dividend was paid in cash to pay any taxes due on the total dividend. We have not yet elected to distribute stock as a dividend but reserve the right to do so.
Failure to Qualify as a RIC
If we fail to satisfy the Annual Distribution Requirement or fail to qualify as a RIC in any taxable year, unless certain cure provisions of the Code apply, we will be subject to tax in that taxable year on all of our taxable income at regular corporate rates, regardless of whether we make any dividend distributions to our stockholders. In that case, all of our income will be subject to corporate-level federal income tax, reducing the amount available to be distributed to our stockholders. In contrast, assuming we qualify as a RIC, our corporate-level federal income tax should be substantially reduced or eliminated. See “Election to be Treated as a RIC” above for more information.
If we are unable to maintain our status as a RIC, we also would not be able to deduct distributions to stockholders, nor would distributions be required to be made. Distributions would generally be taxable as dividends to our stockholders to the extent of our current and accumulated earnings and profits. Subject to certain limitations under the Code, U.S. non-corporate stockholders generally would be eligible to treat such dividends as “qualified dividend income,” which generally would be subject to reduced rates of U.S. federal income tax, and dividends paid by us to certain U.S. corporate stockholders would be eligible for the dividends received deduction. Distributions in excess of our current and accumulated earnings and profits would be treated first as a return of capital to the extent of the stockholder’s tax basis in our
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common stock, and any remaining distributions would be treated as a capital gain. Moreover, if we fail to qualify as a RIC in any taxable year, to qualify again to be treated as a RIC for federal income tax purposes in a subsequent taxable year, we would be required to distribute our earnings and profits attributable to any of our non-RIC taxable years as dividends to our stockholders. In addition, if we fail to qualify as a RIC for a period greater than two consecutive taxable years, to qualify as a RIC in a subsequent taxable year we may be subject to regular corporate tax on any net built-in gains with respect to certain of our assets (that is, the excess of the aggregate gains, including items of income, over aggregate losses that would have been realized with respect to such assets if we had sold the property at fair market value at the end of the taxable year) that we elect to recognize on requalification or when recognized over the next five taxable years.
Item 1A. Risk Factors
Before you invest in our securities, you should be aware of various risks, including those described below. You should carefully consider these risk factors, together with all of the other information included in this Report, before you decide whether to make an investment in our securities. The risks set out below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may have a material adverse effect on our business, financial condition and/or operating results. If any of the following events occur, our business, financial condition and results of operations could be materially adversely affected. In such case, our NAV, the trading price of our common stock, or any securities we may issue, may decline, and an investor may lose all or part of an investment.
RISKS RELATING TO OUR BUSINESS AND STRUCTURE
We are subject to various covenants under Funding I’s Credit Facility which, if not complied with, could result in reduced availability and/or mandatory prepayments under Funding I’s Credit Facility, our 2026 Notes, our 2031 Asset-Backed Debt, 2036-R Asset-Backed Debt, and our 2036 Asset-Backed Debt.
In addition to the asset coverage ratio requirements, the Credit Facility contains various covenants applicable to Funding I, which restricts our ability to borrow funds, and, the indenture governing our 2026 Notes, the indentures governing our 2031 Asset-Backed Debt, 2036-R Asset-Backed Debt, the indenture governing our 2036 Asset-Backed Debt contain various covenants which, if not complied with, could accelerate repayment of the 2026 Notes, the 2031 Asset-Backed Debt, the 2036-R Asset-Backed Debt, and the 2036 Asset-Backed Debt, respectively. For example, the Credit Facility’s income coverage covenant, or test, requires us to maintain a ratio whereby the aggregate amount of interest received on the portfolio loans must equal at least 125% of the interest payable in respect to the Lenders and other parties. Failure to satisfy the various covenants under the Credit Facility could accelerate repayment under the Credit Facility or otherwise prevent us from receiving distributions under the payment waterfall. This could materially and adversely affect our liquidity, financial condition and results of operations. Funding I’s borrowings under the Credit Facility are collateralized by the assets in Funding I’s investment portfolio. The agreements governing the Credit Facility require Funding I to comply with certain financial and operational covenants. These covenants include:
Our continued compliance with these covenants depends on many factors, some of which are beyond our control. A material decrease in our NAV in connection with additional borrowings could result in an inability to comply with our obligation to restrict the level of indebtedness that we are able to incur in relation to the value of our assets or to maintain a minimum level of stockholders’ equity in Funding I or to result in the ability of the trustee and our note holders to accelerate amounts due under the indenture governing our 2026 Notes or the indenture governing our 2031 Asset-Backed Debt, 2036-R Asset-Backed Debt or 2036 Asset-Backed Debt. This could have a material adverse effect on our operations, as it would reduce availability under the Credit Facility and could trigger mandatory prepayment obligations under the terms of the Credit Facility.
We operate in a highly competitive market for investment opportunities.
A number of entities compete with us to make the types of investments that we make in middle-market companies. We compete with public and private funds, including other BDCs, commercial and investment banks, commercial financing companies, CLO funds and, to the extent they provide an alternative form of financing, private equity funds. Additionally, alternative investment vehicles, such as hedge funds, also invest in middle-market companies. As a result, competition for investment opportunities at middle-market companies can be intense. Many of our potential competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. For example, we believe some competitors have a lower cost of funds and access to funding sources that are not available to us. In addition, some of our competitors have higher risk tolerances or different risk assessments, which could allow them to consider a wider variety of investments and establish more relationships than us. Furthermore, many of our competitors are not subject to the regulatory restrictions that the 1940 Act imposes on us as a BDC. We cannot assure you that the competitive pressures we face will not have a material adverse effect on our business, financial condition and results of operations. Also, as a result of this competition, we may not be able to take advantage of attractive investment opportunities from time to time, and we can offer no assurance that we will be able to identify and make investments that are consistent with our investment objectives.
Participants in our industry compete on several factors, including price, flexibility in transaction structuring, customer service, reputation, market knowledge and speed in decision-making. We do not seek to compete primarily based on the interest rates we offer, and we believe that some of our competitors may make loans with interest rates that are lower than the rates we offer. We may lose investment opportunities if we do not match our competitors’ pricing, terms and structure. However, if we match our competitors’ pricing, terms and structure, we may experience decreased net interest income and increased risk of credit loss.
Our borrowers may default on their payments, which may have a materially negative effect on our financial performance.
Our primary business exposes us to credit risk, and the quality of our portfolio has a significant impact on our earnings. Credit risk is a component of our fair valuation of our portfolio companies. Negative credit events will lead to a decrease in the fair value of our portfolio companies.
In addition, market conditions have affected consumer confidence levels, which may harm the business of our portfolio companies and result in adverse changes in payment patterns. Increased delinquencies and default rates would negatively impact our results of operations. Deterioration in the credit quality of our portfolio could have a material adverse effect on our business, financial condition and results of operations. If interest rates rise, some of our portfolio companies may not be able to pay the escalating interest on our loans and may default.
We make long-term loans and debt investments, which may involve a high degree of repayment risk. Our investments with a deferred interest feature, such as OID income and PIK interest, could represent a higher credit risk than investments that must pay interest in full in cash on a regular basis. We invest in companies that may have limited financial resources, typically are highly leveraged and may be unable to obtain financing from traditional sources. Accordingly, a general economic downturn or severe tightening in the credit markets could materially impact the ability of our borrowers to repay their loans, which could significantly damage our business. Numerous other factors may affect a borrower’s ability to repay its loan, including the failure to meet its business plan or a downturn in its industry. A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and, potentially, termination of its loans or foreclosure on the secured assets.
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This could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the loans or debt securities that we hold. In addition, our portfolio companies may have, or may be permitted to incur, other debt that ranks senior to or equally with our securities. This means that payments on such senior-ranking securities may have to be made before we receive any payments on our subordinated loans or debt securities. Deterioration in a borrower’s financial condition and prospects may be accompanied by deterioration in any related collateral and may adversely affect our financial condition and results of operations.
Any unrealized losses we experience on our investment portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
As a BDC, we are required to carry our investments at fair value, which is derived from a market value or, if no market value is ascertainable or if market value does not reflect the fair value of such investment in the bona fide determination of our board of directors, then we would carry our investments at fair value as determined in good faith by or under the direction of our board of directors. Decreases in the market values or fair values of our investments are recorded as unrealized depreciation or loss. Unrealized losses of any given portfolio company could be an indication of such company’s inability in the future to meet its repayment obligations to us.
If the fair value of our portfolio companies reflects unrealized losses that are subsequently realized, we could experience reductions of our income available for distribution in future periods that could materially harm our results of operations and cause a material decline in the value of our publicly traded common stock.
We are dependent upon our Investment Adviser’s key personnel for our future success, and if our Investment Adviser is unable to hire and retain qualified personnel or if our Investment Adviser loses any member of its management team, our ability to achieve our investment objectives could be significantly harmed.
We depend on the diligence, skill and network of business contacts of the senior investment professionals of our Investment Adviser for our future success. We also depend, to a significant extent, on PennantPark Investment Advisers’ access to the investment information and deal flow generated by these senior investment professionals and any others that may be hired by PennantPark Investment Advisers. Subject to the overall supervision of our board of directors, the managers of our Investment Adviser evaluate, negotiate, structure, close and monitor our investments. Our future success depends on the continued service of management personnel of our Investment Adviser. The departure of managers of PennantPark Investment Advisers could have a material adverse effect on our ability to achieve our investment objectives. In addition, we can offer no assurance that PennantPark Investment Advisers will remain our Investment Adviser. The Investment Adviser has the right, under the Investment Management Agreement, to resign at any time upon 60 days’ written notice, whether we have found a replacement or not.
If our Investment Management Agreement is terminated, our costs under new agreements that we enter into may increase. In addition, we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement. Any new investment management agreement would also be subject to approval by our stockholders.
We are exposed to risks associated with changes in interest rates that may affect our cost of capital and net investment income.
Since we borrow money to make investments, our net investment income depends, in part, upon the difference between the rate at which we borrow funds and the rate at which we invest those funds. As a result, we can offer no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income. In periods of rising interest rates, our cost of funds will increase and the interest rate on investments with an interest rate floor will not increase until interest rates exceed the applicable floor, which will reduce our net investment income. We may use interest rate risk management techniques, such as total return swaps and interest rate swaps, in an effort to limit our exposure to interest rate fluctuations. These techniques may include various interest rate hedging activities to the extent permitted by the 1940 Act and applicable commodities laws. These activities may limit our ability to participate in the benefits of lower interest rates with respect to the hedged portfolio. Adverse developments resulting from changes in interest rates or hedging transactions could have a material adverse effect on our business, financial condition and results of operations. Also, we have limited experience in entering into hedging transactions and we will initially have to purchase or develop such expertise, which may diminish the actual benefits of any hedging strategy we employ. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk” for more information.
A rise in the general level of interest rates can be expected to lead to higher interest rates applicable to our debt investments once the interest rate exceeds the applicable floor. Accordingly, an increase in interest rates would make it easier for us to meet or exceed the incentive fee hurdle and may result in a substantial increase of the amount of incentive fees payable to our Investment Adviser with respect to Pre-Incentive Fee Net Investment Income.
General interest rate fluctuations may have a substantial negative impact on our investments, the value of our common stock and our rate of return on invested capital. A reduction in interest rates may result in both lower interest rates on new investments and higher repayments on current investments with higher interest rates, which may have an adverse impact on our net investment income. An increase in interest rates could decrease the value of any investments we hold which earn fixed interest rates or are subject to interest rate floors and also could increase our interest expense on the Credit Facility, thereby decreasing our net investment income. Also, an increase in interest rates available to investors could make an investment in our common stock less attractive if we are not able to increase our dividend rate, which could reduce the value of our common stock.
If general interest rates rise, there is a risk that the portfolio companies in which we hold floating rate securities will be unable to pay escalating interest amounts, which could result in a default under their loan documents with us. Rising interest rates could also cause portfolio companies to shift cash from other productive uses to the payment of interest, which may have a material adverse effect on their business and operations and could, over time, lead to increased defaults. In addition, rising interest rates may increase pressure on us to provide fixed rate loans to our portfolio companies, which could adversely affect our net investment income, as any increases in our cost of borrowed funds would not be accompanied by increased interest income from such fixed-rate investments.
Our financial condition and results of operation depend on our ability to manage future growth effectively.
Our ability to achieve our investment objectives depends on our ability to grow, which depends, in turn, on our Investment Adviser’s ability to identify, invest in and monitor companies that meet our investment selection criteria. Accomplishing this result on a cost-effective basis is largely a function of our Investment Adviser’s structuring of the investment process, its ability to provide competent, attentive and efficient services to us and our access to financing on acceptable terms. The management team of PennantPark Investment Advisers has substantial responsibilities under our Investment Management Agreement. In order for us to grow, our Investment Adviser will need to hire, train, supervise and manage new employees. However, we can offer no assurance that any current or future employees will contribute effectively to the work of, or remain associated with, the Investment Adviser. We caution you that the principals of our Investment Adviser or Administrator may also be called upon to provide and currently do provide significant managerial assistance to portfolio companies and other investment vehicles, including other BDCs, which are managed by the Investment Adviser. Such demands on their time may distract them or slow our rate of investment. Any failure to manage our future growth effectively could have a material adverse effect on our business, financial condition and results of operations.
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We are highly dependent on information systems and systems failures could have a material adverse effect on our business, financial condition and results of operations.
Our business depends on the communications and information systems, including financial and accounting systems, of the Investment Adviser, the Administrator and our external service providers. Any failure or interruption of such systems could cause delays or other problems in our activities. This, in turn, could have a material adverse effect on our business, financial condition and results of operations.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, stockholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common stock.
Effective internal controls over financial reporting are necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation could cause us to fail to meet our reporting obligations. In addition, any testing by us conducted in connection with Section 404 of the Sarbanes-Oxley Act of 2002, or the subsequent testing by our independent registered public accounting firm (when undertaken, as noted below), may reveal deficiencies in our internal controls over financial reporting that are deemed to be significant deficiencies, material weaknesses or that may require prospective or retroactive changes to our consolidated financial statements or identify other areas for further attention or improvement. We have identified material weaknesses in our internal controls over financial reporting in the past and may identify other material weaknesses or significant deficiencies in the future. Inferior internal controls could also cause investors and lenders to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock.
We may not replicate the historical performance of other investment companies and funds with which our senior and other investment professionals have been or are affiliated.
The 1940 Act imposes numerous constraints on the investment activities of BDCs. For example, BDCs are required to invest at least 70% of their total assets primarily in securities of U.S. private companies or thinly traded public companies (i.e., public companies with a market capitalization of less than $250 million), cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. These constraints may hinder the Investment Adviser’s ability to take advantage of attractive investment opportunities and to achieve our investment objectives. In addition, the investment philosophy and techniques used by the Investment Adviser may differ from those used by other investment companies and funds advised by the Investment Adviser. Accordingly, we can offer no assurance that we will replicate the historical performance of other investment companies and funds with which our senior and other investment professionals have been affiliated, and we caution that our investment returns could be substantially lower than the returns achieved by such other companies.
Any failure on our part to maintain our status as a BDC would reduce our operating flexibility.
If we do not remain a BDC, we might be regulated as a closed-end investment company under the 1940 Act, which would subject us to substantially more regulatory restrictions under the 1940 Act and correspondingly decrease our operating flexibility, which could have a material adverse effect on our business, financial condition and results of operations.
Loss of RIC tax status would substantially reduce our net assets and income available for debt service and distributions.
We have operated and continue to operate so as to maintain our election to be treated as a RIC under Subchapter M of the Code. If we meet the 90% Income Test, the Diversification Tests, and the Annual Distribution Requirement, we generally will not be subject to corporate-level income taxation on income we timely distribute, or are deemed to distribute, as dividends for U.S. federal income tax purposes to our stockholders. We would cease to qualify for such tax treatment if we were unable to comply with these requirements. In addition, we may have difficulty meeting our Annual Distribution Requirement to our stockholders because, in certain cases, we may recognize income before or without receiving cash representing such income. If we fail to qualify as a RIC, we will have to pay corporate-level taxes on all of our income whether or not we distribute it, which would substantially reduce the amount of income available for debt service as well as reduce and/or affect the character and amount of our distributions to our stockholders. Even if we qualify as a RIC, we generally will be subject to a 4% nondeductible excise tax if we do not distribute to our stockholders in respect of each calendar year an amount at least equal to the Excise Tax Avoidance Requirement.
We may have difficulty paying our Annual Distribution Requirement if we recognize income before or without receiving cash representing such income.
For federal income tax purposes, we include in income certain amounts that we have not yet received in cash, such as OID and PIK interest, which represents interest added to the loan balance and due at the end of the loan term. OID, which could be significant relative to our overall investment assets, and increases in loan balances as a result of PIK interest will be included in income before we receive any corresponding cash payments. We also may be required to include in income certain other amounts that we will not receive in cash, such as amounts attributable to foreign currency transactions. Our investments with a deferred interest feature, such as PIK interest, may represent a higher credit risk than loans for which interest must be paid in full in cash on a regular basis. For example, even if the accounting conditions for income accrual are met, the borrower could still default when our actual collection is scheduled to occur upon maturity of the obligation.
The part of the incentive fee payable by us that relates to our net investment income is computed and paid on income that may include interest that has been accrued but not yet received in cash. If a portfolio company defaults on a loan that is structured to provide PIK or OID interest, it is possible that accrued interest previously used in the calculation of the incentive fee will become uncollectible.
If we are unable to satisfy the Annual Distribution Requirement, we may have to sell some of our investments at times or prices we would not consider advantageous, or raise additional debt or equity capital or reduce new investment originations to meet these distribution requirements, which could have a material adverse effect on our business, financial condition and results of operations. If we are not able to obtain cash from other sources, we may lose our ability to be subject to tax as a RIC and thus be subject to corporate-level income tax.
Legislation enacted in 2018 allows us to incur additional leverage.
A BDC has historically been able to issue “senior securities,” including borrowing money from banks or other financial institutions, only in amounts such that its asset coverage, as defined in Section 61(a)(2) of the 1940 Act, equals at least 200% after such incurrence or issuance. In March 2018, the Consolidated Appropriations Act of 2018 (which includes the SBCAA) was enacted which amended the 1940 Act to decrease this percentage from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity) for a BDC that has received either stockholder approval or approval of a “required majority” (as defined in Section 57(o) of the 1940 Act) of its board of directors of the application of such lower asset coverage ratio to the BDC. On April 5, 2018, our board of directors approved such reduction. As such, we are able to incur additional indebtedness so long as we comply with the applicable disclosure requirement, which may increase the risk of investing in us. Under the 200% minimum asset coverage ratio, we were permitted to borrow up to one dollar for investment purposes for every one dollar of investor equity and, under the 150% minimum asset coverage ratio, we are permitted to borrow up to two dollars for investment purposes for every one dollar of investor equity. In other words, Section 61(a)(2) of the 1940 Act permits BDCs to potentially increase their debt-to-equity ratio from a maximum of 1-to-1 to a maximum of 2-to-1.
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In addition, since our base management fee is determined and payable based upon our average adjusted gross assets, which includes any borrowings for investment purposes, our base management fee expense may increase if we incur additional leverage.
Because we intend to distribute substantially all of our income to our stockholders to maintain our ability to be subject to tax as a RIC, we may need to raise additional capital to finance our growth. If funds are not available to us, we may need to curtail new investments, and our common stock value could decline.
In connection with satisfying the requirements to be subject to tax as a RIC for federal income tax purposes, we intend to distribute to our stockholders substantially all of our investment company taxable income and net capital gains each taxable year. However, we may retain all or a portion of our net capital gains and incur applicable income taxes with respect thereto and elect to treat such retained net capital gains as deemed dividend distributions to our stockholders.
As noted above, on April 5, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act), approved a reduction of our asset coverage ratio from 200% to 150%. The asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity). If we incur additional indebtedness under this provision, the risk of investing in us will increase. If the value of our assets declines, we may be unable to satisfy this asset coverage test. If that happens, we may be required to sell a portion of our investments or sell additional common stock and, depending on the nature of our leverage, to repay a portion of our indebtedness at a time when such sales and repayments may be disadvantageous. In addition, the issuance of additional securities could dilute the percentage ownership of our current stockholders in us.
We are partially dependent on our subsidiary Funding I for cash distributions to enable us to meet the distribution requirements in order to permit us to be subject to tax as a RIC. In this regard, Funding I is limited by its covenants from making certain distributions to us that may be necessary to fulfill our requirements to be subject to tax as a RIC. In such case, we would need to request a waiver of these covenants’ restrictions for Funding I to make certain distributions to enable us to be subject to tax as a RIC. We cannot assure you that Funding I will be granted such a waiver, and if Funding I is unable to obtain a waiver, compliance with the covenants may cause us to incur a corporate-level income tax.
Regulations governing our operation as a BDC will affect our ability to, and the way in which we, raise additional capital.
Our business requires a substantial amount of capital. We may acquire additional capital from the issuance of additional senior securities or other indebtedness, the issuance of additional shares of our common stock, the issuance of warrants or subscription rights to purchase certain of our securities, or from securitization transactions. However, we may not be able to raise additional capital in the future on favorable terms or at all. We may issue debt securities or preferred securities, which we refer to collectively as “senior securities,” and we may borrow money from banks, or other financial institutions, up to the maximum amount permitted by the 1940 Act. Under the 1940 Act, the asset coverage ratio requirements permit us to issue senior securities or incur indebtedness subject to certain limitations. Our ability to pay distributions or issue additional senior securities would be restricted if our asset coverage ratio was not met. If the value of our assets declines, we may be unable to satisfy the asset coverage ratio. If that happens, we may be required to liquidate a portion of our investments and repay a portion of our indebtedness at a time when such sales may be disadvantageous, which could materially harm our business, financial condition and results of operations.
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We currently use borrowed funds to make investments and are exposed to the typical risks associated with leverage.
Because we borrow funds to make investments, we are exposed to increased risk of loss due to our use of debt to make investments. A decrease in the value of our investments will have a greater negative impact on the NAV attributable to our common stock than it would if we did not use debt. Our ability to pay distributions may be restricted when our asset coverage ratio is not met and any cash that we use to service our indebtedness is not available for distribution to our common stockholders.
Our current debt is governed by the terms of the Credit Facility, the indenture governing our 2026 Notes, the indenture governing the 2031 Asset-Backed Debt, the indenture governing the 2036-R Asset-Backed Debt, and the indenture governing the 2036 Asset-Backed Debt, and future debt may be governed by an indenture or other instrument containing covenants restricting our operating flexibility. We, and indirectly our stockholders, bear the cost of issuing and servicing debt. Any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may also carry leverage related risks. Leverage magnifies the potential risks for loss and the risks of investing in us, both as detailed below.
If we incur additional debt, it could increase the risk of investing in our shares.
We have indebtedness outstanding pursuant to the Credit Facility, 2026 Notes, the 2031 Asset-Backed Debt, the 2036-R Asset-Backed Debt, and the 2036 Asset-Backed Debt and expect in the future to borrow additional amounts under the Credit Facility or otherwise, subject to market availability, and, may increase the size of the Credit Facility. We cannot assure you that our leverage will remain at current levels. The amount of leverage that we employ will depend upon our assessment of the market and other factors at the time of any proposed borrowing. Lenders have fixed dollar claims on our assets that are superior to the claims of our common stockholders or preferred stockholders, if any, and we have granted a security interest in Funding I’s assets in connection with the Credit Facility borrowings. In the case of a liquidation event, those lenders would receive proceeds before our stockholders. Any future debt issuance will increase our leverage and may be subordinate to the Credit Facility. In addition, borrowings or debt issuances, also known as leverage, magnify the potential for loss or gain on amounts invested and, therefore, increase the risks associated with investing in our securities. Leverage is generally considered a speculative investment technique. If the value of our assets decreases, then the use of leverage would cause the NAV attributable to our common stock to decline more than it otherwise would have had we not utilized leverage. Similarly, any decrease in our revenue would cause our net income to decline more than it would have had we not borrowed funds and could negatively affect our ability to make distributions on our common or preferred stock. Our ability to service any debt that we incur depends largely on our financial performance and is subject to prevailing economic conditions and competitive pressures.
As noted above, on April 5, 2018, our board of directors, including a “required majority” (as such term is defined in Section 57(o) of the 1940 Act), and our stockholders, respectively, approved a reduction of our asset coverage ratio. As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% to 150%, so long as we comply with the applicable disclosure requirements, which may increase the risk of investing in us.
As of September 30, 2024 and 2023, our asset coverage ratio, as computed in accordance with the 1940 Act, was 174% and 230%, respectively. Since our leverage was 135% and 76% of our net assets as of September 30, 2024 and 2023, respectively, we would have to receive an annual return of at least 4.0% and 2.4%, respectively, to cover annual interest payments.
As of September 30, 2024, we had outstanding borrowings of $443.9 million under the Credit Facility, zero outstanding under our 2023 Notes, $185.0 million under our 2026 Notes, $266.0 million outstanding under the 2036-R Asset-Backed Debt, and $287.0 million outstanding under the 2036 Asset-Backed Debt. Our consolidated debt outstanding was $1,181.9 million and had a weighted average annual interest rate at the time of 7.0%, exclusive of the fees on the undrawn commitment on the Credit Facility. This example is for illustrative purposes only, and actual interest rates on the Credit Facility or any future borrowings are likely to fluctuate. The costs associated with our borrowings, including any increase in the management fee or incentive fee payable to our Investment Adviser, are and will be borne by our stockholders.
The following table is designed to illustrate the effect on the return to a holder of our common stock of the leverage created by our use of borrowing as of September 30, 2024 of 55.8% of total assets (including such borrowed funds), at the current interest rate at the time of 7.0%, and assumes hypothetical annual returns on our portfolio of minus 10 to plus 10 percent. The table also assumes that we will maintain a constant level of leverage and weighted average interest rate. The amount of leverage and cost of borrowing that we use will vary from time to time. As can be seen, leverage generally increases the return to stockholders when the portfolio return is positive and decreases return when the portfolio return is negative. Actual returns may be greater or less than those appearing in the table.
Assumed return on portfolio (net of expenses) (1) |
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Corresponding return to common stockholders (2) |
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We may in the future determine to fund a portion of our investments with preferred stock, which is another form of leverage and would magnify the potential for loss and the risks of investing in us.
Preferred stock, which is another form of leverage, has the same risks to our common stockholders as borrowings because the distributions on any preferred stock we issue must be cumulative. If we issue preferred securities they would rank “senior” to common stock in our capital structure. Payment of distributions on, and repayment of the liquidation preference of, such preferred stock would typically take preference over any distributions or other payments to our common stockholders. Also, preferred stockholders are not typically subject to any of our expenses or losses and are not entitled to participate in any income or appreciation in excess of their stated preference. Furthermore, preferred stockholders would have separate voting rights and may have rights, preferences or privileges more favorable than those of our common stockholders. Also, the issuance of preferred securities could have the adverse effect of delaying, deferring or preventing a transaction or a change of control that might involve a premium price for our common stockholders or otherwise be in the best interest of stockholders.
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We may in the future determine to fund a portion of our investments with debt securities, which would magnify the potential for loss and the risks of investing in us.
As a result of any issuance of debt securities and borrowings under the Credit Facility, the 2026 Notes, the 2036-R Asset-Backed Debt and the 2036 Asset-Backed Debt, we would be exposed to typical risks associated with leverage, including an increased risk of loss and an increase in expenses, which are ultimately borne by our common stockholders. Payment of interest on such debt securities must take preference over any other distributions or other payments to our common stockholders. If we issue additional debt securities in the future, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. In addition, such securities may be rated by rating agencies, and in obtaining a rating for such securities, we may be required to abide by operating and investment guidelines that could further restrict our operating flexibility. Furthermore, any cash that we use to service our indebtedness would not be available for the payment of distributions to our common stockholders.
Our credit ratings may not reflect all risks of an investment in our debt securities.
Our credit ratings, if any, are an assessment of our ability to pay our obligations. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of any publicly issued debt securities. Our credit ratings may not reflect the potential impact of risks related to market conditions or other factors discussed above on the market value of, or trading market for, any publicly issued debt securities. Rating agencies have reviewed, and may continue to review, our credit ratings and those of other business development companies in light of the SBCAA as well as any corresponding changes to asset coverage ratios and, in certain cases, downgrade such ratings. Such a downgrade in our credit ratings may adversely affect our securities.
Market conditions may make it difficult to extend the maturity of or refinance our existing indebtedness and any failure to do so could have a material adverse effect on our business.
Our Credit Facility expires in August 2029. We utilize proceeds from the Credit Facility to make investments in our portfolio companies. The duration of many of our investments exceeds the duration of our indebtedness under the Credit Facility. This means that we will have to extend the maturity of the Credit Facility or refinance our indebtedness under the Credit Facility in order to avoid selling investments at maturity of the Credit Facility, at which time such sales may be at prices that are disadvantageous to us, which could materially damage our business. In addition, future market conditions may affect our ability to renew or refinance the Credit Facility on terms as favorable as those in our existing Credit Facility. If we fail to extend or refinance the indebtedness outstanding under the Credit Facility by the time it becomes due and payable, the administrative agent of the Credit Facility may elect to exercise various remedies, including the sale of all or a portion of the collateral securing the Credit Facility, subject to certain restrictions, any of which could have a material adverse effect on our business, financial condition and results of operations. The illiquidity of our investments may make it difficult for us to sell such investments. If we are required to sell our investments on short-term notice, we may not receive the value that we have recorded for such investments, and this could materially affect our results of operations.
We may not receive cash on our equity interests from Funding I.
Except for management fees that PennantPark Investment Advisers has irrevocably directed to be paid to us, we receive cash from Funding I only to the extent that we receive distributions on our equity interests in Funding I. Funding I may make equity distributions on such interests only to the extent permitted by the payment priority provisions of the Credit Facility. The Credit Facility generally provides that payments on such interests may not be made on any payment date unless all amounts owing to the Lenders and other secured parties are paid in full. In the event that we fail to receive cash from Funding I, we could be unable to make distributions to our stockholders in amounts sufficient to maintain our ability to be subject to tax as a RIC. We also could be forced to sell investments in portfolio companies at less than their fair value in order to continue making such distributions.
There are significant potential conflicts of interest which could impact our investment returns.
The professionals of the Investment Adviser and Administrator may serve as officers, directors or principals of entities that operate in the same or a related line of business as we do or of investment funds managed by affiliates of us that currently exist or may be formed in the future. The Investment Adviser and Administrator may be engaged by such funds at any time and without the prior approval of our stockholders or our board of directors. Our board of directors monitors any potential conflict that may arise upon such a development. Accordingly, if this occurs, they may have obligations to investors in those entities, the fulfillment of which might not be in the best interests of us or our stockholders. Currently, the executive officers and directors, as well as the current senior investment professionals of the Investment Adviser, may serve as officers and directors of our affiliated funds. In addition, we note that any affiliated investment vehicles currently formed or formed in the future and managed by the Investment Adviser or its affiliates may have overlapping investment objectives with our own and, accordingly, may invest in asset classes similar to those targeted by us. As a result, the Investment Adviser may face conflicts in allocating investment opportunities between us and such other entities. Although the Investment Adviser will endeavor to allocate investment opportunities in a fair and equitable manner, it is possible that, in the future, we may not be given the opportunity to participate in investments made by investment funds managed by the Investment Adviser or an investment manager affiliated with the Investment Adviser. In any such case, when the Investment Adviser identifies an investment, it is forced to choose which investment fund should make the investment. We may co-invest on a concurrent basis with any other affiliates that the Investment Adviser currently has or forms in the future, subject to compliance with applicable regulations and regulatory guidance, our exemptive relief and our allocation procedures.
In the ordinary course of our investing activities, we pay investment advisory and incentive fees to the Investment Adviser, and reimburse the Investment Adviser for certain expenses it incurs. As a result, investors in our common stock invest on a “gross” basis and receive distributions on a “net” basis after expenses, resulting in a lower rate of return than an investor might achieve through direct investments. Accordingly, there may be times when the management team of the Investment Adviser has interests that differ from those of our stockholders, giving rise to a conflict. For example, the Investment Adviser may seek to invest in more speculative investments in order to increase its incentive fee, which practice could result in higher investment losses, particularly during economic downturns.
We have entered into the License Agreement with PennantPark Investment Advisers, pursuant to which the Investment Adviser has agreed to grant us a royalty-free non-exclusive license to use the name “PennantPark.” The License Agreement will expire (i) upon expiration or termination of the Investment Management Agreement, (ii) if the Investment Adviser ceases to serve as our investment adviser, (iii) by either party upon 60 days’ written notice or (iv) by the Investment Adviser at any time in the event we assign or attempt to assign or sublicense the License Agreement or any of our rights or duties thereunder without the prior written consent of the Investment Adviser. Other than with respect to this limited license, we have no legal right to the “PennantPark” name.
In addition, we pay PennantPark Investment Administration, an affiliate of the Investment Adviser, our allocable portion of overhead and other expenses incurred by PennantPark Investment Administration in performing its obligations under the Administration Agreement, including rent and our allocable portion of the cost of our Chief Financial Officer and Chief Compliance Officer and their respective staffs. These arrangements may create conflicts of interest that our board of directors must monitor.
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We are subject to risks associated with cybersecurity and cyber incidents.
Our business relies on secure information technology systems. These systems are subject to potential attacks, including through adverse events that threaten the confidentiality, integrity or availability of our information resources (i.e., cyber incidents). These attacks could involve gaining unauthorized access to our information systems for purposes of misappropriating assets, stealing confidential information, corrupting data or causing operational disruption and result in disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and damage to our business relationships, any of which could have a material adverse effect on our business, financial condition and results of operations. As our reliance on technology has increased, so have the risks posed to our information systems, both internal and those provided by the Investment Adviser and third-party service providers. We, along with our Investment Adviser, have implemented processes, procedures and internal controls to help mitigate cybersecurity risks and cyber intrusions, but these measures, as well as our increased awareness of the nature and extent of the risk of a cyber incident, may be ineffective and do not guarantee that a cyber incident will not occur or that our financial results, operations or confidential information will not be negatively impacted by such an incident. In addition, the costs related to cyber or other security threats or disruptions may not be fully insured or indemnified by other means. Furthermore, cybersecurity continues to be a key priority for regulators around the world, and some jurisdictions have enacted laws requiring companies to notify individuals of data security breaches involving certain types of personal data. If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our businesses, liability to investors, regulatory intervention or reputational damage.
We may experience fluctuations in our quarterly results.
We could experience fluctuations in our quarterly operating results due to a number of factors, including the interest rate payable on the debt securities we acquire, the default rate on such securities, the level of our expenses, variations in, and the timing of the recognition of, realized and unrealized gains or losses, the degree to which we encounter competition in our markets and general economic conditions. However, as a result of our irrevocable election to apply the fair value option to the Credit Facility, future decreases of fair value of our debt is expected to have a corresponding increase to our NAV. Similarly, future increases in the fair value of our debt may have a corresponding decrease to our NAV. Any future indebtedness that we elect the fair value option for may have similar effects on our NAV as the Credit Facility. This is expected to mitigate volatility in our earnings and NAV. As a result, results for any period should not be relied upon as being indicative of future performance.
We may in the future issue securities for which there is no public market and for which we expect no public market to develop.
In order to raise additional capital, we may issue debt or other securities for which no public market exists, and for which no public market is expected to develop. If we issue shares of our common stock as a component of a unit security, we would expect the common stock to separate from the other securities in such unit after a period of time or upon occurrence of an event and to trade publicly on the New York Stock Exchange, which may cause volatility in our publicly traded common stock. To the extent we issue securities for which no public market exists and for which no public market develops, a purchaser of such securities may not be able to liquidate the investment without considerable delay, if at all. If a market should develop for our debt and other securities, the price may be highly volatile, and our debt and other securities may lose value.
If we issue preferred stock, debt securities or convertible debt securities the NAV and market value of our common stock may become more volatile.
We cannot assure you that the issuance of preferred stock and/or debt securities would result in a higher yield or return to the holders of our common stock. The issuance of preferred stock, debt securities and/or convertible debt would likely cause the NAV and market value of our common stock to become more volatile. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to approach the net rate of return on our investment portfolio, the benefit of leverage to the holders of our common stock would be reduced or entirely eliminated. If the dividend rate on the preferred stock, or the interest rate on the debt securities, were to exceed the net rate of return on our portfolio, the use of leverage would result in a lower rate of return to the holders of common stock than if we had not issued the preferred stock or debt securities. Any decline in the NAV of our investment would be borne entirely by the holders of our common stock. Therefore, if the market value of our portfolio were to decline, the leverage would result in a greater decrease in NAV to the holders of our common stock than if we were not leveraged through the issuance of preferred stock, debt securities or convertible debt. This decline in NAV would also tend to cause a greater decline in the market price for our common stock.
There is also a risk that, in the event of a sharp decline in the value of our net assets, we would be in danger of failing to maintain required asset coverage ratios or other covenants which may be required by the preferred stock, debt securities and/or convertible debt or risk a downgrade in the ratings of the preferred stock, debt securities and/or convertible debt or our current investment income might not be sufficient to meet the dividend requirements on the preferred stock or the interest payments on the debt securities. In order to counteract such an event, we might need to liquidate investments in order to fund redemption of some or all of the preferred stock, debt securities or convertible debt. In addition, we would pay (and the holders of our common stock would bear) all costs and expenses relating to the issuance and ongoing maintenance of the preferred stock, debt securities, convertible debt or any combination of these securities. Holders of preferred stock, debt securities, convertible debt or any combination of these securities may have different interests than holders of common stock and may at times have disproportionate influence over our business.
The ability to sell investments held by Funding I is limited.
The Credit Facility places restrictions on the collateral manager’s ability to sell investments. As a result, there may be times or circumstances during which the collateral manager is unable to sell investments or take other actions that might be in our best interests.
The trading market or market value of any publicly issued debt or convertible debt securities may be volatile.
If we publicly issue debt or convertible debt securities, they initially will not have an established trading market. We cannot assure investors that a trading market for our publicly issued debt or convertible debt securities would develop or be maintained if developed. In addition to our creditworthiness, many factors may have a material adverse effect on the trading market for, and market value of, our publicly issued debt or convertible debt securities.
These factors include the following:
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There also may be a limited number of buyers for our debt securities. This too may have a material adverse effect on the market value of the debt securities or the trading market for the debt securities. Our debt securities may include convertible features that cause them to more closely bear risks associated with an investment in our common stock.
Terms relating to debt redemption may have a material adverse effect on the return on any debt securities.
If we issue debt securities that are redeemable at our option, we may choose to redeem the debt securities at times when prevailing interest rates are lower than the interest rate paid on the debt securities. In addition, if the debt securities are subject to mandatory redemption, we may be required to redeem the debt securities at times when prevailing interest rates are lower than the interest rate paid on the debt securities. In this circumstance, a holder of our debt securities may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the debt securities being redeemed.
If we issue subscription rights or warrants for our common stock, your interest in us may be diluted as a result of such rights or warrants offering.
Stockholders who do not fully exercise rights or warrants issued to them in an offering of subscription rights or warrants to purchase our common stock should expect that they will, at the completion of an offering, own a smaller proportional interest in us than would otherwise be the case if they fully exercised their rights or warrants. We cannot state precisely the amount of any such dilution in share ownership because we do not know what proportion of the common stock would be purchased as a result of any such offering.
In addition, if the subscription price or warrant exercise price is less than our NAV per share of common stock at the time of an offering, then our stockholders would experience an immediate dilution of the aggregate NAV of their shares as a result of the offering. The amount of any such decrease in NAV is not predictable because it is not known at this time what the subscription price, warrant exercise price or NAV per share will be on the expiration date of such rights offering or what proportion of our common stock will be purchased as a result of any such offering.
Changes in laws or regulations governing our operations or those of our portfolio companies may adversely affect our business.
We and our portfolio companies are subject to laws and regulations at the U.S. federal, state and local levels and, in some cases, foreign levels. These laws and regulations, as well as their interpretation, may change from time to time, and new laws, regulations and interpretations may come into effect. Accordingly, any change in law and regulations, changes in administration or control of U.S. Congress, changes in interpretations, or newly enacted laws or regulations could have a material adverse effect on our business or the business of our portfolio companies. See “Business—Regulation” for more information.
Over the past several years, there also has been increasing regulatory attention to the extension of credit outside of the traditional banking sector, raising the possibility that some portion of the non-bank financial sector may be subject to new regulation. While it cannot be known at this time whether any regulation will be implemented or what form it will take, increased regulation of non-bank lending could be materially adverse to our business, financial conditions and results of operation. We may experience fluctuations in our quarterly results.
The United States may also potentially withdraw from or renegotiate various trade agreements and take other actions that would change current trade policies of the United States. We cannot predict which, if any, of these actions will be taken or, if taken, their effect on the financial stability of the United States. Such actions could have a material adverse effect on our business, financial condition and results of operations.
Our board of directors may change our investment objectives, operating policies and strategies without prior notice or stockholder approval.
Our board of directors has the authority to modify or waive certain of our operating policies and strategies without prior notice and without stockholder approval (except as required by the 1940 Act). However, absent stockholder approval, under the 1940 Act, we may not change the nature of our business so as to cease to be, or withdraw our election as, a BDC. We cannot predict the effect any changes to our current operating policies and strategies would have on our business, operating results and value of our common stock. Nevertheless, the effects may adversely affect our business and impact our ability to make distributions.
Our business and operations could be negatively affected if we become subject to stockholder activism, which could cause us to incur significant expense, hinder the execution of our investment strategy or impact our stock price.
Stockholder activism, which could take many forms, including making public demands that we consider certain strategic alternatives, engaging in public campaigns to attempt to influence our corporate governance and/or our management, and commencing proxy contests to attempt to elect the activists’ representatives or others to our board of directors, or arise in a variety of situations, has impacted the BDC space. While we are currently not subject to any stockholder activism, due to the potential volatility of our stock price and for a variety of other reasons, we may in the future become the target of stockholder activism. Stockholder activism could result in substantial costs and divert management’s and our board of directors’ attention and resources from our business. Additionally, such stockholder activism could give rise to perceived uncertainties as to our future and adversely affect our relationships with service providers and our portfolio companies. Also, we may be required to incur significant legal and other expenses related to any activist stockholder matters. Further, our stock price could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties of any stockholder activism.
RISKS RELATING TO THE ILLIQUID NATURE OF OUR PORTFOLIO ASSETS
We invest in illiquid assets, and our valuation procedures with respect to such assets may result in recording values that are materially different than the values we ultimately receive upon disposition of such assets.
All of our investments are recorded using broker or dealer quotes, if available, or at fair value as determined in good faith by our board of directors. We expect that most, if not all, of our investments (other than cash and cash equivalents) and the fair value of the Credit Facility will be classified as Level 3 under the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 820, Fair Value Measurements and Disclosures, or ASC 820. This means that the portfolio valuations will be based on unobservable inputs and our own assumptions about how market participants would price the asset or liability. We expect that inputs into the determination of fair values of our portfolio investments and Credit Facility borrowings will require significant management judgment or estimation. Even if observable market data are available, such information may be the result of consensus pricing information or broker quotes, which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by such a disclaimer materially reduces the reliability of such information. As a result, there will be uncertainty as to the value of our portfolio investments.
Determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. In determining fair value in good faith, we generally obtain financial and other information from portfolio companies, which may represent unaudited, projected or pro forma financial information. Unlike banks, we are not permitted to provide a general reserve for anticipated loan losses; we are instead required by the 1940 Act to specifically fair value each individual investment on a quarterly basis. We record unrealized appreciation if we believe that our investment has appreciated in value. Likewise, we record unrealized depreciation if we believe that our investment has depreciated in value. We adjust
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quarterly the valuation of our portfolio to reflect our board of directors’ determination of the fair value of each investment in our portfolio. Any changes in fair value are recorded on our Consolidated Statements of Operations as net change in unrealized appreciation or depreciation.
All of our investments are recorded at fair value as determined in good faith by our board of directors. Our board of directors uses the services of nationally recognized independent valuation firms to aid it in determining the fair value of our investments. The factors that may be considered in fair value pricing of our investments include the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and cash flows, the markets in which the portfolio company does business, comparison to publicly traded companies and other relevant factors. Because valuations may fluctuate over short periods of time and may be based on estimates, our determinations of fair value may differ materially from the value received in an actual transaction. Additionally, valuations of private securities and private companies are inherently uncertain. Our NAV could be adversely affected if our determinations regarding the fair value of our investments were materially lower than the values that we ultimately realize upon the disposal of such investments.
The lack of liquidity in our investments may adversely affect our business.
We may acquire our investments directly from the issuer in privately negotiated transactions. Substantially all of these securities are subject to legal and other restrictions on resale or are otherwise less liquid than publicly traded securities. We typically exit our investments when the portfolio company has a liquidity event such as a sale, refinancing, or initial public offering of the company, but we are generally not required to do so.
The illiquidity of our investments may make it difficult or impossible for us to sell such investments if the need arises, particularly at times when the market for illiquid securities is substantially diminished. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the value at which we have previously recorded our investments, which could have a material adverse effect on our business, financial condition and results of operations. In addition, we may face other restrictions on our ability to liquidate an investment in a portfolio company to the extent that we have material non-public information regarding such portfolio company.
Investments purchased by us that are liquid at the time of purchase may subsequently become illiquid due to events relating to the issuer of the investments, market events, economic conditions or investor perceptions. Domestic and foreign markets are complex and interrelated, so that events in one sector of the world markets or economy, or in one geographical region, can reverberate and have materially negative consequences for other market, economic or regional sectors in a manner that may not be foreseen and which may materially harm our business.
A general disruption in the credit markets could materially damage our business.
We are susceptible to the risk of significant loss if we are forced to discount the value of our investments in order to provide liquidity to meet our debt maturities. Funding I’s borrowings under its Credit Facility are collateralized by the assets in our investment portfolio. A general disruption in the credit markets could result in diminished demand for our securities. In addition, with respect to over-the-counter traded securities, the continued viability of any over-the-counter secondary market depends on the continued willingness of dealers and other participants to purchase the securities.
If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratio stipulated by the 1940 Act, which could, in turn, cause us to lose our status as a BDC and materially impair our business operations. Our liquidity could be impaired further by an inability to access the capital markets or to draw down Funding I’s Credit Facility. These situations may arise due to circumstances that we may be unable to control, such as a general disruption in the credit markets, a severe decline in the value of the U.S. dollar, an economic downturn or recession or an operational problem that affects our counterparties or us, and could materially damage our business.
We may invest in over-the-counter securities, which have and may continue to face liquidity constraints, to provide us with liquidity.
The market for over-the-counter traded securities has and may continue to experience limited liquidity and other weakness as the viability of any over-the-counter secondary market depends on the continued willingness of dealers and other participants to purchase the securities.
RISKS RELATING TO OUR INVESTMENTS
Our investments in prospective portfolio companies may be risky, and an investor could lose all or part of an investment.
We intend to invest primarily in floating rate loans, which may consist of first lien secured debt, second lien secured debt, subordinated debt and selected equity investments issued by U.S. middle-market companies.
Floating rate loans are subject to the risk of non-payment of scheduled interest or principal. Such non-payment would result in a reduction of income to us, a reduction in the fair value of the investment and a potential decrease in our NAV. There can be no assurance that the liquidation of any collateral securing a floating rate loan would satisfy the borrower’s obligation in the event of non-payment of scheduled interest or principal payments, or that the collateral could be readily liquidated. In the event of bankruptcy or insolvency of a borrower, we could experience delays or limitations with respect to our ability to realize the benefits of the collateral securing a floating rate loan. The collateral securing a floating rate loan may lose all or substantially all of its value in the event of the bankruptcy or insolvency of a borrower. Some loans are subject to the risk that a court, pursuant to fraudulent conveyance or other similar laws, could subordinate the rights in collateral of such loans to presently existing or future indebtedness of the borrower or take other actions detrimental to the holders of loans including, in certain circumstances, invalidating such loans or causing interest previously paid to be refunded to the borrower. Either such action could materially negatively affect our performance.
We may acquire floating rate loans through assignments or participations of interests in such loans. The purchaser of an assignment typically succeeds to all the rights and obligations of the assigning institution and becomes a lender under the credit agreement with respect to such debt obligation. However, the purchaser’s rights can be more restricted than those of the assigning institution, and we may not be able to unilaterally enforce all rights and remedies under an assigned debt obligation and with regard to any associated collateral. A participation typically results in a contractual relationship only with the institution participating out the interest and not directly with the borrower. Sellers of participations typically include banks, broker-dealers, other financial institutions and lending institutions. In purchasing participations, we generally will have no right to enforce compliance by the borrower with the terms of the loan
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agreement against the borrower, and we may not directly benefit from the collateral supporting the debt obligation in which we have purchased the participation. As a result, we will be exposed to the credit risk of both the borrower and the institution selling the participation. Further, in purchasing participations in lending syndicates, we will not be able to conduct the same level of due diligence on a borrower or the quality of the floating rate loan with respect to which we are buying a participation as we would conduct if we were investing directly in the floating rate loan. This difference may result in us being exposed to greater credit or fraud risk with respect to such floating rate loans than we expected when initially purchasing the participation. Floating rate loans can be first lien secured debt, second lien secured debt or subordinated debt.
In addition, investing in middle-market companies involves a number of significant risks, including:
Under the 1940 Act, we may invest up to 30% of our assets in investments that are not qualifying assets for BDCs. If we do not invest a sufficient portion of our assets in qualifying assets, we could be precluded from investing in assets that we deem to be attractive.
As a BDC, we may not acquire any asset other than qualifying assets, as defined under the 1940 Act, unless at the time the acquisition is made such qualifying assets represent at least 70% of the value of our total assets. Qualifying assets include investments in U.S. operating companies whose securities are not listed on a national securities exchange and companies listed on a national securities exchange subject to a maximum market capitalization of $250 million. Qualifying assets also include cash, cash equivalents, government securities and high quality debt securities maturing in one year or less from the time of investment.
We believe that most of our debt and equity investments do and will constitute qualifying assets. However, we may be precluded from investing in what we believe are attractive investments if such investments are not qualifying assets for purposes of the 1940 Act. If we have not invested a sufficient portion of our assets in qualifying assets at the time of a proposed investment, we will be prohibited from making any additional investment that is not a qualifying asset and could be forced to forgo attractive investment opportunities. Similarly, these rules could prevent us from making follow-on investments in existing portfolio companies (which could result in the dilution of our position) or could require us to dispose of investments at inappropriate times in order to comply with the 1940 Act. If we need to dispose of such investments quickly, it would be difficult to dispose of such investments on favorable terms. For example, we may have difficulty in finding a buyer and, even if we do find a buyer, we may have to sell the investments at a substantial loss.
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We are a non-diversified investment company within the meaning of the 1940 Act, and therefore we generally are not limited with respect to the proportion of our assets that may be invested in securities of a single issuer.
We are classified as a non-diversified investment company within the meaning of the 1940 Act, which means that we are not limited by the 1940 Act with respect to the proportion of our assets that we may invest in securities of a single issuer, excluding limitations on investments in other investment companies and compliance with the RIC tax regulations. To the extent that we assume large positions in the securities of a small number of issuers, our NAV may fluctuate to a greater extent than that of a diversified investment company as a result of changes in the financial condition or the market’s assessment of the issuer. We may also be more susceptible to any single economic or regulatory occurrence than a diversified investment company. Beyond the Diversification Requirements, we do not have fixed guidelines for portfolio diversification, and our investments could be concentrated in relatively few portfolio companies or industries. Although we are classified as a non-diversified investment company within the meaning of the 1940 Act, we maintain the flexibility to operate as a diversified investment company and have done so for an extended period of time. To the extent that we operate as a non-diversified investment company in the future, we may be subject to greater risk.
Economic recessions or downturns could impair our portfolio companies and harm our operating results.
Many of our portfolio companies are susceptible to economic or industry centric slowdowns or recessions and may be unable to repay debt from us during these periods. Therefore, our non-performing assets are likely to increase, and the value of our portfolio is likely to decrease during these periods. Adverse economic conditions also may decrease the value of collateral securing some of our debt investments and the value of our equity investments. Economic slowdowns or recessions could lead to financial losses in our portfolio and a material decrease in revenues, net income and assets. Unfavorable economic conditions also could increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. These events could prevent us from increasing investments and materially harm our operating results.
A portfolio company’s failure to satisfy financial or operating covenants imposed by us or other lenders could lead to defaults and potential termination of its debt and foreclosure on its secured assets, which could trigger cross-defaults under other agreements and jeopardize our portfolio company’s ability to meet its obligations under the debt securities that we hold. We may incur expenses to the extent necessary to seek recovery upon default or to negotiate new terms with a defaulting portfolio company, and any restructuring could further cause adverse effects on our business. Depending on the facts and circumstances of our investments and the extent of our involvement in the management of a portfolio company, upon the bankruptcy of a portfolio company, a bankruptcy court may recharacterize our debt investments as equity investments and subordinate all or a portion of our claim to that of other creditors. This could occur regardless of how we may have structured our investment. In addition, we cannot assure you that a bankruptcy court would not take actions contrary to our interests.
If we fail to make follow-on investments in our portfolio companies, this could materially impair the value of our portfolio.
Following an initial investment in a portfolio company, we may make additional investments in that portfolio company as “follow-on” investments, in order to:
We have the discretion to make any follow-on investments, subject to the availability of capital resources and regulatory considerations. We may elect not to make follow-on investments or otherwise lack sufficient funds to make those investments. Any failure to make follow-on investments may, in some circumstances, jeopardize the continued viability of a portfolio company and our initial investment, or may result in a missed opportunity for us to increase our participation in a successful transaction or business. Even if we have sufficient capital to make a desired follow-on investment, we may elect not to make a follow-on investment because we may not want to increase our concentration of risk, either because we prefer other opportunities or because we are inhibited by compliance with BDC requirements or the desire to maintain our RIC tax status.
Because we generally do not hold controlling equity interests in our portfolio companies, we are not in a position to exercise control over our portfolio companies or to prevent decisions by management of our portfolio companies that could decrease the value of our investments.
Because we generally do not hold controlling equity positions in our portfolio companies, we are subject to the risk that a portfolio company may make business decisions with which we disagree, and the stockholders and management of a portfolio company may take risks or otherwise act in ways that are adverse to our interests. Due to the lack of liquidity for the debt and equity investments that we typically hold in our portfolio companies, we may not be able to dispose of our investments in the event we disagree with the actions of a portfolio company, and may therefore suffer a decrease in the market value of our investments.
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An investment strategy focused primarily on privately held companies, including controlling equity interests, presents certain challenges, including the lack of available or comparable information about these companies, a dependence on the talents and efforts of only a few key portfolio company personnel and a greater vulnerability to economic downturns.
We have invested and intend to continue to invest primarily in privately held companies. Generally, little public information exists about these companies, and we rely on the ability of our Investment Adviser’s investment professionals to obtain adequate information to evaluate the potential returns from investing in these companies. If they are unable to uncover all material information about these companies, we may not make a fully informed investment decision, and we may lose value on our investments. Also, privately held companies frequently have less diverse product lines and smaller market presence than larger competitors. These factors could have a material adverse impact on our investment returns as compared to companies investing primarily in the securities of public companies.
Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies and our portfolio companies may be highly leveraged.
We invest primarily in floating rate loans issued by our portfolio companies. The portfolio companies usually will have, or may be permitted to incur, other debt that ranks equally with, or senior to, our investments, and they may be highly leveraged. By their terms, such debt instruments may provide that the holders are entitled to receive payment of interest or principal on or before the dates on which we are entitled to receive payments with respect to our debt investments. Also, in the event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a portfolio company, holders of debt instruments ranking senior to our investment in that portfolio company would typically be entitled to receive payment in full before we receive any distribution in respect of our investment. After repaying such senior creditors, the portfolio company may not have any remaining assets to use for repaying its obligation to us. In the case of debt ranking equally with debt securities in which we invest, we would have to share on an equal basis any distributions with other creditors holding such debt in the event of an insolvency, liquidation, dissolution, reorganization or bankruptcy of the relevant portfolio company.
Our incentive fee may induce the Investment Adviser to make speculative investments.
The incentive fee payable by us to PennantPark Investment Advisers may create an incentive for PennantPark Investment Advisers to make investments on our behalf that are risky or more speculative than would be the case in the absence of such compensation arrangement. The incentive fee payable to our Investment Adviser is calculated based on a percentage of our NAV. This may encourage our Investment Adviser to use leverage to increase the return on our investments. Under certain circumstances, the use of leverage may increase the likelihood of default, which would disfavor the holders of our common stock. In addition, our Investment Adviser will receive the incentive fee based, in part, upon net capital gains realized on our investments. Unlike that portion of the incentive fee based on income, there is no hurdle applicable to the portion of the incentive fee based on net capital gains. As a result, the Investment Adviser may have a tendency to invest more capital in investments that are likely to result in capital gains as compared to income producing securities. Such a practice could result in our investing in more speculative securities than would otherwise be the case, which could result in higher investment losses, particularly during economic downturns.
The part of our incentive fee payable by us to PennantPark Investment Advisers that relates to net investment income is computed and paid on income that has been accrued but that has not been received in cash. PennantPark Investment Advisers is not obligated to reimburse us for any such incentive fees even if we subsequently incur losses or never receive in cash the deferred income that was previously accrued. As a result, there is a risk that we will pay incentive fees with respect to income that we never receive in cash.
Any investments in distressed debt may not produce income and may require us to bear large expenses in order to protect and recover our investment.
Distressed debt investments may not produce income and may require us to bear certain additional expenses in order to protect and recover our investment. Therefore, to the extent we invest in distressed debt, our ability to achieve current income for our stockholders may be diminished. We also will be subject to significant uncertainty as to when, in what manner and for what value the distressed debt in which we invest will eventually be satisfied (e.g., through liquidation of the obligor’s assets, an exchange offer or plan of reorganization involving the distressed debt securities or a payment of some amount in satisfaction of the obligation). In addition, even if an exchange offer is made or plan of reorganization is adopted with respect to distressed debt we hold, there can be no assurance that the securities or other assets received by us in connection with such exchange offer or plan of reorganization will not have a lower value or income potential than may have been anticipated when the investment was made. Moreover, any securities received by us upon completion of an exchange offer or plan of reorganization may be restricted as to resale. If we participate in negotiations with respect to any exchange offer or plan of reorganization with respect to an issuer of distressed debt, we may be restricted from disposing of such securities.
Our investments in foreign securities may involve significant risks in addition to the risks inherent in U.S. investments.
Our investment strategy contemplates potential investments in securities of companies located outside of the United States. Investments in securities of companies located outside the United States would not be qualifying assets under Section 55(a) of the 1940 Act. Investing in companies located outside of the United States may expose us to additional risks not typically associated with investing in U.S. companies. These risks include changes in exchange control regulations, political, economic and social instability, expropriation, imposition of foreign taxes, less liquid markets and less available information than is generally the case in the United States, higher transaction costs, less government supervision of exchanges, brokers and issuers, less developed bankruptcy laws, difficulty in enforcing contractual obligations, lack of uniform accounting and auditing standards and greater price volatility.
Although most of our investments will be U.S. dollar-denominated, any investments denominated in a foreign currency will be subject to the risk that the value of a particular currency will change in relation to one or more other currencies. Among the factors that may affect currency values are trade balances, the level of interest rates, differences in relative values of similar assets in different currencies, long-term opportunities for investment and capital appreciation, and economic and political developments. We may employ hedging techniques such as using the Credit Facility’s multicurrency capability to minimize these risks, but we can offer no assurance that we will, in fact, hedge currency risk or, that if we do, such strategies will be effective.
We may make investments that cause our stockholders to bear investment advisory fees and other expenses on such investments in addition to our management fees and expenses.
We may invest, to the extent permitted by law, in the securities and instruments of other investment companies and companies that would be investment companies but are excluded from the definition of an investment company provided in Section 3(c) of the 1940 Act. To the extent we so invest, we will bear our ratable share of any such investment company’s expenses, including management and performance fees. We will also remain obligated to pay investment advisory fees, consisting of a base management fee and an incentive fee, to PennantPark Investment Advisers with respect to investments in the securities and instruments of other investment companies under our Investment Management Agreement. With respect to any such investments, each of our stockholders will bear his or her share of the investment advisory fees of PennantPark Investment Advisers as well as indirectly bearing the investment advisory fees and other expenses of any investment companies in which we invest.
We may be obligated to pay our Investment Adviser incentive compensation even if we incur a loss.
Our Investment Adviser is entitled to incentive compensation for each fiscal quarter in an amount equal to a percentage of the excess of our investment income for that quarter (before deducting incentive compensation, net operating losses and certain other items) above a threshold return for that quarter. Our Pre-Incentive Fee Net Investment Income for incentive compensation purposes excludes realized and unrealized capital losses that we may incur in the fiscal quarter, even if such capital losses
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result in a net loss on our Consolidated Statements of Operations for that quarter. Thus, we may be required to pay the Investment Adviser incentive compensation for a fiscal quarter even if there is a decline in the value of our portfolio, NAV or we incur a net loss for that quarter. In addition, increases in interest rates may increase the amount of incentive fees we pay to the Investment Adviser even though our performance relative to the market has not increased.
We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk, counterparty risk, operational and legal risk and other risks similar to those associated with the use of leverage.
The Company may invest in derivatives and other assets that are subject to many of the same types of risks related to the use of leverage. Derivative transactions, if any, will generally create leverage for the Company and involve significant risks. The primary risks related to derivative transactions include counterparty, correlation, liquidity, leverage, volatility, over-the-counter trading, operational and legal risks. In addition, a small investment in derivatives could have a large potential impact on our performance, effecting a form of investment leverage on our portfolio. In certain types of derivative transactions, the Company could lose the entire amount of its investment; in other types of derivative transactions the potential loss is theoretically unlimited.
Under SEC Rule 18f-4 under the 1940 Act (“Rule 18f-4”), related to the use of derivatives, short sales, reverse repurchase agreements and certain other transactions by registered investment companies, the Company is permitted to enter into derivatives and other transactions that create future payment or delivery obligations, including short sales, notwithstanding the senior security provisions of the 1940 Act if it complies with certain value-at-risk leverage limits and derivatives risk management program and board oversight and reporting requirements or comply with a “limited derivatives users” exception. Rule 18f-4 also permits the Company to enter into reverse repurchase agreements or similar financing transactions notwithstanding the senior security provisions of the 1940 Act if the Company aggregates the amount of indebtedness associated with our reverse repurchase agreements or similar financing transactions with the aggregate amount of any other senior securities representing indebtedness when calculating the asset coverage ratios as discussed herein. In addition, the Company is permitted to invest in a security on a when-issued or forward-settling basis, or with a non-standard settlement cycle, and the transaction will be deemed not to involve a senior security under the 1940 Act, provided that (i) the Company intends to physically settle the transaction and (ii) the transaction will settle within 35 days of its trade date (the “Delayed-Settlement Securities Provision”). The Company may otherwise engage in such transactions that do not meet the conditions of the Delayed-Settlement Securities Provision so long as the Company treats any such transaction as a “derivatives transaction” for purposes of compliance with the rule. Furthermore, the Company is permitted to enter into an unfunded commitment agreement, and such unfunded commitment agreement will not be subject to the asset coverage requirements under the 1940 Act, if the Company reasonably believes, at the time it enters into such agreement, that it will have sufficient cash and cash equivalents to meet its obligations with respect to all such agreements as they come due. The Company cannot predict the effects of these requirements.
The Company has adopted updated policies and procedures in compliance with Rule 18f-4. The Company expects to qualify as a “limited derivatives user.” Future legislation or rules may modify how the Company treats derivatives and other financial arrangements for purposes of the Company’s compliance with the leverage limitations of the 1940 Act. Future legislation or rules, may modify how leverage is calculated under the 1940 Act and, therefore, may increase or decrease the amount of leverage currently available to the Company under the 1940 Act, which may be materially adverse to the Company and the Company’s Investors.
RISKS RELATING TO AN INVESTMENT IN OUR COMMON STOCK
We may obtain the approval of our stockholders to issue shares of our common stock at prices below the then current NAV per share of our common stock. If we receive such approval from stockholders in the future, we may issue shares of our common stock at a price below the then current NAV per share of common stock. Any such issuance could materially dilute your interest in our common stock and reduce our NAV per share.
We may seek to obtain from our stockholders and they may approve a proposal that authorizes us to issue shares of our common stock at prices below the then current NAV per share of our common stock in one or more offerings for a 12-month period. Such approval would allow us to access the capital markets in a way that we were previously unable to do as a result of restrictions that, absent stockholder approval, apply to BDCs under the 1940 Act.
Any sale or other issuance of shares of our common stock at a price below NAV per share will result in an immediate dilution to your interest in our common stock and a reduction of our NAV per share. This dilution would occur as a result of a proportionately greater decrease in a stockholder’s interest in our earnings and assets and voting interest in us than the increase in our assets resulting from such issuance. Because the number of future shares of common stock that may be issued below our NAV per share and the price and timing of such issuances are not currently known, we cannot predict the actual dilutive effect of any such issuance. We also cannot determine the resulting reduction in our NAV per share of any such issuance at this time. We caution you that such effects may be material, and we undertake to describe all the material risks and dilutive effects of any offerings we make at a price below our then current NAV in the future in a prospectus supplement issued in connection with any such offering.
The determination of NAV in connection with an offering of shares of common stock will involve the determination by our board of directors or a committee thereof that we are not selling shares of our common stock at a price below the then current NAV of our common stock at the time at which the sale is made or otherwise in violation of the 1940 Act, unless we have previously received the consent of the majority of our common stockholders to do so and the board of directors decides such an offering is in the best interests of our common stockholders. Whenever we do not have current stockholder approval to issue shares of our common stock at a price per share below our then current NAV per share, the offering price per share (after any distributing commission or discount) will equal or exceed our then current NAV per share, based on the value of our portfolio securities and other assets determined in good faith by our board of directors as of a time within 48 hours (excluding Sundays and holidays) of the sale.
There is a risk that our stockholders may not receive distributions or that our distributions may not grow over time.
We intend to make distributions on a monthly basis to our stockholders out of assets legally available for distribution. We cannot assure you that we will achieve investment results that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. In addition, due to the asset coverage ratio requirements applicable to us as a BDC, we may be limited in our ability to make distributions. Further, we may be forced to liquidate some of our investments and raise cash in order to make distribution payments, which could materially harm our business. Finally, to the extent we make distributions to stockholders which include a return of capital, that portion of the distribution essentially constitutes a return of the stockholders’ investment. Although such return of capital may not be taxable, such distributions may increase an investor’s tax liability for capital gains upon the future sale of our common stock.
Investing in our shares may involve an above average degree of risk.
The investments we make in accordance with our investment objectives may result in a higher amount of risk and volatility than alternative investment options or loss of principal. Our investments in portfolio companies may be highly speculative and aggressive and, therefore, an investment in our shares may not be suitable for someone with lower risk tolerance.
Sales of substantial amounts of our securities may have an adverse effect on the market price of our securities.
Sales of substantial amounts of our securities, or the availability of such securities for sale, could adversely affect the prevailing market prices for our securities. If this occurs and continues it could impair our ability to raise additional capital through the sale of securities should we desire to do so.
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We may allocate the net proceeds from any offering of our securities in ways with which you may not agree.
We have significant flexibility in investing the net proceeds of any offering of our securities and may use the net proceeds from an offering in ways with which you may not agree or for purposes other than those contemplated at the time of the offering.
Our shares may trade at discounts from NAV or at premiums that are unsustainable over the long term.
Shares of BDCs may trade at a market price that is less than the NAV that is attributable to those shares. Our shares have traded above and below our NAV. Our shares closed on The New York Stock Exchange at $11.57 and $10.66 on September 30, 2024 and 2023, respectively. Our NAV per share was $11.31 and $11.13 as of the same dates, respectively. The possibility that our shares of common stock will trade at a discount from NAV or at a premium that is unsustainable over the long term is separate and distinct from the risk that our NAV will decrease. It is not possible to predict whether our shares will trade at, above or below NAV in the future.
The market price of our common stock may fluctuate significantly.
The market price and liquidity of the market for shares of our common stock may be significantly affected by numerous factors, some of which are beyond our control and may not be directly related to our operating performance. These factors include:
Since our initial listing on The Nasdaq Global Select Market to our voluntarily withdrawal of the principal listing of common shares from the Nasdaq Stock Market LLC effective at market close on April 13, 2022 and subsequent listing and trading of the Company's common stock on the New York Stock Exchange, which commenced April 14, 2022, our shares of common stock have traded at a wide range of prices. We can offer no assurance that our shares of common stock will not display similar volatility in future periods.
We may be unable to invest the net proceeds raised from offerings on acceptable terms, which would harm our financial condition and operating results.
Until we identify new investment opportunities, we intend to either invest the net proceeds of future offerings in cash equivalents, U.S. government securities and other high-quality debt investments that mature in one year or less or use the net proceeds from such offerings to reduce then-outstanding obligations under the Credit Facility or any future credit facility. We cannot assure you that we will be able to find enough appropriate investments that meet our investment selection criteria or that any investment we complete using the proceeds from an offering will produce a sufficient return.
There is a risk that our common stockholders may receive our stock as distributions in which case they may be required to pay taxes in excess of the cash they receive.
We may distribute our common stock as a dividend of our taxable income and a stockholder could receive a portion of the dividends declared and distributed by us in shares of our common stock with the remaining amount in cash. Revenue Procedures issued by the IRS allow a publicly offered regulated investment company (including a BDC) to distribute its own stock as a dividend for the purpose of fulfilling its distribution requirements, if certain conditions are satisfied. As long as a portion of such dividend is paid in cash (which portion may be as low as 20% of such dividend) and certain requirements are met, the entire distribution will be treated as a dividend for U.S. federal income tax purposes. As a result, a stockholder will be considered to have recognized dividend income generally equal to the fair market value of the stock paid by us plus cash received with respect to such dividend. The total dividend declared would be taxable income to a stockholder even though he or she may only receive a relatively small portion of the dividend in cash to pay any taxes due on the dividend. We have not elected to distribute stock as a dividend but reserve the right to do so.
Provisions of the Maryland General Corporation Law and of our charter and bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
The Maryland General Corporation Law, our charter and our bylaws contain provisions that may discourage, delay or make more difficult a change in control of us or the removal of our directors. We are subject to the Maryland Business Combination Act, or the Business Combination Act, the application of which is subject to any applicable requirements of the 1940 Act. Our board of directors has adopted a resolution exempting from the Business Combination Act any business combination between us and any other person, subject to prior approval of such business combination by our board, including approval by a majority of our disinterested directors. If the resolution exempting business combinations is repealed or our board does not approve a business combination, the Business Combination Act may discourage third parties from trying to acquire control of us and increase the difficulty of consummating such an offer.
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In addition, our bylaws exempt from the Maryland Control Share Acquisition Act acquisitions of our common stock by any person. If we amend our bylaws to repeal the exemption from such act, it may make it more difficult for a third party to obtain control of us and increase the difficulty of consummating such an offer. Our bylaws require us to consult with the SEC staff before we repeal such exemption. Also, our charter provides for classifying our board of directors in three classes serving staggered three-year terms, and provisions of our charter authorize our board of directors to classify or reclassify shares of our stock in one or more classes or series, to cause the issuance of additional shares of our stock, and to amend our charter, without stockholder approval, to increase or decrease the number of shares of stock that we have authority to issue.
These anti-takeover provisions may inhibit a change of control in circumstances that could give our stockholders the opportunity to realize a premium over the market price for our common stock.
RISKS RELATING TO AN INVESTMENT IN OUR DEBT SECURITIES
Risks Relating to Our 2026 Notes
The 2026 Notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
The
The 2026 Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
The 2026 Notes are obligations exclusively of PennantPark Floating Rate Capital Ltd. and not of any of our subsidiaries. None of our subsidiaries is or acts as a guarantor of the 2026 Notes, and the 2026 Notes are not required to be guaranteed by any subsidiaries we may acquire or create in the future. Our secured indebtedness with respect to the Credit Facility is held through Funding I, and our secured indebtedness with respect to the 2036 Asset-Backed Debt and 2036-R Asset-Backed Debt, (collectively, the "Asset-Backed Debt") is held through the 2036 Securitization Issuer and the 2036-R Securitization Issuers, respectively. The assets of any such subsidiaries are not directly available to satisfy the claims of our creditors, including holders of the 2026 Notes.
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Except to the extent we are a creditor with recognized claims against our subsidiaries, all claims of creditors (including holders of preferred stock, if any, of our subsidiaries) will have priority over our equity interests in such subsidiaries (and therefore the claims of our creditors, including holders of the 2026 Notes) with respect to the assets of such subsidiaries. Even if we are recognized as a creditor of one or more of our subsidiaries, our claims would still be effectively subordinated to any security interests in the assets of any such subsidiary and to any indebtedness or other liabilities of any such subsidiary senior to our claims. Consequently, the 2026 Notes will be structurally subordinated to all indebtedness and other liabilities (including trade payables) of our subsidiaries and any subsidiaries that we may in the future acquire or establish as financing vehicles or otherwise.
The indenture under which the 2026 Notes were issued contains limited protection for their respective holders.
The indenture under which the 2026 Notes were issued offers limited protection for their respective holders. The terms of the indenture and the 2026 Notes do not restrict our or any of our subsidiaries’ ability to engage in, or otherwise be a party to, a variety of corporate transactions, circumstances or events that could have an adverse impact on each holder’s investment in the 2026 Notes. In particular, the terms of the indenture and the 2026 Notes do not place any restrictions on our or our subsidiaries’ ability to:
In addition, the indenture will not require us to offer to purchase the 2026 Notes in connection with a change of control or any other event.
Furthermore, the terms of the indenture and the 2026 Notes do not protect their respective holders in the event that we experience changes (including significant adverse changes) in our financial condition, results of operations or credit ratings, as they do not require that we or our subsidiaries adhere to any financial tests or ratios or specified levels of net worth, revenues, income, cash flow or liquidity, except as required under the 1940 Act.
Our ability to recapitalize, incur additional debt and take a number of other actions that are not limited by the terms of the 2026 Notes may have important consequences for their holders, including making it more difficult for us to satisfy our obligations with respect to the 2026 Notes or negatively affecting their trading value.
Certain of our current debt instruments include more protections for their respective holders than the indenture and the 2026 Notes. In addition, other debt we issue or incur in the future could contain more protections for its holders than the indenture governing the 2026 Notes and the 2026 Notes, including additional covenants and events of default. The issuance or incurrence of any such debt with incremental protections could affect the market for and trading levels and prices of the 2026 Notes.
The optional redemption provision may materially adversely affect your return on the 2026 Notes.
The 2026 Notes will be redeemable in whole or in part upon certain conditions at any time, or from time to time, at our option, on or after January 1, 2026. We may choose to redeem the 2026 Notes at times when prevailing interest rates are lower than the interest rate paid on the 2026 Notes. In this circumstance, investors may not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the 2026 Notes being redeemed.
We may not be able to repurchase the 2026 Notes upon a Change of Control Repurchase Event.
Upon the occurrence of a Change of Control Repurchase Event, as defined in the indenture governing the 2026 Notes, subject to certain conditions, we will be required to offer to repurchase all outstanding 2026 Notes at 100% of their principal amount, plus accrued and unpaid interest. The source of funds for that purchase of 2026 Notes will be our available cash or cash generated from our operations or other potential sources, including borrowings, investment repayments, sales of assets or sales of equity. We cannot assure you that sufficient funds from such sources will be available at the time of any Change of Control Repurchase Event to make required repurchases of the 2026 Notes tendered. Before making any such repurchase of the 2026 Notes, we may have to comply with certain requirements under our then existing financing arrangements, such as the Credit Facility. Our future debt instruments may also contain similar restrictions and provisions. If the holders of the 2026 Notes exercise their right to require us to repurchase the 2026 Notes upon a Change of Control Repurchase Event, the financial effect of this repurchase could cause a default under our existing or future debt instruments, even if the Change of Control Repurchase Event itself would not cause a default. It is possible that we will not have sufficient funds at the time of the Change of Control Repurchase Event to make the required repurchase of the 2026 Notes or our other debt.
While a trading market has developed after issuing the 2026 Notes, we cannot assure you that an active trading market for the 2026 Notes will be maintained.
While a trading market developed after issuing the 2026 Notes, we cannot assure you that an active and liquid market for the 2026 Notes will be maintained. We do not intend to list the 2026 Notes on any securities exchange or for quotation of the 2026 Notes on any automated dealer quotation system. If the 2026 Notes are traded after their initial issuance, they may trade at a discount to their public offering price depending on prevailing interest rates, the market for similar securities, our credit ratings, general economic conditions, our financial condition, performance and prospects and other factors. The underwriters of the 2026 Notes may discontinue any market-making in the 2026 Notes at any time at their sole discretion. In addition, any market-making activity will be subject to limits imposed by law. Accordingly, we cannot assure you that a liquid trading market will be maintained for the 2026 Notes, that you will be able to sell the 2026 Notes at a particular time or that the price you receive when you sell
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will be favorable. To the extent an active trading market is not maintained, the liquidity and trading price for the 2026 Notes may be harmed. Accordingly, you may be required to bear the financial risk of an investment in the 2026 Notes for an indefinite period of time.
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If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the 2026 Notes.
Any default under the agreements governing our indebtedness, including a default under the Credit Facility, the Asset-Backed Debt or under other indebtedness to which we may be a party that is not waived by the required lenders or holders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal, premium, if any, and interest on the 2026 Notes and substantially decrease the market value of the 2026 Notes.
If we are unable to generate sufficient cash flow and are otherwise unable to obtain funds necessary to meet required payments of principal, premium, if any, and interest on our indebtedness, or if we otherwise fail to comply with the various covenants, including financial and operating covenants, in the instruments governing our indebtedness, we could be in default under the terms of the agreements governing such indebtedness. In the event of such default, the holders of such indebtedness could elect to declare all the funds borrowed thereunder to be due and payable, together with accrued and unpaid interest, the lenders or holders under the Credit Facility, the Asset-Backed Debt or other debt we may incur in the future could elect to terminate their commitments, cease making further loans and institute foreclosure proceedings against our assets, and we could be forced into bankruptcy or liquidation.
If our operating performance declines, we may in the future need to seek to obtain waivers from the required lenders or holders under the agreements relating to the Credit Facility, the Asset-Backed Debt or other debt that we may incur in the future to avoid being in default. If we breach our covenants under the Credit Facility, the Asset-Backed Debt or other debt and seek a waiver, we may not be able to obtain a waiver from the required lenders or holders. If this occurs, we would be in default and our lenders or holders could exercise their rights as described above, and we could be forced into bankruptcy or liquidation. If we are unable to repay debt, lenders or holders having secured obligations, including the lenders or holders under the Credit Facility and the Asset-Backed Debt, could proceed against the collateral securing such debt. Because the Credit Facility and the Asset-Backed Debt have, and any future debt will likely have, customary cross-default provisions, if the indebtedness thereunder or under any future credit facility is accelerated, we may be unable to repay or finance the amounts due.
A downgrade, suspension or withdrawal of a credit rating assigned by a rating agency to us or our unsecured debt, if any, or change in the debt markets could cause the liquidity or market value of the 2026 Notes to decline significantly.
Our credit ratings are an assessment by a rating agency of our ability to pay our debts when due. Consequently, real or anticipated changes in our credit ratings will generally affect the market value of the 2026 Notes. These credit ratings may not reflect the potential impact of risks relating to the structure or marketing of the 2026 Notes. Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Neither we nor any underwriter undertakes any obligation to maintain our credit ratings or to advise holders of Notes of any changes in our credit ratings. There can be no assurance that our credit ratings will remain for any given period of time or that such credit ratings will not be lowered or withdrawn entirely by a rating agency if in its judgment future circumstances relating to the basis of the credit ratings, such as adverse changes in our company, so warrant. An increase in the competitive environment, inability to cover distributions, or increase in leverage could lead to a downgrade in our credit ratings and limit our access to the debt and equity markets capability impairing our ability to grow the business. The conditions of the financial markets and prevailing interest rates have fluctuated in the past and are likely to fluctuate in the future, which could have an adverse effect on the market prices of the 2026 Notes.
RISKS RELATING TO OUR DEBT SECURITIZATION
We are subject to certain risks as a result of our interests in connection with the 2036-R Securitization and the 2036 Securitization and our equity interests in the 2036-R Securitization Issuers and the 2036 Securitization Issuer.
On July 25, 2024, PennantPark CLO I, Ltd (the “2036-R Securitization Issuer”), a wholly-owned and consolidated subsidiary of the Company, and PennantPark CLO I LLC, a wholly-owned subsidiary of the Issuer (the “2036-R Co-Securitization Issuer” and, together with the 2036-R Securitization Issuer, the “2036-R Securitization Issuers”), closed the refinancing and upsize of a four-year reinvestment period, twelve-year final maturity $351.0 million debt securitization in the form of a collateralized loan obligation (the “2036-R Securitization”). The 2036-R Securitization was executed through the issuance and incurrence, as applicable, of the 2036-R Asset-Backed Debt. As part of the 2036-R Securitization, we sold and/or contributed to the 2036-R Securitization Issuer approximately $277 million par amount of middle market loans, which loans constituted part of the initial portfolio of assets securing the 2036-R Asset-Backed Debt (other than the $64 million of subordinated notes issued by the 2036-R Securitization Issuer pursuant to the 2036-R Indenture).
As a result of the 2036-R Securitization, we hold, indirectly through CLO I Depositor, LLC, our wholly-owned subsidiary (the “R-Depositor”), 100% of the equity interests in the 2036-R Securitization Issuers. As a result, we consolidate the financial statements of the 2036-R Securitization Issuers, as well as our other subsidiaries, in our consolidated financial statements. Because each of the 2036-R Securitization Issuers is disregarded as an entity separate from its owners for U.S. federal income tax purposes, the sale or contribution by us to the 2036-R Securitization Issuers, as applicable, did not constitute a taxable event for U.S. federal income tax purposes. If the IRS were to take a contrary position, there could be a material adverse effect on our business, financial condition, results of operations or cash flows.
On February 22, 2024, we completed the 2036 Securitization, which was executed through the issuance and incurrence, as applicable, of the 2036 Asset-Backed Debt. by, our consolidated subsidiary, PennantPark CLO VIII, LLC, a Delaware limited liability company (the “2036 Securitization Issuer”). As part of the 2036 Securitization, we sold and/or 2036 contributed via the Financing Subsidiary to the 2036 Securitization Issuer approximately $265.03 million par amount of middle market loans, which loans constituted part of the initial portfolio of assets securing the 2036 Asset-Backed Debt (other than the $63.55 million of subordinated notes issued pursuant to the 2036 Indenture).
As a result of the 2036 Securitization, we hold, indirectly through the 2036 Financing Subsidiary, 100% of the equity interests in the 2036 Securitization Issuer. As a result, we consolidate the financial statements of the 2036 Financing Subsidiary and the 2036 Securitization Issuer, as well as our other subsidiaries, in our consolidated financial statements. Because each of the 2036 Financing Subsidiary and the 2036 Securitization Issuer is disregarded as an entity separate from its owners for U.S. federal income tax purposes, the sale or contribution by us to the 2036 Financing Subsidiary, and by the 2036 Financing Subsidiary to the 2036-R Securitization Issuer, as applicable, did not constitute a taxable event for U.S. federal income tax purposes. If the IRS were to take a contrary position, there could be a material adverse effect on our business, financial condition, results of operations or cash flows.
An event of default in connection with the 2036-R Securitization or the 2036 Securitization could give rise to a cross-default under our other material indebtedness.
The documents governing our other material indebtedness contain customary cross-default provisions that could be triggered if an event of default occurs in connection with the 2036-R Securitization or the 2036 Securitization. An event of default with respect to our other indebtedness could lead to the acceleration of such indebtedness and the exercise of other remedies as provided in the documents governing such other indebtedness. This could have a material adverse effect on our business, financial condition, results of operations and cash flows and may result in our inability to make distributions sufficient to maintain our ability to be subject to tax as a RIC.
35
We may not receive cash distributions in respect of our indirect ownership interests in the 2036 Securitization Issuer or the 2036-R Securitization Issuers.
Apart from fees payable to us in connection with our role as servicer of the Securitization Loans and the reimbursement of related amounts under the documents governing the 2036 Securitization and the 2036-R Securitization, we receive cash in connection with the 2036-R Securitization and the 2036 Securitization only to the extent that the Depositor receives payments in respect of its equity interests in the Securitization Issuers. The respective holders of the equity interests in the 2036 Securitization Issuer and the 2036-R Securitization Issuers are the residual claimants on distributions, if any, made by the 2036 Securitization Issuer or the 2036-R Securitization Issuers, as applicable, after the holders of the 2036 Asset-Backed Debt (the “2036 Securitization Debtholders”), and the holders of the 2036-R Asset-Backed Debt (the “2036-R Securitization Debtholders”), as applicable, and other claimants have been paid in full on each payment date or upon maturity of the 2036 Asset-Backed Debt or 2036-R Asset-Backed Debt, as applicable, subject to the priority of payments under the documents governing the 2036 Securitization and the 2036-R Securitization, as applicable. To the extent that the value of the 2036 Securitization Issuer’s and the 2036-R Securitization Issuer’s portfolio of loans is reduced as a result of conditions in the credit markets (relevant in the event of a liquidation event), other macroeconomic factors, distressed or defaulted loans or the failure of individual portfolio companies to otherwise meet their obligations in respect of the loans, or for any other reason, the ability of the 2036 Securitization Issuer or the 2036-R Securitization Issuers to make cash distributions in respect of the 2036 Financing Subsidiary’s or the R-Depositor's equity interests, as applicable, would be negatively affected and consequently, the value of the equity interests in the 2036 Securitization Issuer or the 2036-R Securitization Issuers, as applicable, would also be reduced. In the event that we fail to receive cash indirectly from the 2036 Securitization Issuer or the 2036-R Securitization Issuers, we could be unable to make distributions, if at all, in amounts sufficient to maintain our ability to be subject to tax as a RIC.
The interests of the 2036 Securitization Debtholders and the 2036-R Securitization Debtholders may not be aligned with our interests.
The 2036 Asset-Backed Debt and the 2036-R Asset-Backed Debt constitute debt obligations ranking senior in right of payment to the rights of the holders of the equity interests in the 2036 Securitization Issuer and the 2036-R Securitization Issuers, as residual claimants in respect of distributions, if any, made by the 2036 Securitization Issuer and the 2036-R Securitization Issuers. As such, there are circumstances in which the interests of the 2036 Securitization Debtholders and the 2036-R Securitization Debtholders may not be aligned with the interests of holders of the equity interests in the 2036 Securitization Issuer or the 2036-R Securitization Issuers, as applicable. For example, under the terms of the documents governing the 2036 Securitization and the 2036-R Securitization, the 2036 Securitization Debtholders and the 2036-R Securitization Debtholders, as applicable, have the right to receive payments of principal and interest prior to holders of the equity interests.
For as long as the 2036 Asset-Backed Debt or the 2036-R Asset-Backed Debt remain outstanding, the respective 2036 Securitization Debtholders and 2036-R Securitization Debtholders, as applicable, have the right to act in certain circumstances with respect to the applicable securitization loans in ways that may benefit their interests but not the interests of the respective holders of the equity interests in the 2036 Securitization Issuer or the 2036-R Securitization Issuers, as applicable, including by exercising remedies under the documents governing the 2036 Securitization or the 2036-R Securitization.
If an event of default occurs, the 2036 Securitization Debtholders or the 2036-R Securitization Debtholders, as applicable, will be entitled to determine the remedies to be exercised, subject to the terms of the documents governing the 2036 Securitization and the 2036-R Securitization, as applicable. For example, upon the occurrence of an event of default with respect to the 2036 Asset-Backed Debt or the 2036-R Asset-Backed Debt, as applicable, the applicable trustee may and will at the direction of the holders of a majority of the applicable 2036 Asset-Backed Debt or the 2036-R Asset-Backed Debt, as applicable, declare the principal, together with any accrued interest, of the debt to be immediately due and payable. This would have the effect of accelerating the principal on such debt, triggering a repayment obligation on the part of the 2036 Securitization Issuer or the 2036-R Securitization Issuers, as applicable. The 2036 Asset-Backed Debt or the 2036-R Asset-Backed Debt then outstanding will be paid in full before any further payment or distribution on the equity interest is made. There can be no assurance that there will be sufficient funds through collections on the applicable securitization loans or through the proceeds of the sale of the applicable securitization loans in the event of a bankruptcy or insolvency to repay in full the obligations under the 2036 Asset-Backed Debt or the 2036-R Asset-Backed Debt, or to make any distribution to holders of the equity interests in the 2036 Securitization Issuer or the 2036-R Securitization Issuers.
Remedies pursued by the 2036 Securitization Debtholders or the 2036-R Securitization Debtholders could be adverse to our interests as the indirect holder of the equity interests in the 2036 Securitization Issuer and the 2036-R Securitization Issuers, as applicable. The 2036 Securitization Debtholders and the 2036-R Securitization Debtholders have no obligation to consider any possible adverse effect on such other interests. Thus, there can be no assurance that any remedies pursued by the 2036 Securitization Debtholders or the 2036-R Securitization Debtholders will be consistent with our best interests, or that we will receive, indirectly through the 2036 Financing Subsidiary or the R-Depositor, any payments or distributions upon an acceleration of the 2036 Asset-Backed Debt or the 2036-R Asset-Backed Debt, as applicable. Any failure of the 2036 Securitization Issuer to make distributions in respect of the equity interests that we indirectly hold, whether as a result of an event of default and the acceleration of payments on the 2036 Asset-Backed Debt or the 2036-R Asset-Backed Debt, as applicable, or otherwise, could have a material adverse effect on our business, financial condition, results of operations and cash flows and may result in our inability to make distributions sufficient to maintain our ability to be subject to tax as a RIC.
We have certain repurchase obligations with respect to the securitization loans transferred in connection with the 2036 Securitization and the 2036-R Securitization.
As part of each of the 2036 Securitization and the 2036-R Securitization, we entered into master loan agreements under which we would be required to repurchase any of the securitization loans (or participation interest therein) which were sold to the 2036 Securitization Issuer or the 2036-R Securitization Issuers, as applicable, in breach of certain customary representations and warranties made by us, the 2036 Financing Subsidiary or the R-Depositor with respect to such securitization loans or the legal structure of the 2036 Securitization or the 2036-R Securitization, as applicable. To the extent that there is a breach of such representations and warranties and we fail to satisfy any such repurchase obligation, the applicable securitization trustee may, on behalf of the 2036 Securitization Issuer or the 2036-R Securitization Issuers, as applicable, bring an action against us to enforce these repurchase obligations.
GENERAL RISK FACTORS
We and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.
Our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held by us and by our portfolio companies in non-interest-bearing and interest-bearing operating accounts may exceed the Federal Deposit Insurance Corporation insurance limits. If such banking institutions were to fail, we or our portfolio companies could lose all or a portion of those amounts held in excess of such insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our and our portfolio companies’ business, financial condition, results of operations, or prospects.
36
Although we assess our and our portfolio companies’ banking relationships as we believe necessary or appropriate, our and our portfolio companies’ access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our respective current and projected future business operations could be significantly impaired by factors that affect us or our portfolio companies, the financial institutions with which we or our portfolio companies have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we or our portfolio companies have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us or our portfolio companies to acquire financing on acceptable terms or at all.
Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
Certain of our portfolio companies are in industries that may be impacted by inflation. If such portfolio companies are unable to pass any increases in their costs of operations along to their customers, it could adversely affect their operating results and impact their ability to pay interest and principal on our loans, particularly if interest rates rise in response to inflation. In addition, any projected future decreases in our portfolio companies’ operating results due to inflation could adversely impact the fair value of those investments. Any decreases in the fair value of our investments could result in future realized or unrealized losses and therefore reduce our net assets resulting from operations.
Global capital markets could enter a period of severe disruption and instability due to future recessions, disease pandemics and other serious health events, political instability, geopolitical turmoil and foreign hostilities. These market conditions have historically had and could again have a materially adverse effect on debt and equity capital markets in the United States, which could have a materially negative impact on our business, financial condition and results of operations.
The U.S. and global capital markets have, from time to time, experienced periods of disruption characterized by the freezing of available credit, a lack of liquidity in the debt capital markets, significant losses in the principal value of investments, the re-pricing of credit risk in the broadly syndicated credit market, the failure of certain financial institutions and general volatility in the financial markets. During these periods of disruption, general economic conditions deteriorated with material and adverse consequences for the broader financial and credit markets, and the availability of debt and equity capital for the market as a whole, and financial services firms in particular, was reduced significantly. These conditions may reoccur for a prolonged period of time or materially worsen in the future. In addition, uncertainty between the United States and other countries with respect to trade policies, treaties and tariffs, among other factors, have caused disruptions in the global markets, including markets in which we participate, and we cannot assure you that these market conditions will not continue or worsen in the future. We may in the future have difficulty accessing debt and equity capital markets, and a severe disruption in the global financial markets, deterioration in credit and financing conditions or uncertainty regarding U.S. government spending and deficit levels or other global economic and political conditions, including future recessions, political instability, geopolitical turmoil and foreign hostilities, and disease, pandemics and other serious health events, could have a material adverse effect on our business, financial condition and results of operations.
Volatility or a prolonged disruption in the credit markets could materially damage our business.
We are required to record our assets at fair value, as determined in good faith by our board of directors, in accordance with our valuation policy. As a result, volatility in the capital markets may have a material adverse effect on our valuations and our NAV, even if we hold investments to maturity. Volatility or dislocation in the capital markets may depress our stock price below our NAV per share and create a challenging environment in which to raise equity and debt capital. As a BDC, we are generally not able to issue additional shares of our common stock at a price less than our NAV without first obtaining approval for such issuance from our stockholders and our independent directors. Additionally, our ability to incur indebtedness is limited by the asset coverage ratio requirements for a BDC, as defined under the 1940 Act. Declining portfolio values negatively impact our ability to borrow additional funds under the Credit Facility because our NAV is reduced for purposes of the asset coverage ratio. If the fair value of our assets declines substantially, we may fail to maintain the asset coverage ratio stipulated by the 1940 Act, which could, in turn, cause us to lose our status as a BDC and materially impair our business operations. A lengthy disruption in the credit markets could also materially decrease demand for our investments and could materially damage our business, financial condition and results of operations.
The significant disruptions in the capital markets experienced in the past has had, and may in the future have, a negative effect on the valuations of our investments and on the potential for liquidity events involving our investments. The debt capital that may be available to us in the future may be at a higher cost and have less favorable terms and conditions than those currently in effect. If our financing costs increase and we have no increase in interest income, then our net investment income will decrease. A prolonged inability to raise capital may require us to reduce the volume of investments we originate and could have a material adverse impact on our business, financial condition and results of operations. This may also increase the probability that other structural risks negatively impact us. These situations may arise due to circumstances that we may be unable to control, such as a lengthy disruption in the credit markets, a severe decline in the value of the U.S. dollar, a sharp economic downturn or recession or an operational problem that affects third parties or us, and could materially damage our business, financial condition and results of operations.
Any public health emergency, including any outbreak of existing or new diseases, and the resulting financial and economic market uncertainty could have a significant adverse impact on us.
The extent of the impact of any public health emergency, on our and our portfolio companies’ operational and financial performance will depend on many factors, including the duration and scope of such public health emergency, the actions taken by governmental authorities to contain its financial and economic impact, the extent of any related travel advisories and restrictions implemented, the impact of such public health emergency on overall supply and demand, investor liquidity and levels of economic activity and the extent of its disruption to important global, regional and local supply chains and economic markets, all of which are highly uncertain and cannot be predicted. In addition, our and our portfolio companies’ operations may be significantly impacted, or halted, as a result of government quarantine measures, restrictions on travel and other factors related to a public health emergency, including its potential adverse impact on the health of any of our or our portfolio companies’ personnel. This could create widespread business continuity issues for us and our portfolio companies. These factors may also cause the valuation of our investments to differ materially from the values that we may ultimately realize. Any public health emergency, including any outbreak of existing or new epidemic diseases, or the threat thereof, and the resulting financial and economic market uncertainty could have a significant adverse impact on us and the fair value of our investments and our portfolio companies.
Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies.
Economic sanction laws in the United States and other jurisdictions may prohibit us or our affiliates from transacting with certain countries, individuals and companies. In the United States, the U.S. Department of the Treasury’s Office of Foreign Assets Control administers and enforces laws, executive orders and regulations establishing U.S. economic and trade sanctions, which prohibit, among other things, transactions with, and the provision of services to, certain non-U.S. countries,
37
territories, entities and individuals. These types of sanctions may significantly restrict or completely prohibit investment activities in certain jurisdictions, and if we, our portfolio companies or other issuers in which we invest were to violate any such laws or regulations, we may face significant legal and monetary penalties.
The Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws and regulations, as well as anti-boycott regulations, may also apply to and restrict our activities, our portfolio companies and other issuers of our investments. If an issuer or we were to violate any such laws or regulations, such issuer or we may face significant legal and monetary penalties. The U.S. government has indicated that it is particularly focused on FCPA enforcement, which may increase the risk that an issuer or us becomes the subject of such actual or threatened enforcement. In addition, certain commentators have suggested that private investment firms and the funds that they manage may face increased scrutiny and/or liability with respect to the activities of their underlying portfolio companies. As such, a violation of the FCPA or other applicable regulations by us or an issuer of our portfolio investments could have a material adverse effect on us. We are committed to complying with the FCPA and other anti-corruption laws and regulations, as well as anti-boycott regulations, to which it is subject. As a result, we may be adversely affected because of our unwillingness to enter into transactions that violate any such laws or regulations.
We may be the target of litigation.
We may be the target of securities litigation in the future, particularly if the trading price of our common stock or our 2026 Notes fluctuates significantly. We could also generally be subject to litigation, including derivative actions by our stockholders. Any litigation could result in substantial costs and divert management’s attention and resources from our business and cause a material adverse effect on our business, financial condition and results of operations.
The effect of global climate change may impact the operations of our portfolio companies.
There may be evidence of global climate change. Climate change creates physical and financial risk and some of our portfolio companies may be adversely affected by climate change. For example, the needs of customers of energy companies vary with weather conditions, primarily temperature and humidity. To the extent weather conditions are affected by climate change, energy use could increase or decrease depending on the duration and magnitude of any changes. Increases in the cost of energy could adversely affect the cost of operations of our portfolio companies if the use of energy products or services is material to their business. A decrease in energy use due to weather changes may affect some of our portfolio companies’ financial condition through, for example, decreased revenues. Extreme weather conditions in general require more system backup, adding to costs, and can contribute to increased system stresses, including service interruptions.
Legislative or regulatory tax changes could adversely affect investors.
At any time, the federal income tax laws governing RICs or the administrative interpretations of those laws or regulations may be amended. The Biden Administration has enacted significant changes to the existing U.S. tax rules that include, among others, a minimum tax on book income and profits of certain multinational corporations, and there are a number of proposals in the U.S. Congress that would similarly modify the existing U.S. tax rules. The likelihood of any new legislation being enacted is uncertain. Any new laws, regulations or interpretations may take effect retroactively and could adversely affect the taxation of us or our shareholders. Therefore, changes in tax laws, regulations or administrative interpretations or any amendments thereto could diminish the value of an investment in our shares or the value or the resale potential of our investments.
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Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
The Company has processes in place to assess, identify, and manage material risks from cybersecurity threats. The Company's business is dependent on the communications and information systems of the Adviser and other third-party service providers. The Adviser manages the Company’s day-to-day operations and has implemented a cybersecurity program that applies to the Company and its operations.The Adviser manages the Company’s day-to-day operations and has implemented a cybersecurity program that applies to the Company and its operations.
Cybersecurity Program Overview
The Adviser has instituted a cybersecurity program designed to identify, assess, and manage cyber risks applicable to the Company. The Adviser's cyber risk management program involves risk assessments, implementation of security measures, and ongoing monitoring of systems and networks, including networks on which the Company relies. The Adviser actively monitors the current threat landscape in an effort to identify material risks arising from new and evolving cybersecurity threats, including material risks faced by the Company.
The Company relies on the Adviser to engage external experts, including cybersecurity assessors, consultants, and auditors to evaluate cybersecurity measures and risk management processes, including those applicable to the Company.
The Company relies on the Adviser's risk management program and processes, which include cyber risk assessments.
The Company depends on and engages various third parties, including suppliers, vendors, and service providers, to operate its business. The Company relies on the expertise of risk management, legal, information technology, and compliance personnel of the Adviser when identifying and overseeing risks from cybersecurity threats associated with our use of such entities.
Board Oversight of Cybersecurity Risks
The Board provides strategic oversight on cybersecurity matters, including risks associated with cybersecurity threats. The Board receives periodic updates from the Company's Chief Compliance Officer ("CCO") regarding the overall state of the Adviser's cybersecurity program, information on the current threat landscape, and risks from cybersecurity threats and cybersecurity incidents impacting the Company.
Management's Role in Cybersecurity Risk Management
The Company’s management, including the Company’s Chief Financial Officer (“CFO”) and CCO, is responsible for assessing and managing material risks from cybersecurity threats. The CFO and CCO of the Company oversee the Company’s oversight function generally and rely on Information Technology staff of, and consultants to, the Adviser to manage the assessment and management of material risks from cybersecurity threats. The CFO has been responsible for his oversight function as CFO to the Company for two years and has worked in the financial services industry for more than 30 years, during which time the CFO has gained expertise in assessing and managing risk applicable to the Company. The CCO has been responsible for oversight functions for the Company for two years, serving as CCO since May 2023 and has worked in the financial services industry for more than 27 years, during which time the CCO has gained expertise in assessing and managing risks applicable to the Company.
Management of the Company, including the CCO, is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents impacting the Company, including through the receipt of notifications from service providers and reliance on communications with risk management, legal, information technology, and/or compliance personnel of the Adviser.
Assessment of Cybersecurity Risk
The potential impact of risks from cybersecurity threats on the Company are assessed on an ongoing basis, and how such risks could materially affect the Company's business strategy, operational results, and financial condition are regularly evaluated. During the reporting period the Company has not identified any risks from cybersecurity threats, including as a result of previous cybersecurity incidents, that the Company believes have materially affected, or are reasonably likely to materially affect, the Company, including its business strategy, operational results, and financial condition.
Item 2. Properties
As of September 30, 2024, we did not own any real estate or other physical properties materially important to our operation. We believe that the office facilities of the Investment Adviser and Administrator are suitable and adequate for our business as it is contemplated to be conducted.
Item 3. Legal Proceedings
None of us, our Investment Adviser or our Administrator, is currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us, or against our Investment Adviser or Administrator. From time to time, we, our Investment Adviser or Administrator may be a party to certain legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
PRICE RANGE OF COMMON STOCK
On April 14, 2022, listing and trading of the Company's common stock commenced on the New York Stock Exchange after the Company voluntarily withdrew the principal listing of its common stock from the Nasdaq Global Stock Market effective at market close on April 13, 2022. Our common stock trades on the New York Stock Exchange under the symbol “PFLT.” The following table lists the high and low closing sale prices for our common stock, the closing sale prices as a premium or (discount) to our NAV per share and distributions per share for each full quarterly period within the fiscal years ended September 30, 2024 and 2023.
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Closing Sale Prices |
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of High Sale |
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NAV (1) |
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Low |
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Price to NAV (2) |
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Declared |
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Year Ended September 30, 2024 |
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Fourth quarter |
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$ |
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$ |
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$ |
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$ |
0.308 |
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Third quarter |
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0.308 |
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Second quarter |
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0.308 |
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First quarter |
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0.308 |
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Year Ended September 30, 2023 |
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Fourth quarter |
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$ |
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$ |
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$ |
0.308 |
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Third quarter |
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0.303 |
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Second quarter |
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0.290 |
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First quarter |
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0.285 |
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Shares of BDCs may trade at a market price both above and below the NAV that is attributable to those shares. Our shares have traded above and below our NAV. Our shares closed on the New York Stock Exchange at $
Sale of Unregistered Securities
We did not engage in any sales of unregistered securities during the year ended September 30, 2024.
Issuer Purchases of Equity Securities
We did not repurchase any of our common stock under our share repurchase plan during the year ended September 30, 2024.
DISTRIBUTIONS
We intend to continue making monthly distributions to our stockholders. The timing and amount of our monthly distributions, if any, is determined by our board of directors. Any distributions to our stockholders are declared out of assets legally available for distribution. We monitor available net investment income to determine if a tax return of capital may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, a portion of those distributions may be deemed to be a tax return of capital to our common stockholders.
In January 2025, a Form 1099-DIV will be sent to stockholders subject to information reporting that will state the amount and composition of distributions and provide information with respect to appropriate tax treatment of our distributions.
The tax characteristics of distributions declared, in accordance with Section 19(a) of the 1940 Act, for our fiscal and taxable years ended September 30, 2024 and 2023 from ordinary income (including short-term gains), if any, totaled $80.6 million, or $1.23 per share , and $60.5 million, or $1.19 per share, respectively, based on the weighted average shares outstanding for the respective periods. Additionally, for both years ended September 30, 2024 and 2023, we did not pay any distributions from long-term capital gains.
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage ratio for borrowings when applicable to us as a BDC under the 1940 Act and due to provisions in future credit facilities. If we do not distribute a certain minimum percentage of our income annually, we will suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions or distributions at a particular level.
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Stock Performance Graph
This graph compares the return on our common stock with that of the Standard & Poor’s 500 Stock Index (the "S&P Index") and the Russell 2000 Financial Services Index, for the last five fiscal years. The graph assumes that, on September 30, 2019, a person invested $100 in each of our common stock, the S&P 500 Index, and the Russell 2000 Financial Services Index. The graph measures total stockholder return, which takes into account both changes in stock price and distributions. It assumes that distributions paid are invested in like securities.
The graph and other information furnished under this Part II Item 5 of this Report shall not be deemed to be “soliciting material” or to be “filed” with the SEC or subject to Regulation 14A or 14C, or to the liabilities of Section 18 of the Exchange Act. The stock price performance included in the above graph is not necessarily indicative of future stock price performance.
FEES AND EXPENSES
The following table is being provided to update, as of September 30, 2024, certain information in our registration statement on Form N-2 (File No. 333-279726), most recently declared effective by the SEC on July 17, 2024. This table will assist you in understanding the various costs and expenses that an investor in shares of our common stock will bear directly or indirectly. However, we caution you that some of the percentages indicated in the table below are estimates and may vary from actual results. The following table should not be considered a representation of our future expenses. Actual expenses may be greater or less than shown. Except where the context suggests otherwise, whenever reference is made to fees or expenses paid by “you” or “us” or that “we” will pay, stockholders will indirectly bear such fees or expenses as investors in us.
Stockholder transaction expenses |
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Sales load (as a percentage of offering price) |
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Offering expenses (as a percentage of offering price) |
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(2) |
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Total stockholder expenses (as a percentage of offering price) |
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Estimated annual expenses (as a percentage of average net assets attributable to common shares)(3) |
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Management fees |
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(4) |
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Incentive fees |
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(5) |
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Interest on borrowed funds |
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(6) |
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Acquired fund fees and expenses |
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(7) |
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Other expenses |
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% |
(8) |
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Total estimated annual expenses |
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% |
(9) |
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Our stockholders indirectly bear 23.08% of the expenses of our investment in PTSF. A management fee equal to 0.50% per annum of the gross assets of PTSF and its subsidiaries is charged by PennantPark Investment Advisers in connection with PTSF, and the entity is subject to an incentive fee of 20% of residual income proceeds after the internal rate of return on the equity has reached at least 12%. For this chart, PTSF fees and operating expenses are based on our share of the actual fees and operating expenses of PTSF for the fiscal year ended September 30, 2024. Expenses for PSSL may fluctuate over time and may be substantially higher or lower in the future.
Example
The following example illustrates the projected dollar amount of total cumulative expenses that you would pay on a $1,000 hypothetical investment in common shares, assuming (1) a 3.0% sales load (underwriting discounts and commissions) and offering expenses totaling 0.50%, (2) total net estimated annual expenses of 23.91% of average net assets attributable to common shares as set forth in the table above (other than performance-based incentive fees) and (3) a 5% annual return.
You would pay the following expenses on a $1,000 common stock investment |
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3 Years |
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5 Years |
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10 Years |
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Assuming a 5% annual return (assumes no return from net realized capital gains or net |
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unrealized capital appreciation) |
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$ |
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$ |
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Assuming a 5% annual return (assumes return only from realized capital gains and thus |
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subject to the capital gains incentive fee) |
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$ |
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$ |
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$ |
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This example and the expenses in the table above should not be considered a representation of our future expenses. Actual expenses may be greater or less than those assumed. The table above is provided to assist you in understanding the various costs and expenses that an investor in our common stock will bear directly or indirectly. While the example assumes, as required by the SEC, a 5% annual return, our performance will vary and may result in a return greater or less than 5%. If we were to earn an annual return equal to or less than 5% from net investment income, the incentive fee under our Investment Management Agreement would not be earned or payable. If our returns on our investments, including the realized capital gains, result in an incentive fee, then our expenses would be higher. The example assumes that all distributions are reinvested at NAV. See “Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distributions” for more information.
Item 6. Selected Financial Data
Not applicable.
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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains statements that constitute forward-looking statements, which relate to us and our consolidated subsidiaries regarding future events or our future performance or future financial condition. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about our Company, our industry, our beliefs and our assumptions. The forward-looking statements contained in this Report involve risks and uncertainties, including statements as to:
We use words such as “anticipates,” “believes,” “expects,” “intends,” “seeks,” “plans,” “estimates” and similar expressions to identify forward-looking statements. You should not place undue influence on the forward-looking statements as our actual results could differ materially from those projected in the forward-looking statements for any reason, including the factors in “Risk Factors” and elsewhere in this Report.
Although we believe that the assumptions on which these forward-looking statements are based are reasonable, any of those assumptions could prove to be inaccurate, and, as a result, the forward-looking statements based on those assumptions also could be inaccurate. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this Report should not be regarded as a representation by us that our plans and objectives will be achieved.
We have based the forward-looking statements included in this Report on information available to us on the date of this Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements in this Report, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we in the future may file with the SEC, including reports on Form 10-Q/K and current reports on Form 8-K.
You should understand that under Section 27A(b)(2)(B) of the Securities Act and Section 21E(b)(2)(B) of the Exchange Act, the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 do not apply to forward-looking statements made in periodic reports we file under the Exchange Act.
The following analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and the related notes thereto contained elsewhere in this Report.
Overview
PennantPark Floating Rate Capital Ltd. is a BDC whose objectives are to generate both current income and capital appreciation while seeking to preserve capital by investing primarily in floating rate loans and other investments made to U.S. middle-market companies.
We believe that floating rate loans to U.S. middle-market companies offer attractive risk-reward to investors due to a limited amount of capital available for such companies. We use the term “middle-market” to refer to companies with annual revenues between $50 million and $1 billion. Our investments are typically rated below
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investment grade. Securities rated below investment grade are often referred to as “leveraged loans”, “high yield” securities or “junk bonds” and are often higher risk compared to debt instruments that are rated above investment grade and have speculative characteristics. However, when compared to junk bonds and other non-investment grade debt, senior secured floating rate loans typically have more robust capital-preserving qualities, such as historically lower default rates than junk bonds, represent the senior source of capital in a borrower’s capital structure and often have certain of the borrower’s assets pledged as collateral. Our debt investments may generally range in maturity from three to ten years and are made to U.S. and, to a limited extent, non-U.S. corporations, partnerships and other business entities which operate in various industries and geographical regions.
Under normal market conditions, we generally expect that at least 80% of the value of our managed assets will be invested in floating rate loans and other investments bearing a variable-rate of interest. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We also generally expect to invest up to 35% of our overall portfolio opportunistically in other types of investments, including second lien secured debt and subordinated debt and, to a lesser extent, equity investments. We seek to create a diversified portfolio by generally targeting an investment size between $5 million and $30 million, on average, although we expect that this investment size will vary proportionately with the size of our capital base.
Our investment activity depends on many factors, including the amount of debt and equity capital available to middle-market companies, the level of merger and acquisition activity for such companies, the general economic environment and the competitive environment for the types of investments we make. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives.
Organization and Structure of PennantPark Floating Rate Capital Ltd.
PennantPark Floating Rate Capital Ltd., a Maryland corporation organized in October 2010, is a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. In addition, for federal income tax purposes we elected to be treated, and intend to qualify annually, as a RIC under the Code.
Our investment activities are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer, Corporate Counsel and their respective staffs. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our day-to-day activities.
At-the-Market Offering
On August 20, 2021, we entered into equity distribution agreements with each of JMP Securities LLC and Raymond James & Associates, Inc., as the sales agents, in connection with the sale of shares of our common stock, with an aggregate offering price of up to $75 million under an at-the-market offering. The equity distribution agreements provide that we may offer and sell shares of our common stock from time to time through a sales agent in amounts and at times to be determined by us. On May 5, 2022, we amended the equity distribution agreements to update references from NASDAQ to NYSE and reflect that the agents are now represented by Kirkland & Ellis LLP. On March 27, 2023 we terminated the equity distribution agreements and entered into new equity distribution agreements with Citizens JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. (together, the "Prior Equity Distribution Agreements"), as sales agents (each,as "Sales Agent," and together, the "Sales Agents") in connection with the sale of shares of our common stock, with an aggregate offering price of up to $100 million under an ATM program. On August 11, 2023, we amended the Prior Equity Distribution Agreements with each of the Sales Agents (together, the “Amended and Restated Equity Distribution Agreements”) to increase the aggregate offering price to up to $250 million. On July 17, 2024 we terminated the existing equity distribution agreements and entered into new equity distribution agreements with the Sales Agents (together, the "Equity Distribution Agreements") in connection with the sale of our shares of common stock with an aggregate offering price of up to $500 million under an ATM Program ("ATM Program"). The Equity Distribution Agreements provide that we may offer and sell shares of our common stock from time to time through a Sales Agent in amounts and at times to be determined by us. Actual sales will depend on a variety of factors to be determined by us from time to time, including, market conditions and the trading price of our common stock. The Investment Adviser may, from time to time, in its sole discretion, pay some or all of the commissions payable under the Equity Distribution Agreements or make additional supplemental payments to ensure that the sales price per share of our common stock in connection with all of the offerings made hereunder will not be less than our current NAV per share. Any such payments made by the Investment Adviser will not be subject to reimbursement by us.
Revenues
We generate revenue in the form of interest income on the debt securities we hold and capital gains and dividends, if any, on investment securities that we may acquire in portfolio companies. Our debt investments, whether in the form of first lien secured debt, second lien secured debt or subordinated debt, typically have a term of three to ten years and bear interest at a floating or fixed rate. Interest on debt securities is generally payable quarterly or semiannually. In some cases, our investments provide for deferred interest payments or PIK interest. The principal amount of the debt securities and any accrued but unpaid interest generally becomes due at the maturity date. In addition, we may generate revenue in the form of amendment, commitment, origination, structuring or diligence fees, fees for providing significant managerial assistance and possibly consulting fees. Loan origination fees, OID and market discount or premium are capitalized and accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which may or may not be non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees and agency fees, and are recorded as other investment income when earned. Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC Subtopic 450-30, Gain Contingencies, or ASC 450-30.
Expenses
Our primary operating expenses include the payment of a management fee and the payment of an incentive fee to our Investment Adviser, if any, our allocable portion of overhead under our Administration Agreement and other operating costs as detailed below. Our management fee compensates our Investment Adviser for its work in identifying, evaluating, negotiating, consummating and monitoring our investments. Additionally, we pay interest expense on the outstanding debt and unused commitment fees on undrawn amounts under our various debt facilities. We bear all other direct or indirect costs and expenses of our operations and transactions, including:
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Generally, during periods of asset growth, we expect our general and administrative expenses to be relatively stable or to decline as a percentage of total assets and increase during periods of asset declines. Incentive fees, interest expense and costs relating to future offerings of securities would be additive to the expenses described above.
PORTFOLIO AND INVESTMENT ACTIVITY
As of September 30, 2024, our portfolio totaled $1,983.5 million and consisted of $1,746.7 million of first lien secured debt (including $237.7 million in PSSL), $2.7 million of second lien secured debt and subordinated debt and $234.1 million of preferred and common equity (including $56.5 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of September 30, 2024, we had two portfolio companies on non-accrual, representing 0.4% and 0.2% percent of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $11.4 million. Our overall portfolio consisted of 158 companies with an average investment size of $12.6 million, had a weighted average yield on debt investments of 11.5%, and was invested 88% in first lien secured debt (including 12% in PSSL), less than 1% in second lien secured debt and subordinated debt and 12% in preferred and common equity (including 3% in PSSL). As of September 30, 2024, over 99% of the investments held by PSSL were first lien secured debt.
As of September 30, 2023, our portfolio totaled $1,067.2 million and consisted of $906.2 million of first lien secured debt (including $210.1 million in PSSL), $0.1 million of second lien secured debt and $160.9 million of preferred and common equity (including $50.9 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of September 30, 2023, we had three portfolio companies on non-accrual, representing 0.9% and 0.2% percent of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $25.7 million. Our overall portfolio consisted of 131 companies with an average investment size of $8.1 million, had a weighted average yield on debt investments of 12.6%, and was invested 85% in first lien secured debt (including 20% in PSSL), less than 1% in second lien secured debt and 15% in preferred and common equity (including 5% in PSSL). As of September 30, 2023, 99% of the investments held by PSSL were first lien secured debt.
For the year ended September 30, 2024, we invested $1,407.5 million in 43 new and 91 existing portfolio companies with a weighted average yield on debt investments of 11.4%. Sales and repayments of investments for the same period totaled $514.1 million.
For the year ended September 30, 2023, we invested $324.5 million in 16 new and 71 existing portfolio companies with a weighted average yield on debt investments of 12.1%. Sales and repayments of investments for the same period totaled $399.1 million.
PennantPark Senior Secured Loan Fund I LLC
As of September 30, 2024, PSSL’s portfolio totaled $913.3 million, consisted of 109 companies with an average investment size of $8.4 million and had a weighted average yield on debt investments of 11.4%. As of September 30, 2023, PSSL’s portfolio totaled $785.9 million, consisted of 105 companies with an average investment size of $7.5 million and had a weighted average yield on debt investments of 12.1%.
For the year ended September 30, 2024, PSSL invested $286.2 million (of which $253.6 million was purchased from the Company) in 24 new and 36 existing portfolio companies with a weighted average yield on debt investments of 11.7%. PSSL’s sales and repayments of investments for the same period totaled $160.1 million.
For the year ended September 30, 2023, PSSL invested $190.9 million (of which $158.2 million was purchased from the Company) in 22 new and 27 existing portfolio companies with a weighted average yield on debt investments of 11.8%. PSSL’s sales and repayments of investments for the same period totaled $155.2 million.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of our Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany
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balances and transactions. References to ASC serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued. In addition to the discussion below, we describe our critical accounting policies in the notes to our Consolidated Financial Statements.
Investment Valuations
We expect that there may not be readily available market values for many of our investments which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material.
Our portfolio generally consists of illiquid securities, including debt and equity investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:
Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at the bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:
Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our 2031 Asset-Backed Debt, 2036-R Asset-Backed Debt, 2036 Asset-Backed Debt and the Credit Facility are classified as Level 3. Our 2023 Notes and 2026 Notes are classified as Level 2 as they are financial instruments with readily observable market inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.
On December 3, 2020, the SEC adopted Rule 2a-5 under the 1940 Act, which establishes an updated regulatory framework for determining fair value in good faith for purposes of the 1940 Act. The new rule clarifies how fund boards of directors can satisfy their valuation obligations and requires, among other things, the board of directors to periodically assess material valuation risks and take steps to manage those risks. The rule also permit boards of directors, subject to board oversight and certain other conditions, to designate the fund’s investment adviser to perform fair value determinations. The new rule went into effect on March 8, 2021 and had a compliance date of September 8, 2022. We came into compliance with Rule 2a-5 under the 1940 Act before the compliance date. While our board of directors has not elected to designate the Investment Adviser as the valuation designee at this time, we have adopted certain revisions to our valuation policies and procedures in order comply with the applicable requirements of Rule 2a-5 under the 1940 Act.
In addition to using the above inputs to value cash equivalents, investments, our 2023 Notes, our 2026 Notes, our 2031 Asset-Backed Debt, our 2036-R Asset-Backed Debt, our 2036 Asset-Backed Debt and the Credit Facility, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value.
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Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to the Credit Facility and the 2023 Notes. We elected to use the fair value option for the Credit Facility and the 2023 Notes to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we incurred expenses of $6.5 million and zero relating to amendment costs on the Credit Facility and debt issuance costs on the 2023 Notes during the years ended September 30, 2024 and 2023, respectively. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Credit Facility and the 2023 Notes are reported in our Consolidated Statements of Operations. We elected not to apply ASC 825-10 to any other financial assets or liabilities, including the 2026 Notes, the 2031 Asset-Backed Debt, 2036-R Asset-Backed Debt and the 2036 Asset-Backed Debt.
For the years September 30, 2024 and 2023, the Credit Facility or our Prior Credit Facility, as applicable, the 2023 Notes had a net change in unrealized (appreciation) depreciation of approximately zero and $(2.3) million, respectively. As of September 30, 2024 and 2023, the net unrealized depreciation on the Credit Facility and the 2023 Notes totaled approximately zero and zero, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility and 2023 Notes in a manner consistent with the valuation process that our board of directors uses to value our investments.
Revenue Recognition
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, OID, market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned.
Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees and prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments, the Credit Facility, the 2023 Notes during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
Foreign Currency Translation
Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:
Although net assets and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair value of investments and liabilities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and liabilities.
Payment-in-kind, or PIK, Interest
We have investments in our portfolio which contain a PIK interest provision. PIK interest is added to the principal balance of the investment and is recorded as income. In order for us to maintain our ability to be subject to tax as a RIC, substantially all of this income must be paid out to stockholders in the form of dividends for U.S. federal income tax purposes, even though we may not have collected any cash with respect to interest on PIK securities.
Federal Income Taxes
We have elected to be treated, and intend to qualify annually to maintain our election to be treated, as a RIC under Subchapter M of the Code. To maintain our RIC tax election, we must, among other requirements, meet certain annual source-of-income and quarterly asset diversification requirements. We also must annually distribute dividends for federal income tax purposes to our stockholders out of the assets legally available for distribution of an amount generally at least equal to 90% of the sum of our net ordinary income and realized net short-term capital gains in excess of realized net long-term capital losses, or investment company taxable income, determined without regard to any deduction for dividends paid.
Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute dividends for U.S. federal income tax purposes to our stockholders in respect of each calendar year of an amount at least equal to the sum of (1) 98% of our net ordinary income (subject to certain deferrals and elections) for the calendar year, (2) 98.2% of our capital gain net income (i.e., the excess, if any, of our capital gains over capital losses), adjusted for certain ordinary losses, generally for the one-year period ending on October 31 of the calendar year plus (3) any net ordinary income or capital gain net income for the preceding years that was not distributed during such years on which we did not incur any corporate income tax, or the Excise Tax Avoidance Requirement. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, out of the assets legally available for such distributions in the manner described above, we have retained and may continue to retain such net capital gains or investment company taxable income, subject to maintaining our ability to be taxed as a RIC, in order to provide us with additional liquidity.
Because federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and net realized gain recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences are reclassified among capital accounts in the Consolidated Financial Statements to reflect their appropriate tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.
For the years ended September 30, 2024, 2023 and 2022, we recorded a provision for taxes on net investment income of $1.1 million, $1.0 million, and $0.4 million, respectively, pertaining to federal excise tax.
47
The Taxable Subsidiary is subject to U.S. federal, state and local corporate income taxes. The income tax expense and related tax liabilities of the Taxable Subsidiary are reflected in the Company’s consolidated financial statements.
For the years ended September 30, 2024, 2023 and 2022, the Company recognized a provision for taxes of $(0.1) million, $(2.8) million and $4.6 million, respectively, on unrealized appreciation on investments by the Taxable Subsidiary. The provision for taxes on unrealized appreciation on investments is the result of netting (i) the expected tax liability on gains from sales of investments and (ii) the expected tax benefit from the use of losses in the current year. As of September 30, 2024 and 2023, $1.7 million and $1.8 million, respectively, was accrued as a deferred tax liability on the Consolidated Statements of Assets and Liabilities relating to unrealized gain on investments held by the Taxable Subsidiary. As of September 30, 2024 and 2023, of $0.1 million and $0.3 million, respectively, the Company recognized a provision for taxes on realized gain on investments held by the Taxable Subsidiary.
During the year ended September 30, 2024, 2023 and 2022 the Company paid zero, zero, and $1.2 million, respectively, in federal taxes on realized gains on the sale of investments held by the Taxable Subsidiary. The state and local tax liability of zero as of September 30, 2024 is included under accrued other expenses in the consolidated statement of assets and liabilities.
The Taxable Subsidiary, which is subject to tax as a corporation, allows us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.
RESULTS OF OPERATIONS
Set forth below are the results of operations for the years ended September 30, 2024 and 2023. For information regarding results of operations for the year ended September 30, 2022, see the Company's Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC on December 8, 2023.
Investment Income
Investment income for the year ended September 30, 2024 was $186.4 million and was attributable to $164.3 million from first lien secured debt and $22.1 million from other investments. The increase in investment income compared to the same periods in the prior year was primarily due to an increase in the size of the debt portfolio.
Investment income for the year ended September 30, 2023 was $139.3 million and was attributable to $120.0 million from first lien secured debt and $19.3 million from other investments.
Expenses
Expenses for the year ended September 30, 2024 totaled $108.6 million base management fee totaled $14.9 million, incentive fee totaled $18.1 million, debt related interest and expenses totaled $67.9 million, general and administrative expenses totaled $6.7 million and provision for taxes totaled $1.1 million. The increase in expenses compared to the prior year was primarily due to an increase in debt related interest and expenses and incentive fees.
Expenses for the year ended September 30, 2023 totaled $71.8 million. Base management fee totaled $11.4 million, incentive fee totaled $16.9 million, debt related interest and expenses totaled $38.2 million, general and administrative expenses totaled $4.4 million and provision for taxes totaled $1.0 million.
Net Investment Income
Net investment income totaled $77.7 million, or $1.18 per share, and $67.5 million, or $1.33 per share, for the years ended September 30, 2024 and 2023, respectively. The increase in net investment income compared to the prior year was primarily due to an increase in the size of our debt portfolio.
Net Realized Gains or Losses
Sales and repayments of investments for the years ended September 30, 2024 and 2023 totaled $514.1 million and $399.1 million, respectively. Net realized gain (losses) on investments totaled $0.2 million and $(15.9) million for the same periods, respectively. The change in realized gains (losses) was primarily due to changes in market conditions of our investments and the values at which they were realized, caused by the fluctuations in the market and in the economy, as discussed above under “Forward-Looking Statements”.
Unrealized Appreciation or Depreciation on Investments, the Credit Facility and the 2023 Notes
For the years ended September 30, 2024 and 2023, we reported net change in unrealized appreciation (depreciation) on investments of $14.3 million and ($12.6) million, respectively. As of September 30, 2024 and 2023, our net unrealized appreciation (depreciation) on investments totaled $(11.4) million and $(25.7) million, respectively. The net change in unrealized appreciation/depreciation on our investments for the year ended September 30, 2024 compared to the prior year was primarily due to changes in the capital market conditions of our investments and the values at which they were realized, caused by the fluctuations in the market and in the economy, as discussed above under the “Forward-Looking Statements" section above.
For the year ended September 30, 2024 and 2023, the Credit Facility or Prior Credit Facility, as applicable, and the 2023 Notes had a net change in unrealized (appreciation) depreciation of less than $(0.1) million and $(2.3) million and, respectively. As of September 30, 2024 and 2023, our net unrealized (appreciation) depreciation on the Credit Facility and the 2023 Notes totaled zero and zero, respectively. The net change in unrealized depreciation for the year ended September 30, 2024 compared to the prior year was primarily due to changes in the capital markets, with the economic instability negatively affecting the value, as further discussed above under “Forward-Looking Statements”.
48
Net Change in Net Assets Resulting from Operations
Net change in net assets resulting from operations totaled $91.8 million, or $1.40 per share, and $39.3 million, or $0.77 per share, for the years ended September 30, 2024 and 2023, respectively. The increase in net assets from operations for the year ended September 30, 2024 compared to the prior year was primarily due to less depreciation of the portfolio primarily driven by changes in market conditions of our investments along with the change in size and cost yield of our debt portfolio and costs of financing, as discussed above under “Forward-Looking Statements” as well as higher investment income.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived primarily from proceeds of securities offerings, debt capital and cash flows from operations, including investment sales and repayments, and income earned. Our primary use of funds from operations includes investments in portfolio companies and payments of fees and other operating expenses we incur. We have used, and expect to continue to use, our debt capital, proceeds from the rotation of our portfolio and proceeds from public and private offerings of securities to finance our investment objectives. As of September 30, 2024, in accordance with the 1940 Act, with certain limited exceptions, we are only allowed to borrow amounts such that we are in compliance with a 150% asset coverage ratio requirement after such borrowing. For information regarding liquidity and capital resources for the year ended September 30, 2022, see the Company's Form 10-K for the fiscal year ended September 30, 2023, as filed with the SEC on December 8, 2023.
On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the SBCAA). As a result, the asset coverage requirement applicable to us for senior securities was reduced from 200% (i.e., $1 of debt outstanding for each $1 of equity) to 150% (i.e., $2 of debt outstanding for each $1 of equity), effective as of April 5, 2019, subject to compliance with certain disclosure requirements. As of September 30, 2024 and 2023, our asset coverage ratio, as computed in accordance with the 1940 Act, was 174% and 230%, respectively.
The annualized weighted average cost of debt for the years ended September 30, 2024 and 2023, inclusive of the fee on the undrawn commitment on the Credit Facility or Prior Credit Facility, as applicable, amendment costs and debt issuance costs, was 8.5% and 6.2%, respectively. As of September 30, 2024 and 2023, we had $192.1 million and $376.6 million of unused borrowing capacity under the Credit Facility, subject to leverage and borrowing base restrictions.
Funding I’s multi-currency Credit Facility with the Lenders upsized during the year increasing the facility to $636.0 million as of September 30, 2024, subject to satisfaction of certain conditions and regulatory restrictions that the 1940 Act imposes on us as a BDC, has an interest rate spread above SOFR (or an alternative risk-free floating interest rate index) of 225 basis points, a maturity date of August 2029 and a revolving period that ends in August 2027. As of September 30, 2024 and 2023, Funding I had $443.9 million and $9.4 million of outstanding borrowings under the Credit Facility or the Prior Credit Facility, as applicable, respectively. The Credit Facility had a weighted average interest rate of 7.5% and 7.7%, exclusive of the fee on undrawn commitments, as of September 30, 2024 and 2023, respectively.
During the revolving period, the Credit Facility bears interest at SOFR (or an alternative risk-free floating interest rate index) plus 225 basis points and, after the revolving period, the rate will reset to Base Rate (or an alternative risk-free floating interest rate index) plus 250 basis points for the remaining two years, maturing in August 2029. The Credit Facility is secured by all of the assets of Funding I. Both PennantPark Floating Rate Capital Ltd. and Funding I have made customary representations and warranties and are required to comply with various covenants, reporting requirements and other customary requirements for similar credit facilities.
The Credit Facility contains covenants, including, but not limited to, restrictions of loan size, currency types and amounts, industry requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions on certain payments and issuance of debt. The Credit Facility compliance reporting is prepared on a basis of accounting other than GAAP. As of September 30, 2024, we were in compliance with the covenants relating to the Credit Facility.
We own 100% of the equity interest in Funding I and treat the indebtedness of Funding I as our leverage. Our Investment Adviser serves as collateral manager to Funding I under the Credit Facility.
Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made (1) all required cash interest and, if applicable, principal payments to the Lenders, (2) required administrative expenses and (3) claims of other unsecured creditors of Funding I. We cannot assure you that there will be sufficient funds available to make any distributions to us or that such distributions will meet our expectations from Funding I. The Investment Adviser has irrevocably directed that the management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.
In November 2017, we issued $
The 2023 Notes paid interest at a rate of 4.3% per year. Interest on the 2023 Notes was payable semi-annually in arrears on June 15 and December 15 of each year, commencing June 15, 2018. The principal on the 2023 Notes was payable in four annual installments as follows: 15% of the original principal amount on December 15, 2020, 15% of the original principal amount on December 15, 2021, 15% of the original principal amount on December 15, 2022 and 55% of the original principal amount on December 15, 2023. On December 15, 2023, the remaining outstanding 2023 Notes were repaid in full.
In March 2021 and in October 2021, we issued $
In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $78.5 million Class A-1 Senior Secured Floating Rate Notes maturing 2031, which bear interest at the three-month SOFR plus 1.8%, (ii) $15.0 million Class A-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 3.7%, (iii) $14.0 million Class B-1 Senior Secured Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 2.9%, (iv) $16.0 million Class B-2 Senior Secured Fixed Rate Notes due 2031, which bear interest at 4.3%, (v) $19.0 million Class C‑1 Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 4.0%, (vi) $8.0 million Class C-2 Secured Deferrable Fixed Rate Notes due 2031, which bear
49
interest at 5.4%, and (vii) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2031, which bear interest at the three-month SOFR plus 4.8% and (B) the borrowing of $77.5 million Class A‑1 Senior Secured Floating Rate Loans due 2031, which bear interest at the three-month SOFR plus 1.8%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031. As of September 30, 2024 and 2023, the Company had zero and $228.0 million, respectively, of 2031 Asset-Backed Debt outstanding with a weighted average interest rate of zero and 7.1%, respectively.
On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by our wholly-owned subsidiary, the Securitization Issuer transferred to us 100% of the Preferred Shares of the Securitization Issuer, 100% of the Class D Secured Deferrable Floating Rate Notes issued by the Securitization Issuer, and a portion of the net cash proceeds received from the sale of the 2031 Asset-Backed Debt. The Preferred Shares of the Securitization Issuer do not bear interest and had a stated value of $55.4 million at the closing of the Debt Securitization.
The 2031 Asset-Backed Debt constitutes secured obligations of the Securitization Issuers, and the indenture governing the 2031 Asset-Backed Debt includes customary covenants and events of default. The 2031 Asset-Backed Debt has not been, and will not be, registered under the Securities Act or any state securities or “blue sky” laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from registration.
Our Investment Adviser serves as collateral manager to the Securitization Issuer pursuant to a collateral management agreement between our Investment Adviser and the Securitization Issuer, or the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.
50
In July 2024, the 2031 Asset-Backed Debt was refinanced through a $351.0 million debt securitization in the form of a collateralized loan obligation, or the "2036-R Asset-Backed Debt". The Company retained $85.0 million of the debt securitization. The 2036-R Asset-Backed Debt was executed through: (A) the issuance by the 2036-R Securitization Issuers of the following classes of notes pursuant that certain indenture, dated September 19, 2019, by and among the 2036-R Securitization Issuers and U.S. Bank Trust Company, National Association, as amended by the second supplemental indenture, dated June 25, 2024): (i) $203 million of A-1-R Notes, which bear interest at the three-month SOFR plus 1.75%, (ii) $10.5 million of A-2-R Notes, which bear interest at three-month SOFR plus 1.90%, (iii) $12 million of Class B-R Notes, which bear interest at three-month SOFR plus 2.05%, (iv) $28 million of C-R Notes, which bear interest at three-month SOFR plus 2.75% and (v) $21 million of D-R Notes, which bear interest at three-month SOFR plus 4.30%, (B) the issuance by the issuer of $64 million of subordinated notes pursuant to the Indenture and (C) the borrowing by one of the 2036-R Securitization Issuers of $12.5 million of Class B-R Loans, which bear interest at three-month SOFR plus 2.05%, pursuant to a credit agreement, by and among the 2036-R Securitization Issuers, the various financial institutions and other persons party thereto, as lenders and U.S. Bank Trust Company, National Association, as loan agent and as trustee. The 2036-R Asset-Backed Debt matures in July 2036. As of September 30, 2024, the Company had $266.0 million of 2036-R Asset-Backed Debt outstanding with a weighted average interest rate of 7.2%. As of September 30, 2024, the unamortized fees on the 2036-R Asset-Backed Debt were $0.8 million.
In February 2024, the 2036 Asset-Backed Debt was issued by the 2036 Securitization Issuer. The 2036 Asset-Backed Debt is secured by the middle market loans, participation interests in middle market loans and other assets of the 2036 Securitization Issuer. The Debt Securitization was executed through (A) a private placement of: (i) $139.5 million of AAA(sf) Class A-1 Notes, which bear interest at the three-month secured overnight financing rate published by the Federal Reserve Bank of New York (“SOFR”) plus 2.30%, (ii) $14 million of AAA(sf) Class A-2 Notes, which bear interest at three-month SOFR plus 2.70%, (iii) $24.5 million of AA(sf) Class B Notes, which bear interest at three-month SOFR plus 2.90%, (iv) $28 million of A(sf) Class C Notes, which bear interest at three-month SOFR plus 3.90%, (v) $21 million of BBB-(sf) Class D Notes, which bear interest at three-month SOFR plus 5.90%, (together, the “Secured Notes”), and (vi) $63.6 million of subordinated notes (“Subordinated Notes”) and (B) the borrowing of $60.0 million AAA(sf) Class A-1 Senior Secured Floating Rate Loans (the “Class A-1 Loans” and together with the Secured Notes and Subordinated Notes, the “Debt”), which bear interest at three-month SOFR plus 2.30%, under a credit agreement (the “Credit Agreement”), dated as of the Closing Date, by and among the Issuer, as borrower, various financial institutions, as lenders, and Wilmington Trust, National Association, as collateral agent and as loan agent. The annualized interest on the 2036 Asset-Backed Debt will be paid, to the extent of funds available. The Debt is scheduled to mature on April 18, 2036.
The 2036 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Subordinated Notes of the 2036-Securitization Issuer were eliminated in consolidation. As of September 30, 2024, the Company had $287.0 million of 2036 Asset-Backed Debt outstanding with a weighted average interest rate of 8.1%. As of September 30, 2024, the unamortized fees on the 2036 Asset-Backed Debt were $2.9 million.
Our Investment Adviser serves as collateral manager to the 2036-Securitization Issuer pursuant to the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.
On August 20, 2021, we entered into equity distribution agreements with each of JMP Securities LLC and Raymond James & Associates, Inc., as the sales agents, in connection with the sale of shares of our common stock, with an aggregate offering price of up to $75 million under an at-the-market offering. The equity distribution agreements provide that we may offer and sell shares of our common stock from time to time through a sales agent in amounts and at times to be determined by us. On May 5, 2022, we amended the equity distribution agreements to update references from NASDAQ to NYSE and reflect that the agents are now represented by Kirkland & Ellis LLP. On March 27, 2023 we terminated the equity distribution agreements and entered into new equity distribution agreements with Citizens JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. (together, the "Prior Equity Distribution Agreements"), as sales agents (each, as "Sales Agent," and together, the "Sales Agents") in connection with the sale of shares of our common stock, with an aggregate offering price of up to $100 million under an ATM program. On August 11, 2023, we amended the Prior Equity Distribution Agreements with each of the Sales Agents (together, the “Amended and Restated Equity Distribution Agreements”) to increase the aggregate offering price to up to $250 million. On July 17, 2024 we terminated the existing equity distribution agreements and entered into new equity distribution agreements with the Sales Agents (together, the "Equity Distribution Agreements") in connection with the sale of our shares of common stock with an aggregate offering price of up to $500 million under an ATM Program ("ATM Program"). The Equity Distribution Agreements provide that we may offer and sell shares of our common stock from time to time through a Sales Agent in amounts and at times to be determined by us. Actual sales will depend on a variety of factors to be determined by us from time to time, including, market conditions and the trading price of our common stock. The Investment Adviser may, from time to time, in its sole discretion, pay some or all of the commissions payable under the Equity Distribution Agreements or make additional supplemental payments to ensure that the sales price per share of our common stock in connection with all of the offerings made hereunder will not be less than our current NAV per share. Any such payments made by the Investment Adviser will not be subject to reimbursement by us.
During the years ended September 30, 2024, and 2023 we issued 18,845,194 and 9,089,064 shares of our Common Stock, respectively, under ATM Programs at an average price of $11.35 and $11.03 per share, respectively, raising $213.3 million and $100.2 million of net proceeds after commissions to the sales agents and inclusive of proceeds from the Investment Adviser to ensure that all shares were sold at or above NAV. We incurred $0.8 million and $0.5 million, respectively, of deferred offering costs incurred related to establishing the ATM Programs. As of September 30, 2024, and 2023, we had $437.3 million and $154.1 million available under the ATM Programs.
Since inception of the ATM Programs through September 30, 2024, we issued 27,848,081 shares of our Common Stock under the ATM Programs at a weighted-average price of $11.22, raising $312.5 million of net proceeds after commissions to the sales agents and inclusive of proceeds from the Investment Adviser to ensure that all shares were sold at or above NAV. We incurred $1.2 million of legal and other offering costs associated with establishing the ATM Programs.
We may raise equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, securitizing a portion of our investments among other considerations or mergers and acquisitions. Furthermore, the Credit Facility availability depends on various covenants and restrictions as discussed in the preceding paragraphs. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate purposes.
We have entered into certain contracts under which we have material future commitments. Under our Investment Management Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in February 2023, PennantPark Investment Advisers serves as our investment adviser. Payments under our Investment Management Agreement in each reporting period are equal to (1) a management fee equal to a percentage of the value of our average adjusted gross assets and (2) an incentive fee based on our performance.
Under our Administration Agreement, which was most recently reapproved by our board of directors, including a majority of our directors who are not interested persons of us, in May 2024, the Administrator furnishes us with office facilities and administrative services necessary to conduct our day-to-day operations. The Administration Agreement was amended on July 1, 2022. If requested to provide significant managerial assistance to our portfolio companies, we or the Administrator will be paid an additional amount based on the services provided. Payment under our Administration Agreement is based upon our allocable portion of the Administrator’s overhead in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of our Chief Compliance Officer, Chief Financial Officer, Corporate Counsel and their respective staffs.
If any of our contractual obligations discussed above are terminated, our costs under new agreements that we enter into may increase. In addition, we will likely incur significant time and expense in locating alternative parties to provide the services we expect to receive under our Investment Management Agreement and our Administration Agreement. Any new investment management agreement would also be subject to approval by our stockholders.
51
As of September 30, 2024 and 2023, we had cash equivalents of $112.1 million and $100.6 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to take advantage of market opportunities.
Our operating activities used cash of $801.4 million for the year ended September 30, 2024, and our financing activities provided cash of $812.9 million for the same period. Our operating activities used cash primarily for our investment activities and our financing activities provided cash primarily from proceeds from ATM program, borrowing under our Credit Facility and issuances of asset-backed debt.
Our operating activities provided cash of $140.6 million for the year ended September 30, 2023, and our financing activities used cash of $91.5 million for the same period. Our operating activities provided cash primarily from for our investment activities and our financing activities used cash primarily from paying down the Credit Facility and paying distributions to stockholders offset by offering proceeds.
Senior Securities
Information about our senior securities is shown in the following table as of September 30, 2024, 2023, 2022, 2021, 2020, 2019, 2018, 2017, 2016, and 2015. The report of RSM US LLP, an independent registered public accounting firm, on the Senior Securities table as of September 30, 2024, is attached as an exhibit to this Report.
Class and Year |
|
Total Amount |
|
|
Asset Coverage |
|
|
Average |
||
Credit Facility |
|
|
|
|
|
|
|
|
||
Fiscal 2024 |
|
$ |
|
|
$ |
|
|
N/A |
||
Fiscal 2023 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2022 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2021 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2020 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2019 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2018 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2017 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2016 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2015 |
|
|
|
|
|
|
|
N/A |
||
2023 Notes |
|
|
|
|
|
|
|
|
||
Fiscal 2024 |
|
$ |
|
|
$ |
|
|
N/A |
||
Fiscal 2023 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2022 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2021 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2020 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2019 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2018 |
|
|
|
|
|
|
|
N/A |
||
2026 Notes |
|
|
|
|
|
|
|
|
||
Fiscal 2024 |
|
$ |
|
|
$ |
|
|
N/A |
||
Fiscal 2023 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2022 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2021 |
|
|
|
|
|
|
|
N/A |
||
2031 Asset-Backed Debt |
|
|
|
|
|
|
|
|
||
Fiscal 2024 |
|
$ |
|
|
$ |
|
|
N/A |
||
Fiscal 2023 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2022 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2021 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2020 |
|
|
|
|
|
|
|
N/A |
||
Fiscal 2019 |
|
|
|
|
|
|
|
N/A |
||
2036 Asset-Backed Debt |
|
|
|
|
|
|
|
|
||
Fiscal 2024 |
|
$ |
|
|
$ |
|
|
N/A |
||
2036-R Asset-Backed Debt |
|
|
|
|
|
|
|
|
||
Fiscal 2024 |
|
$ |
|
|
|
|
|
N/A |
||
(1) |
Total cost of each class of senior securities outstanding at the end of the period presented in thousands (000s). |
(2) |
The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our consolidated total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness at par. This asset coverage ratio is multiplied by $1,000 to determine the Asset Coverage Per Unit. |
(3) |
Not applicable, as senior securities are not registered for public trading in the United States of America. |
PennantPark Senior Secured Loan Fund I LLC
In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. As of September 30, 2024 and 2023, PSSL had total assets of $988.1 million and $869.4 million, respectively, and its investment portfolio consisted of investments in 109 and 105 portfolio companies, respectively. As of September 30, 2024, at fair value, the largest investment in a single portfolio company in PSSL was $21.3 million and the five largest investments totaled $97.3 million. As of September 30, 2023, at fair value, the largest investment in a single portfolio company in PSSL was $18.5 million and the five largest investments totaled $83.4 million. PSSL invests in portfolio companies in the same industries in which we may directly invest.
We and Kemper provide capital to PSSL in the form of first lien secured debt and equity interests. As of September 30, 2024 and 2023, we and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding first lien secured debt and equity interests. As of the same dates, our investment in PSSL consisted of first lien secured debt of $237.7 million (zero remaining unfunded) and $210.1 million (additional $27.6 million unfunded), respectively, and equity interests of $101.9 million (zero remaining unfunded) and $90.0 million (additional $11.8 million unfunded), respectively.
52
We and Kemper each appointed two members to PSSL’s four-person board of directors and investment committee. All material decisions with respect to PSSL, including those involving its investment portfolio, require unanimous approval of a quorum of the board of directors or investment committee. Quorum is defined as (i) the presence of two members of the board of directors or investment committee, provided that at least one individual is present that was elected, designated or appointed by each member; (ii) the presence of three members of the board of directors or investment committee, provided that the individual that was elected, designated or appointed by the member with only one individual present shall be entitled to cast two votes on each matter; and (iii) the presence of four members of the board of directors or investment committee shall constitute a quorum, provided that two individuals are present that were elected, designated or appointed by each member.
In August 2023 PSSL entered into a $260.0 million (decreased from $325.0 million) senior secured revolving credit facility which bears interest at SOFR plus 260 basis points (including a spread adjustment) with Ally Bank through its wholly-owned subsidiary, PennantPark Senior Secured Loan Facility LLC II, or PSSL Subsidiary II, subject to leverage and borrowing base restrictions. On January 2024, the maturity was extended to 2029 and the interest change to SOFR plus 280 basis points.
In January 2021, PSSL completed a $300.7 million debt securitization in the form of a collateralized loan obligation, or the “2032 Asset-Backed Debt”. The 2032 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO II, Ltd., a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2032 Asset-Backed Debt is scheduled to mature in January 2032. On the closing date of the transaction, in consideration of PSSL’s transfer to PennantPark CLO II, Ltd. of the initial closing date loan portfolio, which included loans distributed to PSSL by certain of its wholly owned subsidiaries and us, PennantPark CLO II, Ltd. transferred to PSSL 100% of the Preferred Shares of PennantPark CLO II, Ltd. and 100% of the Class E Notes issued by PennantPark CLO II, Ltd.
In May 2024, PSSL completed the refinancing of the 2032 Asset-Backed Debt through a $300.7 million debt securitization in the form of a collateralized loan obligation, or the "2036 PSSL Asset-Backed Debt". The 2036 PSSL Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO II, Ltd., a wholly-owned subsidiary of PSSL, consisting primarily of middle market loans and participation interest in middle market loans. The 2036 PSSL Asset-Backed Debt is scheduled to mature in April 2036. PSSL retained the preferred shares and Class E-R Notes through a consolidated subsidiary.
In April 2023, PSSL completed a $297.8 million debt securitization in the form of a collateralized loan obligation, or the “2035 Asset-Backed Debt”. The 2035 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO VI, LLC, a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2035 Asset-Backed Debt is scheduled to mature in April 2035. On the closing date of the transaction, in consideration of PSSL’s transfer to PennantPark CLO VI, LLC of the initial closing date loan portfolio, which included loans distributed to PSSL by certain of its wholly owned subsidiaries and us, PennantPark CLO VI, LLC transferred to PSSL 100% of the Preferred Shares of CLO VI, LLC
Below is a summary of PSSL’s portfolio at fair value ($ in thousands):
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||
Total investments |
|
$ |
913,281 |
|
|
$ |
785,859 |
|
Weighted average cost yield on income producing investments |
|
|
11.4 |
% |
|
|
12.1 |
% |
Number of portfolio companies in PSSL |
|
|
109 |
|
|
|
105 |
|
Largest portfolio company investment |
|
$ |
21,274 |
|
|
$ |
18,463 |
|
Total of five largest portfolio company investments |
|
$ |
97,292 |
|
|
$ |
83,365 |
|
53
Below is a listing of PSSL’s individual investments as of September 30, 2024 (par and $ in thousands):
Issuer Name (7) |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par or Number |
|
|
Cost |
|
|
Fair Value (2) |
|
|||
First Lien Secured Debt - 1,404.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
A1 Garage Merger Sub, LLC |
|
12/22/2028 |
|
Commercial Services & Supplies |
|
10.95% |
|
SOFR+610 |
|
|
2,903 |
|
|
$ |
2,855 |
|
|
$ |
2,903 |
|
ACP Avenu Buyer, LLC |
|
10/2/2029 |
|
Business Services |
|
10.58% |
|
SOFR+525 |
|
|
9,925 |
|
|
|
9,771 |
|
|
|
9,602 |
|
ACP Falcon Buyer, Inc. |
|
8/1/2029 |
|
Business Services |
|
10.83% |
|
SOFR+550 |
|
|
18,762 |
|
|
|
18,434 |
|
|
|
18,837 |
|
Ad.net Acquisition, LLC |
|
5/7/2026 |
|
Media |
|
11.28% |
|
SOFR+626 |
|
|
8,708 |
|
|
|
8,658 |
|
|
|
8,708 |
|
Aeronix, Inc |
|
12/18/2028 |
|
Aerospace and Defense |
|
9.85% |
|
SOFR+525 |
|
|
15,880 |
|
|
|
15,665 |
|
|
|
15,880 |
|
Alpine Acquisition Corp II |
|
11/30/2026 |
|
Containers and Packaging |
|
11.30% |
|
SOFR+610 |
|
|
12,722 |
|
|
|
12,481 |
|
|
|
12,213 |
|
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
6/30/2026 |
|
Media: Advertising, Printing & Publishing |
|
10.50% |
|
SOFR+590 |
|
|
4,717 |
|
|
|
4,613 |
|
|
|
4,717 |
|
Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan |
|
6/30/2026 |
|
Media: Advertising, Printing & Publishing |
|
10.50% |
|
SOFR+590 |
|
|
4,625 |
|
|
|
4,584 |
|
|
|
4,625 |
|
Applied Technical Services, LLC |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
10.50% |
|
SOFR+590 |
|
|
11,155 |
|
|
|
11,058 |
|
|
|
10,988 |
|
Arcfield Acquisition Corp. |
|
8/3/2029 |
|
Aerospace and Defense |
|
11.56% |
|
SOFR+625 |
|
|
11,115 |
|
|
|
10,967 |
|
|
|
11,059 |
|
Beacon Behavioral Services, LLC |
|
6/21/2029 |
|
Healthcare and Pharmaceuticals |
|
9.85% |
|
SOFR+525 |
|
|
9,975 |
|
|
|
9,836 |
|
|
|
9,825 |
|
Beta Plus Technologies, Inc. |
|
7/1/2029 |
|
Business Services |
|
10.35% |
|
SOFR+575 |
|
|
4,900 |
|
|
|
4,828 |
|
|
|
4,753 |
|
Big Top Holdings, LLC |
|
2/28/2030 |
|
Business Services |
|
11.18% |
|
SOFR+625 |
|
|
15,423 |
|
|
|
15,167 |
|
|
|
15,423 |
|
BioDerm, Inc. |
|
1/31/2028 |
|
Healthcare and Pharmaceuticals |
|
11.70% |
|
SOFR+650 |
|
|
8,888 |
|
|
|
8,797 |
|
|
|
8,776 |
|
Blackhawk Industrial Distribution, Inc. |
|
9/17/2026 |
|
Distributors |
|
11.00% |
|
SOFR+640 |
|
|
14,974 |
|
|
|
14,779 |
|
|
|
14,718 |
|
BlueHalo Financing Holdings, LLC |
|
10/31/2025 |
|
Aerospace and Defense |
|
10.60% |
|
SOFR+600 |
|
|
5,546 |
|
|
|
5,523 |
|
|
|
5,435 |
|
Broder Bros., Co. |
|
12/4/2025 |
|
Consumer Products |
|
10.97% |
|
SOFR+611 |
|
|
2,274 |
|
|
|
2,274 |
|
|
|
2,274 |
|
Burgess Point Purchaser Corporation |
|
9/26/2029 |
|
Automotive |
|
10.20% |
|
SOFR+535 |
|
|
442 |
|
|
|
417 |
|
|
|
416 |
|
By Light Professional IT Services, LLC |
|
5/16/2025 |
|
High Tech Industries |
|
12.18% |
|
SOFR+698 |
|
|
13,084 |
|
|
|
13,059 |
|
|
|
13,084 |
|
Carnegie Dartlet, LLC |
|
2/7/2030 |
|
Media: Advertising, Printing & Publishing |
|
10.60% |
|
SOFR+550 |
|
|
15,243 |
|
|
|
15,025 |
|
|
|
15,015 |
|
Cartessa Aesthetics, LLC |
|
6/14/2028 |
|
Distributors |
|
10.35% |
|
SOFR+575 |
|
|
9,539 |
|
|
|
9,431 |
|
|
|
9,539 |
|
CF512, Inc. |
|
8/20/2026 |
|
Media |
|
11.21% |
|
SOFR+619 |
|
|
6,751 |
|
|
|
6,682 |
|
|
|
6,649 |
|
Confluent Health, LLC |
|
10/28/2028 |
|
Healthcare and Pharmaceuticals |
|
8.96% |
|
SOFR+400 |
|
|
6,708 |
|
|
|
6,506 |
|
|
|
6,540 |
|
Connatix Buyer, Inc. |
|
7/13/2027 |
|
Media |
|
10.53% |
|
SOFR+561 |
|
|
3,775 |
|
|
|
3,734 |
|
|
|
3,775 |
|
Crane 1 Services, Inc. |
|
8/16/2027 |
|
Commercial Services & Supplies |
|
10.71% |
|
SOFR+586 |
|
|
2,068 |
|
|
|
2,051 |
|
|
|
2,052 |
|
Dr. Squatch, LLC |
|
8/31/2027 |
|
Personal Products |
|
9.95% |
|
SOFR+535 |
|
|
14,562 |
|
|
|
14,398 |
|
|
|
14,562 |
|
DRI Holding Inc. |
|
12/21/2028 |
|
Media |
|
10.20% |
|
SOFR+535 |
|
|
2,600 |
|
|
|
2,420 |
|
|
|
2,509 |
|
DRS Holdings III, Inc. |
|
11/3/2025 |
|
Consumer Goods: Durable |
|
11.20% |
|
SOFR+635 |
|
|
13,805 |
|
|
|
13,788 |
|
|
|
13,694 |
|
Dynata, LLC - First Out Term Loan (6) |
|
7/15/2028 |
|
Diversified Consumer Services |
|
10.38% |
|
SOFR+526 |
|
|
1,360 |
|
|
|
1,264 |
|
|
|
1,358 |
|
Dynata, LLC - Last Out Term Loan |
|
10/15/2028 |
|
Diversified Consumer Services |
|
10.88% |
|
SOFR+576 |
|
|
8,439 |
|
|
|
8,439 |
|
|
|
7,769 |
|
ECL Entertainment, LLC |
|
8/31/2030 |
|
Hotel, Gaming and Leisure |
|
8.85% |
|
SOFR+400 |
|
|
4,963 |
|
|
|
4,894 |
|
|
|
4,973 |
|
EDS Buyer, LLC |
|
1/10/2029 |
|
Electronic Equipment, Instruments, and Components |
|
10.35% |
|
SOFR+575 |
|
|
8,865 |
|
|
|
8,763 |
|
|
|
8,732 |
|
Exigo Intermediate II, LLC |
|
3/15/2027 |
|
Software |
|
11.20% |
|
SOFR+635 |
|
|
12,546 |
|
|
|
12,418 |
|
|
|
12,484 |
|
ETE Intermediate II, LLC |
|
5/29/2029 |
|
Diversified Consumer Services |
|
11.56% |
|
SOFR+650 |
|
|
12,249 |
|
|
|
12,032 |
|
|
|
12,249 |
|
Eval Home Solutions Intermediate, LLC |
|
5/10/2030 |
|
Healthcare and Pharmaceuticals |
|
10.60% |
|
SOFR+575 |
|
|
9,268 |
|
|
|
9,132 |
|
|
|
9,176 |
|
Fairbanks More Defense |
|
6/17/2028 |
|
Aerospace and Defense |
|
9.65% |
|
SOFR+450 |
|
|
10,117 |
|
|
|
10,071 |
|
|
|
10,128 |
|
Global Holdings InterCo LLC |
|
3/16/2026 |
|
Diversified Financial Services |
|
11.43% |
|
SOFR+615 |
|
|
3,696 |
|
|
|
3,689 |
|
|
|
3,511 |
|
Graffiti Buyer, Inc. |
|
8/10/2027 |
|
Trading Companies & Distributors |
|
10.45% |
|
SOFR+560 |
|
|
3,723 |
|
|
|
3,686 |
|
|
|
3,685 |
|
Hancock Roofing and Construction L.L.C. |
|
12/31/2026 |
|
Insurance |
|
10.20% |
|
SOFR+560 |
|
|
2,153 |
|
|
|
2,131 |
|
|
|
2,110 |
|
HEC Purchaser Corp |
|
6/17/2029 |
|
Healthcare and Pharmaceuticals |
|
9.75% |
|
SOFR+550 |
|
|
3,691 |
|
|
|
3,648 |
|
|
|
3,665 |
|
Hills Distribution, Inc |
|
11/8/2029 |
|
Business Services |
|
11.11% |
|
SOFR+600 |
|
|
8,957 |
|
|
|
8,835 |
|
|
|
8,868 |
|
HW Holdco, LLC |
|
5/10/2026 |
|
Media |
|
11.18% |
|
SOFR+590 |
|
|
3,486 |
|
|
|
3,475 |
|
|
|
3,486 |
|
Imagine Acquisitionco, LLC |
|
11/15/2027 |
|
Software |
|
10.20% |
|
SOFR+510 |
|
|
9,154 |
|
|
|
9,018 |
|
|
|
9,108 |
|
Infinity Home Services Holdco, Inc. |
|
12/28/2028 |
|
Commercial Services & Supplies |
|
11.45% |
|
SOFR+685 |
|
|
6,029 |
|
|
|
5,932 |
|
|
|
6,089 |
|
Integrative Nutrition, LLC |
|
1/31/2025 |
|
Diversified Consumer Services |
|
11.75% |
|
SOFR+715 |
|
|
11,287 |
|
|
|
11,274 |
|
|
|
9,707 |
|
|
|
|
|
|
|
(PIK 2.25%) |
|
|
|
|
|
|
|
|
|
|
|
|||
Inventus Power, Inc. |
|
6/30/2025 |
|
Consumer Goods: Durable |
|
12.46% |
|
SOFR+761 |
|
|
8,164 |
|
|
|
8,094 |
|
|
|
8,041 |
|
ITI Holdings, Inc. |
|
3/3/2028 |
|
IT Services |
|
10.58% |
|
SOFR+565 |
|
|
3,900 |
|
|
|
3,855 |
|
|
|
3,900 |
|
Kinetic Purchaser, LLC |
|
11/10/2027 |
|
Personal Products |
|
10.75% |
|
SOFR+615 |
|
|
13,492 |
|
|
|
13,289 |
|
|
|
13,492 |
|
Lash OpCo, LLC |
|
2/18/2027 |
|
Personal Products |
|
12.94% |
|
SOFR+785 |
|
|
14,731 |
|
|
|
14,539 |
|
|
|
14,584 |
|
|
|
|
|
|
|
(PIK 5.10%) |
|
|
|
|
|
|
|
|
|
|
|
|||
LAV Gear Holdings, Inc. (6) |
|
10/31/2025 |
|
Capital Equipment |
|
11.42% |
|
SOFR+643 |
|
|
12,125 |
|
|
|
12,102 |
|
|
|
11,907 |
|
LAV Gear Holdings, Inc. - Term Loan Incremental |
|
10/31/2025 |
|
Capital Equipment |
|
11.64% |
|
SOFR+640 |
|
|
2,861 |
|
|
|
2,856 |
|
|
|
2,810 |
|
Lightspeed Buyer Inc. |
|
2/3/2026 |
|
Healthcare Providers and Services |
|
10.15% |
|
SOFR+535 |
|
|
11,330 |
|
|
|
11,258 |
|
|
|
11,330 |
|
LJ Avalon Holdings, LLC |
|
1/31/2030 |
|
Environmental Industries |
|
10.48% |
|
SOFR+525 |
|
|
2,559 |
|
|
|
2,516 |
|
|
|
2,559 |
|
Loving Tan Intermediate II, Inc. |
|
5/31/2028 |
|
Consumer Products |
|
11.10% |
|
SOFR+650 |
|
|
7,407 |
|
|
|
7,288 |
|
|
|
7,296 |
|
Lucky Bucks, LLC - First-Out Term Loan |
|
10/2/2028 |
|
Hotel, Gaming and Leisure |
|
12.77% |
|
SOFR+765 |
|
|
259 |
|
|
|
259 |
|
|
|
259 |
|
Lucky Bucks, LLC - Last-Out Term Loan |
|
10/2/2029 |
|
Hotel, Gaming and Leisure |
|
12.77% |
|
SOFR+765 |
|
|
518 |
|
|
|
518 |
|
|
|
518 |
|
MAG DS Corp |
|
4/1/2027 |
|
Aerospace and Defense |
|
10.20% |
|
SOFR+550 |
|
|
2,218 |
|
|
|
2,143 |
|
|
|
2,085 |
|
Magenta Buyer, LLC - First-Out Term Loan |
|
7/31/2028 |
|
Software |
|
12.13% |
|
SOFR+701 |
|
|
357 |
|
|
|
357 |
|
|
|
337 |
|
Magenta Buyer, LLC - Second-Out Term Loan |
|
7/31/2028 |
|
Software |
|
12.38% |
|
SOFR+801 |
|
|
452 |
|
|
|
452 |
|
|
|
310 |
|
Magenta Buyer, LLC - Third-Out Term Loan |
|
7/31/2028 |
|
Software |
|
11.63% |
|
SOFR+726 |
|
|
1,675 |
|
|
|
1,675 |
|
|
|
490 |
|
Marketplace Events, LLC - Super Priority First Lien Term Loan (6) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
10.38% |
|
SOFR+540 |
|
|
1,845 |
|
|
|
1,845 |
|
|
|
1,845 |
|
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3)(6) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
0.00% |
|
|
|
|
564 |
|
|
|
- |
|
|
|
- |
|
Marketplace Events, LLC (6) |
|
9/30/2026 |
|
Media: Diversified and Production |
|
10.53% |
|
SOFR+525 |
|
|
4,837 |
|
|
|
4,068 |
|
|
|
4,837 |
|
MBS Holdings, Inc. |
|
4/16/2027 |
|
Internet Software and Services |
|
10.59% |
|
SOFR+585 |
|
|
7,256 |
|
|
|
7,183 |
|
|
|
7,256 |
|
MBS Holdings, Inc. (New Issue) - Incremental |
|
4/16/2027 |
|
Internet Software and Services |
|
11.34% |
|
SOFR+660 |
|
|
523 |
|
|
|
514 |
|
|
|
528 |
|
MBS Holdings, Inc. (New Issue) - Second Incremental |
|
4/16/2027 |
|
Internet Software and Services |
|
11.09% |
|
SOFR+635 |
|
|
551 |
|
|
|
543 |
|
|
|
554 |
|
MDI Buyer, Inc. |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
10.60% |
|
SOFR+575 |
|
|
4,900 |
|
|
|
4,829 |
|
|
|
4,851 |
|
MDI Buyer, Inc. - Incremental |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
11.25% |
|
SOFR+600 |
|
|
1,416 |
|
|
|
1,395 |
|
|
|
1,409 |
|
Meadowlark Acquirer, LLC |
|
12/10/2027 |
|
Professional Services |
|
10.50% |
|
SOFR+590 |
|
|
2,348 |
|
|
|
2,319 |
|
|
|
2,289 |
|
Medina Health, LLC |
|
10/20/2028 |
|
Healthcare and Pharmaceuticals |
|
10.85% |
|
SOFR+625 |
|
|
19,199 |
|
|
|
18,911 |
|
|
|
19,199 |
|
Megawatt Acquisitionco, Inc |
|
3/1/2030 |
|
Electronic Equipment, Instruments, and Components |
|
9.85% |
|
SOFR+525 |
|
|
15,671 |
|
|
|
15,453 |
|
|
|
14,794 |
|
Mission Critical Electronics, Inc. |
|
3/31/2025 |
|
Capital Equipment |
|
10.50% |
|
SOFR+590 |
|
|
5,551 |
|
|
|
5,551 |
|
|
|
5,551 |
|
MOREGroup Holdings, Inc |
|
1/16/2030 |
|
Business Services |
|
10.35% |
|
SOFR+575 |
|
|
13,067 |
|
|
|
12,891 |
|
|
|
12,871 |
|
Municipal Emergency Services, Inc. |
|
9/28/2027 |
|
Distributors |
|
9.75% |
|
SOFR+515 |
|
|
3,395 |
|
|
|
3,355 |
|
|
|
3,395 |
|
54
Below is a listing of PSSL’s individual investments as of September 30, 2024 (continued):
Issuer Name (7) |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par or Number |
|
|
Cost |
|
|
Fair Value(2) |
|
|||
NBH Group LLC |
|
8/19/2026 |
|
Healthcare, Education & Childcare |
|
11.05% |
|
SOFR+585 |
|
|
10,602 |
|
|
|
10,504 |
|
|
|
10,284 |
|
NORA Acquisition, LLC |
|
8/31/2029 |
|
Healthcare Providers and Services |
|
10.95% |
|
SOFR+635 |
|
|
21,274 |
|
|
|
20,913 |
|
|
|
21,274 |
|
One Stop Mailing, LLC |
|
5/7/2027 |
|
Air Freight and Logistics |
|
11.21% |
|
SOFR+636 |
|
|
15,682 |
|
|
|
15,480 |
|
|
|
15,682 |
|
ORL Acquisitions, Inc. |
|
9/3/2027 |
|
Consumer Finance |
|
14.00% |
|
SOFR+940 |
|
|
2,140 |
|
|
|
2,124 |
|
|
|
1,819 |
|
|
|
|
|
|
|
(PIK 7.50%) |
|
|
|
|
|
|
|
|
|
|
|
|||
Output Services Group, Inc - First-Out Term Loan |
|
11/30/2028 |
|
Business Services |
|
13.75% |
|
SOFR+843 |
|
|
821 |
|
|
|
821 |
|
|
|
821 |
|
Output Services Group, Inc - Last-Out Term Loan |
|
5/30/2028 |
|
Business Services |
|
12.00% |
|
SOFR+668 |
|
|
1,667 |
|
|
|
1,667 |
|
|
|
1,667 |
|
Owl Acquisition, LLC |
|
2/4/2028 |
|
Professional Services |
|
10.20% |
|
SOFR+535 |
|
|
3,893 |
|
|
|
3,842 |
|
|
|
3,825 |
|
Ox Two, LLC |
|
5/18/2026 |
|
Construction and Building |
|
11.12% |
|
SOFR+651 |
|
|
4,307 |
|
|
|
4,282 |
|
|
|
4,307 |
|
Pacific Purchaser, LLC |
|
9/30/2028 |
|
Business Services |
|
11.51% |
|
SOFR+625 |
|
|
11,938 |
|
|
|
11,745 |
|
|
|
11,914 |
|
PCS Midco, Inc |
|
3/1/2030 |
|
Diversified Consumer Services |
|
10.81% |
|
SOFR+575 |
|
|
3,871 |
|
|
|
3,818 |
|
|
|
3,871 |
|
PH Beauty Holdings III, Inc. |
|
9/29/2025 |
|
Wholesale |
|
10.17% |
|
SOFR+543 |
|
|
9,391 |
|
|
|
9,289 |
|
|
|
9,302 |
|
PL Acquisitionco, LLC |
|
11/9/2027 |
|
Textiles, Apparel and Luxury Goods |
|
11.99% |
|
SOFR+725 |
|
|
7,816 |
|
|
|
7,733 |
|
|
|
6,253 |
|
|
|
|
|
|
|
(PIK 4.00%) |
|
|
|
|
|
|
|
|
|
|
|
|||
Pragmatic Institute, LLC (5) |
|
7/6/2028 |
|
Education |
|
12.35% |
|
SOFR+750 |
|
|
11,855 |
|
|
|
11,480 |
|
|
|
7,261 |
|
|
|
|
|
|
|
(PIK 12.35%) |
|
|
|
|
|
|
|
|
|
|
|
|||
Quantic Electronics, LLC |
|
11/19/2026 |
|
Aerospace and Defense |
|
10.95% |
|
SOFR+635 |
|
|
2,775 |
|
|
|
2,758 |
|
|
|
2,761 |
|
Rancho Health MSO, Inc. |
|
12/18/2025 |
|
Healthcare Providers and Services |
|
10.85% |
|
SOFR+560 |
|
|
1,016 |
|
|
|
1,016 |
|
|
|
1,016 |
|
Reception Purchaser, LLC |
|
2/28/2028 |
|
Air Freight and Logistics |
|
10.75% |
|
SOFR+615 |
|
|
4,875 |
|
|
|
4,828 |
|
|
|
3,656 |
|
Recteq, LLC |
|
1/29/2026 |
|
Leisure Products |
|
11.75% |
|
SOFR+715 |
|
|
4,825 |
|
|
|
4,796 |
|
|
|
4,777 |
|
RTIC Subsidiary Holdings, LLC |
|
5/3/2029 |
|
Consumer Goods: Durable |
|
10.35% |
|
SOFR+575 |
|
|
9,975 |
|
|
|
9,830 |
|
|
|
9,776 |
|
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
6/15/2029 |
|
High Tech Industries |
|
10.35% |
|
SOFR+575 |
|
|
4,336 |
|
|
|
4,266 |
|
|
|
4,282 |
|
Safe Haven Defense US, LLC |
|
5/23/2029 |
|
Construction and Building |
|
9.85% |
|
SOFR+525 |
|
|
9,973 |
|
|
|
9,830 |
|
|
|
9,873 |
|
Sales Benchmark Index LLC |
|
1/3/2025 |
|
Professional Services |
|
10.80% |
|
SOFR+620 |
|
|
9,268 |
|
|
|
9,260 |
|
|
|
9,268 |
|
Sargent & Greenleaf Inc. |
|
12/20/2024 |
|
Wholesale |
|
12.45% |
|
SOFR+760 |
|
|
4,916 |
|
|
|
4,906 |
|
|
|
4,916 |
|
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
|
|
|
|||
Schlesinger Global, Inc. |
|
7/14/2025 |
|
Business Services |
|
13.20% |
|
SOFR+835 |
|
|
12,388 |
|
|
|
12,387 |
|
|
|
12,078 |
|
|
|
|
|
|
|
(PIK 0.50%) |
|
|
|
|
|
|
|
|
|
|
|
|||
Seaway Buyer, LLC |
|
6/13/2029 |
|
Chemicals, Plastics and Rubber |
|
10.75% |
|
SOFR+615 |
|
|
4,900 |
|
|
|
4,842 |
|
|
|
4,729 |
|
Sigma Defense Systems, LLC |
|
12/18/2027 |
|
Aerospace and Defense |
|
11.50% |
|
SOFR+690 |
|
|
18,620 |
|
|
|
18,370 |
|
|
|
18,434 |
|
Simplicity Financial Marketing Group Holdings, Inc |
|
12/2/2026 |
|
Diversified Financial Services |
|
11.00% |
|
SOFR+640 |
|
|
11,359 |
|
|
|
11,206 |
|
|
|
11,472 |
|
Skopima Consilio Parent, LLC |
|
5/17/2028 |
|
Business Services |
|
9.46% |
|
SOFR+461 |
|
|
1,290 |
|
|
|
1,268 |
|
|
|
1,289 |
|
Smartronix, LLC |
|
11/23/2028 |
|
Aerospace and Defense |
|
10.35% |
|
SOFR+610 |
|
|
4,863 |
|
|
|
4,800 |
|
|
|
4,863 |
|
Smile Brands Inc. |
|
10/14/2025 |
|
Healthcare and Pharmaceuticals |
|
10.20% |
|
SOFR+550 |
|
|
11,887 |
|
|
|
11,860 |
|
|
|
10,520 |
|
|
|
|
|
|
|
(PIK 1.50%) |
|
|
|
|
|
|
|
|
|
|
|
|||
Solutionreach, Inc. |
|
7/17/2025 |
|
Healthcare and Pharmaceuticals |
|
12.40% |
|
SOFR+715 |
|
|
4,582 |
|
|
|
4,560 |
|
|
|
4,582 |
|
Spendmend Holdings LLC |
|
3/1/2028 |
|
Healthcare Technology |
|
10.25% |
|
SOFR+565 |
|
|
4,070 |
|
|
|
4,017 |
|
|
|
4,070 |
|
Summit Behavioral Healthcare, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
9.31% |
|
SOFR+425 |
|
|
1,777 |
|
|
|
1,700 |
|
|
|
1,653 |
|
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
8/16/2027 |
|
Aerospace and Defense |
|
10.26% |
|
SOFR+500 |
|
|
14,588 |
|
|
|
14,445 |
|
|
|
14,558 |
|
TCG 3.0 Jogger Acquisitionco |
|
1/23/2029 |
|
Media |
|
11.10% |
|
SOFR+650 |
|
|
19,626 |
|
|
|
19,312 |
|
|
|
19,430 |
|
Team Services Group, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
9.95% |
|
SOFR+500 |
|
|
343 |
|
|
|
332 |
|
|
|
338 |
|
Teneo Holdings, LLC |
|
3/13/2031 |
|
Business Services |
|
9.60% |
|
SOFR+475 |
|
|
5,473 |
|
|
|
5,418 |
|
|
|
5,490 |
|
The Bluebird Group LLC |
|
7/27/2026 |
|
Professional Services |
|
11.25% |
|
SOFR+665 |
|
|
8,521 |
|
|
|
8,427 |
|
|
|
8,521 |
|
The Vertex Companies, LLC |
|
8/31/2027 |
|
Construction and Engineering |
|
10.95% |
|
SOFR+610 |
|
|
7,636 |
|
|
|
7,538 |
|
|
|
7,639 |
|
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
11/24/2025 |
|
Consumer Goods: Non-Durable |
|
10.84% |
|
SOFR+565 |
|
|
16,524 |
|
|
|
16,394 |
|
|
|
16,524 |
|
Transgo, LLC |
|
12/29/2028 |
|
Automotive |
|
10.60% |
|
SOFR+575 |
|
|
18,552 |
|
|
|
18,293 |
|
|
|
18,552 |
|
TWS Acquisition Corporation |
|
6/16/2025 |
|
Diversified Consumer Services |
|
11.33% |
|
SOFR+640 |
|
|
943 |
|
|
|
943 |
|
|
|
943 |
|
Tyto Athene, LLC |
|
4/1/2028 |
|
IT Services |
|
10.23% |
|
SOFR+490 |
|
|
14,670 |
|
|
|
14,585 |
|
|
|
14,376 |
|
Urology Management Holdings, Inc. |
|
6/15/2026 |
|
Healthcare and Pharmaceuticals |
|
10.76% |
|
SOFR+550 |
|
|
6,823 |
|
|
|
6,742 |
|
|
|
6,755 |
|
Walker Edison Furniture Company LLC (4)(6) |
|
3/1/2029 |
|
Wholesale |
|
0.00% |
|
|
|
|
5,441 |
|
|
|
4,986 |
|
|
|
490 |
|
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (4)(6) |
|
3/1/2029 |
|
Wholesale |
|
0.00% |
|
|
|
|
1,667 |
|
|
|
1,667 |
|
|
|
1,667 |
|
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(4)(6) |
|
3/1/2029 |
|
Wholesale |
|
0.00% |
|
|
|
|
83 |
|
|
|
- |
|
|
|
(76 |
) |
Watchtower Buyer, LLC |
|
12/3/2029 |
|
Diversified Consumer Services |
|
10.60% |
|
SOFR+600 |
|
|
12,189 |
|
|
|
12,007 |
|
|
|
12,067 |
|
Wildcat Buyerco, Inc. |
|
2/27/2027 |
|
Electronic Equipment, Instruments, and Components |
|
10.60% |
|
SOFR+575 |
|
|
16,014 |
|
|
|
15,916 |
|
|
|
16,014 |
|
Zips Car Wash, LLC |
|
12/31/2024 |
|
Automobiles |
|
12.46% |
|
SOFR+740 |
|
|
16,736 |
|
|
|
16,722 |
|
|
|
15,983 |
|
|
|
|
|
|
|
(PIK 1.50%) |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
920,485 |
|
|
|
906,532 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Equity Securities - 10.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
New Insight Holdings, Inc. |
|
|
|
Diversified Consumer Services |
|
|
|
|
|
|
116 |
|
|
|
2,031 |
|
|
|
2,031 |
|
Lucky Bucks, LLC |
|
|
|
Hotel, Gaming and Leisure |
|
|
|
|
|
|
74 |
|
|
|
2,062 |
|
|
|
904 |
|
New MPE Holdings, LLC |
|
|
|
Media: Diversified and Production |
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
2,710 |
|
Output Services Group, Inc |
|
|
|
Business Services |
|
|
|
|
|
|
126 |
|
|
|
1,012 |
|
|
|
1,104 |
|
Walker Edison Furniture - Common Equity |
|
|
|
Wholesale |
|
|
|
|
|
|
36 |
|
|
|
3,393 |
|
|
|
- |
|
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
8,498 |
|
|
|
6,749 |
|
|
Total Investments - 1,415.0% |
|
|
|
|
|
|
|
|
|
928,983 |
|
|
|
913,281 |
|
|||||
Cash and Cash Equivalents - 106.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
68,429 |
|
|
|
68,429 |
|
|
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
68,429 |
|
|
|
68,429 |
|
|
Total Investments and Cash Equivalents —1,521.0% |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
997,412 |
|
|
$ |
981,710 |
|
|
Liabilities in Excess of Other Assets — (1,421.0)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(917,163 |
) |
||
Members' Equity—100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
64,547 |
|
||
55
Below is a listing of PSSL’s individual investments as of September 30, 2023 (Par and $ in thousands):
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
|
Basis Point |
|
Par |
|
|
Cost |
|
|
Fair Value (2) |
|
||||
First Lien Secured Debt - 1,347.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
A1 Garage Merger Sub, LLC |
|
12/22/2028 |
|
Commercial Services & Supplies |
|
|
11.84 |
% |
|
SOFR+660 |
|
|
2,940 |
|
|
$ |
2,886 |
|
|
$ |
2,925 |
|
Ad.net Acquisition, LLC |
|
5/7/2026 |
|
Media |
|
|
11.65 |
% |
|
SOFR+626 |
|
|
8,798 |
|
|
|
8,723 |
|
|
|
8,754 |
|
Alpine Acquisition Corp II |
|
11/30/2026 |
|
Containers and Packaging |
|
|
11.24 |
% |
|
SOFR+600 |
|
|
12,852 |
|
|
|
12,535 |
|
|
|
12,338 |
|
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
5/23/2024 |
|
Media: Advertising, Printing & Publishing |
|
|
11.04 |
% |
|
SOFR+550 |
|
|
5,001 |
|
|
|
4,971 |
|
|
|
4,913 |
|
Anteriad Holdings Inc (fka MeritDirect) March 2023 |
|
5/23/2024 |
|
Media: Advertising, Printing & Publishing |
|
|
12.04 |
% |
|
SOFR+650 |
|
|
4,875 |
|
|
|
4,817 |
|
|
|
4,814 |
|
Any Hour Services |
|
7/21/2027 |
|
Professional Services |
|
|
11.59 |
% |
|
SOFR+585 |
|
|
7,510 |
|
|
|
7,348 |
|
|
|
7,360 |
|
Apex Service Partners, LLC |
|
7/31/2025 |
|
Diversified Consumer Services |
|
|
10.52 |
% |
|
SOFR+525 |
|
|
1,002 |
|
|
|
1,002 |
|
|
|
1,000 |
|
Apex Service Partners, LLC Term Loan B |
|
7/31/2025 |
|
Diversified Consumer Services |
|
|
11.04 |
% |
|
SOFR+550 |
|
|
2,187 |
|
|
|
2,187 |
|
|
|
2,181 |
|
Apex Service Partners, LLC Term Loan C |
|
7/31/2025 |
|
Diversified Consumer Services |
|
|
10.69 |
% |
|
SOFR+525 |
|
|
11,013 |
|
|
|
10,972 |
|
|
|
10,985 |
|
Applied Technical Services, LLC |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
|
11.54 |
% |
|
SOFR+615 |
|
|
9,579 |
|
|
|
9,475 |
|
|
|
9,387 |
|
Applied Technical Services, LLC - DDTL Unfunded (3) |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
|
|
|
|
|
|
194 |
|
|
|
- |
|
|
|
(2 |
) |
|
Arcfield Acquisition Corp. |
|
8/3/2029 |
|
Aerospace and Defense |
|
|
11.62 |
% |
|
SOFR+625 |
|
|
9,218 |
|
|
|
9,093 |
|
|
|
9,126 |
|
Beta Plus Technologies, Inc. |
|
7/1/2029 |
|
Business Services |
|
|
11.14 |
% |
|
SOFR+575 |
|
|
4,950 |
|
|
|
4,863 |
|
|
|
4,604 |
|
BioDerm, Inc. |
|
1/31/2028 |
|
Healthcare and Pharmaceuticals |
|
|
11.83 |
% |
|
SOFR+650 |
|
|
8,978 |
|
|
|
8,874 |
|
|
|
8,933 |
|
Blackhawk Industrial Distribution, Inc. |
|
9/17/2026 |
|
Distributors |
|
|
11.79 |
% |
|
SOFR+640 |
|
|
15,132 |
|
|
|
14,928 |
|
|
|
14,905 |
|
Broder Bros., Co. |
|
12/4/2025 |
|
Consumer Products |
|
|
11.50 |
% |
|
SOFR+626 |
|
|
2,349 |
|
|
|
2,349 |
|
|
|
2,349 |
|
Burgess Point Purchaser Corporation |
|
9/26/2029 |
|
Automotive |
|
|
10.67 |
% |
|
SOFR+525 |
|
|
447 |
|
|
|
418 |
|
|
|
420 |
|
By Light Professional IT Services, LLC |
|
5/16/2025 |
|
High Tech Industries |
|
|
12.43 |
% |
|
SOFR+688 |
|
|
13,821 |
|
|
|
13,778 |
|
|
|
13,579 |
|
Cadence Aerospace, LLC |
|
11/14/2023 |
|
Aerospace and Defense |
|
|
12.07 |
% |
|
SOFR+665 |
|
|
4,011 |
|
|
|
4,010 |
|
|
|
4,011 |
|
|
|
|
|
|
|
(PIK 2.00%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cartessa Aesthetics, LLC |
|
6/14/2028 |
|
Distributors |
|
|
11.39 |
% |
|
SOFR+600 |
|
|
9,636 |
|
|
|
9,509 |
|
|
|
9,636 |
|
CF512, Inc. |
|
8/20/2026 |
|
Media |
|
|
11.60 |
% |
|
SOFR+619 |
|
|
6,820 |
|
|
|
6,722 |
|
|
|
6,684 |
|
CHA Holdings, Inc. |
|
4/10/2025 |
|
Construction and Engineering |
|
|
10.15 |
% |
|
SOFR+476 |
|
|
5,499 |
|
|
|
5,455 |
|
|
|
5,499 |
|
Challenger Performance Optimization, Inc. |
|
8/31/2024 |
|
Business Services |
|
|
12.18 |
% |
|
SOFR+675 |
|
|
9,232 |
|
|
|
9,201 |
|
|
|
8,955 |
|
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Confluent Health, LLC |
|
10/28/2028 |
|
Healthcare and Pharmaceuticals |
|
|
9.32 |
% |
|
SOFR+400 |
|
|
6,797 |
|
|
|
6,559 |
|
|
|
6,445 |
|
Connatix Buyer, Inc. |
|
7/13/2027 |
|
Media |
|
|
11.16 |
% |
|
SOFR+576 |
|
|
3,815 |
|
|
|
3,762 |
|
|
|
3,681 |
|
Crane 1 Services, Inc. |
|
8/16/2027 |
|
Commercial Services & Supplies |
|
|
10.90 |
% |
|
SOFR+551 |
|
|
2,089 |
|
|
|
2,067 |
|
|
|
2,079 |
|
Dr. Squatch, LLC |
|
8/31/2027 |
|
Personal Products |
|
|
11.24 |
% |
|
SOFR+585 |
|
|
14,712 |
|
|
|
14,511 |
|
|
|
14,712 |
|
DRI Holding Inc. |
|
12/21/2028 |
|
Media |
|
|
10.67 |
% |
|
SOFR+525 |
|
|
2,627 |
|
|
|
2,418 |
|
|
|
2,394 |
|
DRS Holdings III, Inc. |
|
11/3/2025 |
|
Consumer Goods: Durable |
|
|
11.79 |
% |
|
SOFR+640 |
|
|
14,429 |
|
|
|
14,376 |
|
|
|
14,256 |
|
Duraco Specialty Tapes LLC |
|
6/30/2024 |
|
Containers and Packaging |
|
|
11.89 |
% |
|
SOFR+650 |
|
|
10,904 |
|
|
|
10,838 |
|
|
|
10,740 |
|
ECL Entertainment, LLC |
|
8/31/2030 |
|
Hotel, Gaming and Leisure |
|
|
10.07 |
% |
|
SOFR+475 |
|
|
5,000 |
|
|
|
4,900 |
|
|
|
4,985 |
|
EDS Buyer, LLC |
|
1/10/2029 |
|
Electronic Equipment, Instruments, and Components |
|
|
11.64 |
% |
|
SOFR+625 |
|
|
8,955 |
|
|
|
8,833 |
|
|
|
8,821 |
|
Electro Rent Corporation |
|
1/17/2024 |
|
Electronic Equipment, Instruments, and Components |
|
|
11.00 |
% |
|
SOFR+550 |
|
|
2,219 |
|
|
|
2,200 |
|
|
|
2,171 |
|
Exigo Intermediate II, LLC |
|
3/15/2027 |
|
Software |
|
|
11.17 |
% |
|
SOFR+585 |
|
|
12,675 |
|
|
|
12,505 |
|
|
|
12,422 |
|
ETE Intermediate II, LLC |
|
5/29/2029 |
|
Diversified Consumer Services |
|
|
11.89 |
% |
|
SOFR+650 |
|
|
12,404 |
|
|
|
12,154 |
|
|
|
12,193 |
|
Fairbanks Morse Defense |
|
6/17/2028 |
|
Aerospace and Defense |
|
|
10.40 |
% |
|
SOFR+475 |
|
|
10,195 |
|
|
|
10,143 |
|
|
|
10,114 |
|
Global Holdings InterCo LLC |
|
3/16/2026 |
|
Diversified Financial Services |
|
|
11.96 |
% |
|
SOFR+660 |
|
|
3,736 |
|
|
|
3,724 |
|
|
|
3,549 |
|
Graffiti Buyer, Inc. |
|
8/10/2027 |
|
Trading Companies & Distributors |
|
|
10.99 |
% |
|
SOFR+575 |
|
|
2,345 |
|
|
|
2,316 |
|
|
|
2,322 |
|
Hancock Roofing and Construction L.L.C. |
|
12/31/2026 |
|
Insurance |
|
|
10.92 |
% |
|
SOFR+560 |
|
|
2,250 |
|
|
|
2,217 |
|
|
|
2,194 |
|
Holdco Sands Intermediate, LLC |
|
11/23/2028 |
|
Aerospace and Defense |
|
|
11.32 |
% |
|
SOFR+585 |
|
|
4,913 |
|
|
|
4,838 |
|
|
|
4,913 |
|
HW Holdco, LLC |
|
12/10/2024 |
|
Media |
|
|
11.75 |
% |
|
SOFR+640 |
|
|
3,014 |
|
|
|
2,988 |
|
|
|
2,968 |
|
Imagine Acquisitionco, LLC |
|
11/15/2027 |
|
Software |
|
|
10.72 |
% |
|
SOFR+535 |
|
|
9,248 |
|
|
|
9,075 |
|
|
|
9,110 |
|
Inception Fertility Ventures, LLC |
|
12/31/2024 |
|
Healthcare Providers and Services |
|
|
12.51 |
% |
|
SOFR+715 |
|
|
16,453 |
|
|
|
16,257 |
|
|
|
16,453 |
|
Infinity Home Services Holdco, Inc. |
|
12/28/2028 |
|
Commercial Services & Supplies |
|
|
12.24 |
% |
|
SOFR+685 |
|
|
6,090 |
|
|
|
5,979 |
|
|
|
6,090 |
|
Integrated Data Services |
|
8/1/2029 |
|
Business Services |
|
|
11.87 |
% |
|
SOFR+650 |
|
|
18,904 |
|
|
|
18,532 |
|
|
|
18,463 |
|
Integrative Nutrition, LLC |
|
1/31/2025 |
|
Diversified Consumer Services |
|
|
12.54 |
% |
|
SOFR+700 |
|
|
11,105 |
|
|
|
11,083 |
|
|
|
10,439 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
||
|
|
|
|
|
|
(PIK 2.25%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Integrity Marketing Acquisition, LLC |
|
8/27/2026 |
|
Insurance |
|
|
11.57 |
% |
|
SOFR+575 |
|
|
5,906 |
|
|
|
5,851 |
|
|
|
5,847 |
|
Inventus Power, Inc. |
|
6/30/2025 |
|
Consumer Goods: Durable |
|
|
12.93 |
% |
|
SOFR+761 |
|
|
8,246 |
|
|
|
8,104 |
|
|
|
8,080 |
|
ITI Holdings, Inc. |
|
3/3/2028 |
|
IT Services |
|
|
11.06 |
% |
|
SOFR+560 |
|
|
3,940 |
|
|
|
3,886 |
|
|
|
3,861 |
|
K2 Pure Solutions NoCal, L.P. |
|
12/20/2023 |
|
Chemicals, Plastics and Rubber |
|
|
13.42 |
% |
|
SOFR+810 |
|
|
15,509 |
|
|
|
15,487 |
|
|
|
15,509 |
|
Kinetic Purchaser, LLC |
|
11/10/2027 |
|
Personal Products |
|
|
11.54 |
% |
|
SOFR+615 |
|
|
16,662 |
|
|
|
16,346 |
|
|
|
16,412 |
|
Lash OpCo, LLC |
|
2/18/2027 |
|
Personal Products |
|
|
12.13 |
% |
|
SOFR+675 |
|
|
14,210 |
|
|
|
13,989 |
|
|
|
14,068 |
|
LAV Gear Holdings, Inc. |
|
10/31/2024 |
|
Capital Equipment |
|
|
11.74 |
% |
|
SOFR+643 |
|
|
15,042 |
|
|
|
14,997 |
|
|
|
14,862 |
|
Lightspeed Buyer Inc. |
|
2/3/2026 |
|
Healthcare Providers and Services |
|
|
10.70 |
% |
|
SOFR+535 |
|
|
12,056 |
|
|
|
11,911 |
|
|
|
11,935 |
|
LJ Avalon Holdings, LLC |
|
1/31/2030 |
|
Environmental Industries |
|
|
11.77 |
% |
|
SOFR+640 |
|
|
2,585 |
|
|
|
2,537 |
|
|
|
2,534 |
|
Loving Tan Intermediate II, Inc. |
|
5/26/2028 |
|
Consumer Products |
|
|
12.39 |
% |
|
SOFR+700 |
|
|
7,481 |
|
|
|
7,337 |
|
|
|
7,369 |
|
Lucky Bucks, LLC (4) |
|
7/20/2027 |
|
Hotel, Gaming and Leisure |
|
|
0.00 |
% |
|
|
|
|
4,489 |
|
|
|
4,207 |
|
|
|
1,182 |
|
Lucky Bucks. LLC - OpCo DIP Loans |
|
9/30/2025 |
|
Hotel, Gaming and Leisure |
|
|
15.33 |
% |
|
SOFR+1000 |
|
|
160 |
|
|
|
158 |
|
|
|
160 |
|
MAG DS Corp |
|
4/1/2027 |
|
Aerospace and Defense |
|
|
10.99 |
% |
|
SOFR+550 |
|
|
2,097 |
|
|
|
2,007 |
|
|
|
1,986 |
|
Magenta Buyer, LLC |
|
7/31/2028 |
|
Software |
|
|
10.63 |
% |
|
SOFR+500 |
|
|
3,006 |
|
|
|
2,845 |
|
|
|
2,228 |
|
Marketplace Events, LLC - Super Priority First Lien Term Loan |
|
9/30/2025 |
|
Media: Diversified and Production |
|
|
10.94 |
% |
|
SOFR+525 |
|
|
647 |
|
|
|
647 |
|
|
|
647 |
|
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
|
|
|
|
|
|
589 |
|
|
|
- |
|
|
|
- |
|
|
Marketplace Events, LLC |
|
9/30/2026 |
|
Media: Diversified and Production |
|
|
10.94 |
% |
|
SOFR+525 |
|
|
4,837 |
|
|
|
3,782 |
|
|
|
4,837 |
|
Mars Acquisition Holdings Corp. |
|
5/14/2026 |
|
Media |
|
|
11.04 |
% |
|
SOFR+565 |
|
|
11,588 |
|
|
|
11,476 |
|
|
|
11,472 |
|
MBS Holdings, Inc. |
|
4/16/2027 |
|
Internet Software and Services |
|
|
11.17 |
% |
|
SOFR+585 |
|
|
7,859 |
|
|
|
7,758 |
|
|
|
7,749 |
|
MDI Buyer, Inc. |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
|
11.32 |
% |
|
SOFR+600 |
|
|
6,380 |
|
|
|
6,271 |
|
|
|
6,244 |
|
Meadowlark Acquirer, LLC |
|
12/10/2027 |
|
Professional Services |
|
|
11.04 |
% |
|
SOFR+565 |
|
|
2,372 |
|
|
|
2,336 |
|
|
|
2,312 |
|
56
Below is a listing of PSSL’s individual investments as of September 30, 2023 (continued):
Issuer Name (6) |
|
Maturity |
|
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par |
|
|
Cost |
|
|
Fair Value (2) |
|
||||||
Output Services Group, Inc. (4) |
|
6/27/2026 |
|
|
Business Services |
|
|
0.00 |
% |
|
|
— |
|
|
|
7,759 |
|
|
|
7,689 |
|
|
|
1,513 |
|
|
Owl Acquisition, LLC |
|
2/4/2028 |
|
|
Professional Services |
|
|
10.80 |
% |
|
SOFR+575 |
|
|
|
3,893 |
|
|
|
3,832 |
|
|
|
3,834 |
|
||
Ox Two, LLC |
|
5/18/2026 |
|
|
Construction and Building |
|
|
12.90 |
% |
|
SOFR+751 |
|
|
|
4,345 |
|
|
|
4,306 |
|
|
|
4,269 |
|
||
Peaquod Merger Sub, Inc. |
|
12/2/2026 |
|
|
Diversified Financial Services |
|
|
11.79 |
% |
|
SOFR+640 |
|
|
|
11,474 |
|
|
|
11,267 |
|
|
|
11,244 |
|
||
PH Beauty Holdings III, Inc. |
|
9/29/2025 |
|
|
Wholesale |
|
|
10.68 |
% |
|
SOFR+500 |
|
|
|
9,493 |
|
|
|
9,282 |
|
|
|
7,974 |
|
||
PL Acquisitionco, LLC |
|
11/9/2027 |
|
|
Textiles, Apparel and Luxury Goods |
|
|
12.42 |
% |
|
SOFR+710 |
|
|
|
7,565 |
|
|
|
7,467 |
|
|
|
6,809 |
|
||
|
|
|
|
|
|
|
(PIK 4.00%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PlayPower, Inc. |
|
5/8/2026 |
|
|
Consumer Goods: Durable |
|
|
10.57 |
% |
|
SOFR+565 |
|
|
|
2,551 |
|
|
|
2,491 |
|
|
|
2,436 |
|
||
Pragmatic Institute, LLC |
|
7/6/2028 |
|
|
Education |
|
|
11.17 |
% |
|
SOFR+575 |
|
|
|
11,138 |
|
|
|
10,999 |
|
|
|
10,636 |
|
||
Quantic Electronics, LLC |
|
11/19/2026 |
|
|
Aerospace and Defense |
|
|
11.74 |
% |
|
SOFR+635 |
|
|
|
2,803 |
|
|
$ |
2,776 |
|
|
$ |
2,761 |
|
||
Rancho Health MSO, Inc. |
|
12/18/2025 |
|
|
Healthcare Providers and Services |
|
|
11.22 |
% |
|
SOFR+585 |
|
|
|
1,029 |
|
|
|
1,029 |
|
|
|
1,029 |
|
||
Reception Purchaser, LLC |
|
2/28/2028 |
|
|
Air Freight and Logistics |
|
|
11.54 |
% |
|
SOFR+600 |
|
|
|
4,938 |
|
|
|
4,876 |
|
|
|
4,740 |
|
||
Recteq, LLC |
|
1/29/2026 |
|
|
Leisure Products |
|
|
12.54 |
% |
|
SOFR+700 |
|
|
|
4,875 |
|
|
|
4,825 |
|
|
|
4,729 |
|
||
Research Now Group, LLC and Dynata, LLC |
|
12/20/2024 |
|
|
Diversified Consumer Services |
|
|
11.13 |
% |
|
SOFR+576 |
|
|
|
12,432 |
|
|
|
12,322 |
|
|
|
10,878 |
|
||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
6/15/2029 |
|
|
High Tech Industries |
|
|
11.52 |
% |
|
SOFR+625 |
|
|
|
3,749 |
|
|
|
3,676 |
|
|
|
3,692 |
|
||
Sales Benchmark Index LLC |
|
1/3/2025 |
|
|
Professional Services |
|
|
11.59 |
% |
|
SOFR+620 |
|
|
|
9,522 |
|
|
|
9,474 |
|
|
|
9,475 |
|
||
Sargent & Greenleaf Inc. |
|
12/20/2024 |
|
|
Wholesale |
|
|
12.92 |
% |
|
SOFR+760 |
|
|
|
5,167 |
|
|
|
5,148 |
|
|
|
5,116 |
|
||
|
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Schlesinger Global, Inc. |
|
7/14/2025 |
|
|
Business Services |
|
|
12.52 |
% |
|
SOFR+715 |
|
|
|
11,791 |
|
|
|
11,777 |
|
|
|
11,407 |
|
||
|
|
|
|
|
|
|
(PIK 0.50%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Seaway Buyer, LLC |
|
6/13/2029 |
|
|
Chemicals, Plastics and Rubber |
|
|
11.54 |
% |
|
SOFR+615 |
|
|
|
4,950 |
|
|
|
4,884 |
|
|
|
4,802 |
|
||
Sigma Defense Systems, LLC |
|
12/18/2025 |
|
|
Aerospace and Defense |
|
|
14.04 |
% |
|
SOFR+865 |
|
|
|
13,787 |
|
|
|
13,579 |
|
|
|
13,580 |
|
||
Skopima Consilio Parent, LLC |
|
5/17/2028 |
|
|
Business Services |
|
|
9.93 |
% |
|
SOFR+450 |
|
|
|
1,300 |
|
|
|
1,274 |
|
|
|
1,272 |
|
||
Smile Brands Inc. |
|
10/14/2025 |
|
|
Healthcare and Pharmaceuticals |
|
|
9.70 |
% |
|
SOFR+450 |
|
|
|
11,796 |
|
|
|
11,739 |
|
|
|
10,598 |
|
||
Solutionreach, Inc. |
|
7/17/2025 |
|
|
Healthcare and Pharmaceuticals |
|
|
12.37 |
% |
|
SOFR+700 |
|
|
|
4,582 |
|
|
|
4,577 |
|
|
|
4,563 |
|
||
Spendmend Holdings LLC |
|
3/1/2028 |
|
|
Healthcare Technology |
|
|
11.04 |
% |
|
SOFR+565 |
|
|
|
4,112 |
|
|
|
4,047 |
|
|
|
4,022 |
|
||
STV Group Incorporated |
|
12/11/2026 |
|
|
Construction and Building |
|
|
10.67 |
% |
|
SOFR+535 |
|
|
|
9,075 |
|
|
|
9,025 |
|
|
|
8,894 |
|
||
Summit Behavioral Healthcare, LLC |
|
11/24/2028 |
|
|
Healthcare and Pharmaceuticals |
|
|
10.43 |
% |
|
SOFR+475 |
|
|
|
1,786 |
|
|
|
1,696 |
|
|
|
1,779 |
|
||
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
8/16/2027 |
|
|
Aerospace and Defense |
|
|
11.49 |
% |
|
SOFR+600 |
|
|
|
14,738 |
|
|
|
14,540 |
|
|
|
14,575 |
|
||
Team Services Group, LLC |
|
11/24/2028 |
|
|
Healthcare and Pharmaceuticals |
|
|
10.75 |
% |
|
SOFR+500 |
|
|
|
346 |
|
|
|
333 |
|
|
|
339 |
|
||
Teneo Holdings LLC |
|
7/18/2025 |
|
|
Business Services |
|
|
10.67 |
% |
|
SOFR+535 |
|
|
|
2,262 |
|
|
|
2,261 |
|
|
|
2,259 |
|
||
The Aegis Technologies Group, LLC |
|
10/31/2025 |
|
|
Aerospace and Defense |
|
|
12.04 |
% |
|
SOFR+665 |
|
|
|
5,602 |
|
|
|
5,560 |
|
|
|
5,518 |
|
||
The Bluebird Group LLC |
|
7/27/2026 |
|
|
Professional Services |
|
|
12.79 |
% |
|
SOFR+700 |
|
|
|
5,403 |
|
|
|
5,336 |
|
|
|
5,382 |
|
||
The Vertex Companies, LLC |
|
8/31/2027 |
|
|
Construction and Engineering |
|
|
11.72 |
% |
|
SOFR+635 |
|
|
|
7,716 |
|
|
|
7,591 |
|
|
|
7,656 |
|
||
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
11/24/2025 |
|
|
Consumer Goods: Non-Durable |
|
|
10.95 |
% |
|
SOFR+565 |
|
|
|
8,654 |
|
|
|
8,556 |
|
|
|
8,654 |
|
||
TWS Acquisition Corporation |
|
6/16/2025 |
|
|
Diversified Consumer Services |
|
|
11.80 |
% |
|
SOFR+625 |
|
|
|
4,316 |
|
|
|
4,310 |
|
|
|
4,316 |
|
||
Tyto Athene, LLC |
|
4/1/2028 |
|
|
IT Services |
|
|
10.90 |
% |
|
SOFR+550 |
|
|
|
14,670 |
|
|
|
14,565 |
|
|
|
13,379 |
|
||
Urology Management Holdings, Inc. |
|
6/15/2026 |
|
|
Healthcare and Pharmaceuticals |
|
|
11.79 |
% |
|
SOFR+665 |
|
|
|
6,892 |
|
|
|
6,775 |
|
|
|
6,749 |
|
||
Walker Edison Furniture Company LLC (5) |
|
3/31/2027 |
|
|
Wholesale |
|
|
12.18 |
% |
|
SOFR+685 |
|
|
|
3,521 |
|
|
|
3,521 |
|
|
|
3,521 |
|
||
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (5) |
|
3/31/2027 |
|
|
Wholesale |
|
|
11.68 |
% |
|
SOFR+635 |
|
|
|
1,667 |
|
|
|
1,667 |
|
|
|
1,667 |
|
||
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(5) |
|
3/31/2027 |
|
|
Wholesale |
|
|
|
|
|
|
|
|
333 |
|
|
|
|
|
|
|
|||||
Wildcat Buyerco, Inc. |
|
2/27/2026 |
|
|
Electronic Equipment, Instruments, and Components |
|
|
10.54 |
% |
|
SOFR+515 |
|
|
|
10,565 |
|
|
|
10,491 |
|
|
|
10,460 |
|
||
Zips Car Wash, LLC |
|
3/1/2024 |
|
|
Automobiles |
|
|
12.67 |
% |
|
SOFR+735 |
|
|
|
16,732 |
|
|
|
16,660 |
|
|
|
16,188 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
801,215 |
|
|
|
783,598 |
|
||||
Equity Securities - 3.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
New MPE Holdings, LLC |
|
|
— |
|
|
Media: Diversified and Production |
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
- |
|
|
|
495 |
|
Walker Edison Furniture - Common Equity |
|
|
— |
|
|
Wholesale |
|
|
|
|
|
|
|
|
36 |
|
|
|
3,393 |
|
|
|
1,766 |
|
||
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,393 |
|
|
|
2,261 |
|
||||
Total Investments - 1,351.4% |
|
|
|
|
|
|
|
|
|
|
|
804,608 |
|
|
|
785,859 |
|
|||||||||
Cash and Cash Equivalents - 133.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,446 |
|
|
|
77,446 |
|
||||
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
77,446 |
|
|
|
77,446 |
|
||||
Total Investments and Cash Equivalents —1,484.6% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
882,054 |
|
|
$ |
863,305 |
|
||||
Liabilities in Excess of Other Assets — (1,384.6)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(805,155 |
) |
|||||
Members' Equity—100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
58,150 |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
57
Below are the consolidated statements of assets and liabilities for PSSL ($ in thousands):
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||
Assets |
|
|
|
|
|
|
||
Investments at fair value (amortized cost—$928,983 and $804,608, respectively) |
|
$ |
913,281 |
|
|
$ |
785,859 |
|
Cash and cash equivalents (cost—$68,429 and $77,446, respectively) |
|
|
68,429 |
|
|
|
77,446 |
|
Interest receivable |
|
|
4,722 |
|
|
|
5,179 |
|
Prepaid expenses and other assets |
|
|
1,642 |
|
|
|
490 |
|
Due from affiliate |
|
|
48 |
|
|
|
436 |
|
Total assets |
|
|
988,122 |
|
|
|
869,410 |
|
Liabilities |
|
|
|
|
|
|
||
Credit facility payable |
|
|
146,100 |
|
|
|
48,600 |
|
2032 Asset-backed debt, net (par—$0 and $246,000) |
|
|
— |
|
|
|
243,973 |
|
2035 Asset-backed debt, net (par—$246,000 and $246,000, respectively) |
|
|
243,934 |
|
|
|
243,483 |
|
2036 Asset-backed debt, net (par—$246,000 and $0, respectively) |
|
|
244,372 |
|
|
|
— |
|
Notes payable to members |
|
|
271,600 |
|
|
|
240,100 |
|
Payable for investments purchased |
|
|
86 |
|
|
|
13,466 |
|
Interest payable on notes to members |
|
|
7,315 |
|
|
|
6,488 |
|
Interest payable on Credit facility and asset backed debt |
|
|
9,281 |
|
|
|
14,291 |
|
Accrued expenses |
|
|
822 |
|
|
|
859 |
|
Due to affiliate |
|
|
65 |
|
|
|
— |
|
Total liabilities |
|
|
923,575 |
|
|
|
811,260 |
|
Commitments and contingencies (1) |
|
|
|
|
|
|
||
Members' equity |
|
|
64,547 |
|
|
|
58,150 |
|
Total liabilities and members' equity |
|
$ |
988,122 |
|
|
$ |
869,410 |
|
Below are the consolidated statements of operations for PSSL ($ in thousands):
|
|
Year Ended |
|
|
Year Ended |
|
||
Investment income: |
|
|
|
|
|
|
||
Interest |
|
$ |
109,094 |
|
|
$ |
89,547 |
|
Other income |
|
|
1,191 |
|
|
|
1,297 |
|
Total investment income |
|
|
110,285 |
|
|
|
90,844 |
|
Expenses: |
|
|
|
|
|
|
||
Interest and expenses on credit facility and asset-backed debt |
|
|
54,814 |
|
|
|
42,797 |
|
Interest expense on notes to members |
|
|
34,186 |
|
|
|
30,325 |
|
Administrative services expenses |
|
|
2,354 |
|
|
|
2,103 |
|
Other general and administrative expenses (1) |
|
|
1,464 |
|
|
|
1,116 |
|
Expenses before debt issuance costs |
|
|
92,818 |
|
|
|
76,341 |
|
Debt issuance costs |
|
|
999 |
|
|
|
— |
|
Total expenses |
|
|
93,817 |
|
|
|
76,341 |
|
Net investment income |
|
|
16,468 |
|
|
|
14,503 |
|
Realized and unrealized (loss) gain on investments and debt: |
|
|
|
|
|
|
||
Net realized (loss) gain on investments |
|
|
(8,914 |
) |
|
|
(6,328 |
) |
Debt extinguishment |
|
|
(705 |
) |
|
|
— |
|
Net change in unrealized (depreciation) appreciation on investments |
|
|
3,048 |
|
|
|
(3,171 |
) |
Net realized and unrealized gain (loss) on investments and debt |
|
|
(6,571 |
) |
|
|
(9,499 |
) |
Net increase (decrease) in members' equity resulting from operations |
|
$ |
9,897 |
|
|
$ |
5,004 |
|
Distributions
In order to be treated as a RIC for federal income tax purposes and to not be subject to corporate-level tax on undistributed income or gains, we are required, under Subchapter M of the Code, to annually distribute dividends for U.S. federal income tax purposes to our stockholders out of the assets legally available for distribution of an amount generally at least equal to 90% of investment company taxable income, determined without regard to any deduction for dividends paid.
Although not required for us to maintain our RIC tax status, in order to preclude the imposition of a 4% nondeductible federal excise tax imposed on RICs, we must distribute dividends for U.S. federal income tax purposes to our stockholders in respect of each calendar year an amount at least equal to the Excise Tax Avoidance Requirement. In addition, although we may distribute realized net capital gains (i.e., net long-term capital gains in excess of net short-term capital losses), if any, at least annually, out of the assets legally available for such distributions in the manner described above, we have retained and may continue to retain such net capital gains or investment company taxable income, subject to maintaining our ability to be taxed as a RIC, in order to provide us with additional liquidity.
During the years ended September 30, 2024 and 2023, we declared distributions of $1.23 per share and $1.19 per share, respectively, for total distributions of $80.6 million and $60.5 million, respectively. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.
We intend to continue to make monthly distributions to our stockholders. Our monthly distributions, if any, are determined by our board of directors quarterly.
On November 22, 2017, we terminated our dividend reinvestment plan. The termination of the plan applies to the reinvestment of cash distributions paid on or after December 22, 2017.
58
We may not be able to achieve operating results that will allow us to make distributions at a specific level or to increase the amount of these distributions from time to time. In addition, we may be limited in our ability to make distributions due to the asset coverage ratio for borrowings applicable to us as a BDC under the 1940 Act and due to provisions in future credit facilities. If we do not distribute at least a certain percentage of our income annually, we could suffer adverse tax consequences, including possible loss of our ability to be subject to tax as a RIC. We cannot assure stockholders that they will receive any distributions at a particular level.
Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The FASB approved an (optional) two year extension to December 31, 2024, for transitioning away from LIBOR. The Company adopted ASU 2020-04, the effect of which was not material to the consolidated financial statements and the notes thereto.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Company has adopted the new accounting standard implementing appropriate controls and procedures, the effect which was not material to the consolidated financial statements and the notes thereto.
In June 2022, the FASB issued Accounting Standards Update No. 2022-03, or ASU, 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, or ASU 2022-03, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early application is permitted. The Company is currently evaluating the impact the adoption of this new accounting standard will have on its consolidated financial statements, but the impact of the adoption is not expected to be material.
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities' segment disclosure by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosure of a reportable segment's profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods for our fiscal years beginning December 15, 2024, and should be applied on a retrospective basis to all periods presented, noting early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023 - 09 "Improvements to Income Tax Disclosures" ("ASU 2023 - 09"). ASU 2023 - 09 intends to improve the transparency of income tax disclosures. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. We are currently assessing the impact of this guidance, however, we do not expect a material impact to our financial statements.
59
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
We are subject to financial market risks, including changes in interest rates. As of September 30, 2024, our debt portfolio consisted of approximately 100% variable-rate investments. The variable-rate loans are usually based on a SOFR (or an alternative risk-free floating interest rate index) rate and typically have durations of three months, after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regards to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.
Assuming that the most recent Consolidated Statements of Assets and Liabilities was to remain constant, and no actions were taken to alter the existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates:
Change in Interest Rates |
|
Change in Interest Income, |
|
|
Change in Interest Income, |
|
||
Down 1% |
|
$ |
(7,730 |
) |
|
$ |
(0.10 |
) |
Up 1% |
|
|
7,730 |
|
|
|
0.10 |
|
Up 2% |
|
|
15,460 |
|
|
|
0.20 |
|
Up 3% |
|
|
23,190 |
|
|
|
0.30 |
|
Up 4% |
|
|
30,938 |
|
|
|
0.40 |
|
Although management believes that this measure is indicative of our sensitivity to interest rate changes, it does not adjust for potential changes in the credit market, credit quality, size and composition of the assets on the Consolidated Statements of Assets and Liabilities and other business developments that could affect net increase in net assets resulting from operations or net investment income. Accordingly, no assurances can be given that actual results would not differ materially from those shown above.
Because we borrow money to make investments, our net investment income is dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds, as well as our level of leverage. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income or net assets.
We may hedge against interest rate and foreign currency fluctuations by using standard hedging instruments such as futures, options and forward contracts or the Credit Facility subject to the requirements of the 1940 Act and applicable commodities laws. While hedging activities may insulate us against adverse changes in interest rates and foreign currencies, they may also limit our ability to participate in benefits of lower interest rates or higher exchange rates with respect to our portfolio of investments with fixed interest rates or investments denominated in foreign currencies. During the periods covered by this Report, we did not engage in interest rate hedging activities or foreign currency derivatives hedging activities.
60
Item 8. Consolidated Financial Statements and Supplementary Data
61
Management’s Report on Internal Control Over Financial Reporting
The management of PennantPark Floating Rate Capital, Ltd. (except where the context suggests otherwise, the terms “we,” “us,” “our” and “PennantPark Floating” refer to PennantPark Floating Rate Capital, Ltd. and its Subsidiaries) is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f), and for performing an assessment of the effectiveness of internal control over financial reporting as of September 30, 2024. Our internal control system is a process designed to provide reasonable assurance to our management and board of directors regarding the preparation and fair presentation of published financial statements.
PennantPark Floating’s internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions recorded necessary to permit the preparation of financial statements in accordance with U.S. generally accepted accounting principles. Our policies and procedures also provide reasonable assurance that receipts and expenditures are being made only in accordance with authorizations of management and the directors of PennantPark Floating, and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of PennantPark Floating’s internal control over financial reporting as of September 30, 2024. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 Internal Control—Integrated Framework. Based on such assessment management has determined that, as of September 30, 2024, our internal control over financial reporting is effective based on those criteria.
62
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
PennantPark Floating Rate Capital Ltd. and Subsidiaries
Opinion on the Internal Control Over Financial Reporting
We have audited PennantPark Floating Rate Capital Ltd. and Subsidiaries’ (the Company) internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of assets and liabilities, including the consolidated schedules of investments, as of September 30, 2024 and 2023, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended September 30, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements) of the Company and our report dated November 25, 2024, expressed an unqualified opinion.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ RSM US LLP
New York, New York
November 25, 2024
63
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of
PennantPark Floating Rate Capital Ltd. and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of assets and liabilities of PennantPark Floating Rate Capital Ltd. and Subsidiaries (the Company), including the consolidated schedules of investments, as of September 30, 2024 and 2023, the related consolidated statements of operations, changes in net assets, and cash flows for each of the three years in the period ended September 30, 2024, and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2024 and 2023, and the results of its operations, changes in net assets, and cash flows for each of the three years in the period ended September 30, 2024, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of September 30, 2024, based on criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated November 25, 2024, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2024 and 2023, by correspondence with the custodians, underlying fund advisors, and by other appropriate auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which they relate.
Level 3 Fair Value Measurements
The fair value of the Company’s investments valued using Level 3 fair value measurements was approximately $1,917.8 million as of September 30, 2024. The fair value of the Company’s financial instruments classified as liabilities valued using Level 3 fair value measurements was approximately $443.9 million as of September 30, 2024. As discussed in Notes 2 and 5 to the consolidated financial statements, the Company’s investment portfolio generally consists of illiquid securities, including debt and equity investments, which were acquired directly from the issuer. Such investments include first lien secured debt, second lien secured debt, subordinated debt and equity investments. Additionally, the Company has elected to apply the fair value option to certain financial instruments classified as liabilities. The inputs into the determination of fair value require significant management judgment or estimation.
We identified Level 3 fair value measurements as a critical audit matter due to the subjective nature of the judgments necessary for management to select valuation techniques and the use of significant unobservable inputs to estimate the fair value. Auditing the reasonableness of management’s selection of valuation technique and the related unobservable inputs required a high degree of auditor judgment and increased audit effort, including the use of a valuation specialist.
The primary procedures we performed to address this critical audit matter included the following, among others:
We tested both the source information used to determine the unobservable input and the mathematical accuracy of the calculation used to compute the unobservable input for a sample of investments.
/s/
We have served as the Company's auditor since 2013.
64
New York,
November 25, 2024
65
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except per share data)
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||
Assets |
|
|
|
|
|
|
||
Investments at fair value |
|
|
|
|
|
|
||
Non-controlled, non-affiliated investments (cost—$ |
|
$ |
|
|
$ |
|
||
Controlled, affiliated investments (cost— $ |
|
|
|
|
|
|
||
Total of investments (cost—$ |
|
|
|
|
|
|
||
Cash and cash equivalents (cost—$ |
|
|
|
|
|
|
||
Interest receivable |
|
|
|
|
|
|
||
Distributions receivable |
|
|
|
|
|
|
||
Due from affiliate |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Total assets |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Credit Facility payable, at fair value (cost—$ |
|
|
|
|
|
|
||
2023 Notes payable, at fair value (par—$ |
|
|
|
|
|
|
||
2026 Notes payable, net (par—$ |
|
|
|
|
|
|
||
2031 Asset-Backed Debt, net (par—$ |
|
|
|
|
|
|
||
2036 Asset-Backed Debt, net (par - $ |
|
|
|
|
|
|
||
2036-R Asset-Backed Debt, net (par—$ |
|
|
|
|
|
|
||
Payable for investments purchased |
|
|
|
|
|
|
||
Interest payable on debt |
|
|
|
|
|
|
||
Distributions payable |
|
|
|
|
|
|
||
Base management fee payable |
|
|
|
|
|
|
||
Incentive fee payable |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
|
||
Deferred tax liability |
|
|
|
|
|
|
||
Due to affiliates |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Net assets |
|
|
|
|
|
|
||
Common stock, |
|
|
|
|
|
|
||
Paid-in capital in excess of par value |
|
|
|
|
|
|
||
Accumulated deficit |
|
|
( |
) |
|
|
( |
) |
Total net assets |
|
$ |
|
|
$ |
|
||
Total liabilities and net assets |
|
$ |
|
|
$ |
|
||
Net asset value per share |
|
$ |
|
|
$ |
|
||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
66
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
|
|
Years Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Investment income: |
|
|
|
|
|
|
|
|
|
|||
From non-controlled, non-affiliated investments: |
|
|
|
|
|
|
|
|
|
|||
Interest |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Dividend |
|
|
|
|
|
|
|
|
|
|||
Other income |
|
|
|
|
|
|
|
|
|
|||
From non-controlled, affiliated investments: |
|
|
|
|
|
|
|
|
|
|||
Interest |
|
|
|
|
|
|
|
|
|
|||
From controlled, affiliated investments: |
|
|
|
|
|
|
|
|
|
|||
Interest |
|
|
|
|
|
|
|
|
|
|||
Dividend |
|
|
|
|
|
|
|
|
|
|||
Other income |
|
|
|
|
|
|
|
|
|
|||
Total investment income |
|
|
|
|
|
|
|
|
|
|||
Expenses: |
|
|
|
|
|
|
|
|
|
|||
Base management fee |
|
|
|
|
|
|
|
|
|
|||
Incentive fee |
|
|
|
|
|
|
|
|
|
|||
Interest and expenses on debt |
|
|
|
|
|
|
|
|
|
|||
Administrative services expenses |
|
|
|
|
|
|
|
|
|
|||
Other general and administrative expenses |
|
|
|
|
|
|
|
|
|
|||
Expenses before amendment costs, debt issuance costs and provision for taxes |
|
|
|
|
|
|
|
|
|
|||
Credit Facility amendment costs and debt issuance costs |
|
|
|
|
|
|
|
|
|
|||
Provision for taxes |
|
|
|
|
|
|
|
|
|
|||
Total expenses |
|
|
|
|
|
|
|
|
|
|||
Net investment income |
|
|
|
|
|
|
|
|
|
|||
Realized and unrealized gain (loss) on investments and debt: |
|
|
|
|
|
|
|
|
|
|||
Net realized gain (loss) on investments and debt: |
|
|
|
|
|
|
|
|
|
|||
Non-controlled, non-affiliated investments |
|
|
|
|
|
( |
) |
|
|
|
||
Non-controlled and controlled, affiliated investments |
|
|
|
|
|
|
|
|
( |
) |
||
Debt extinguishment |
|
|
( |
) |
|
|
|
|
|
|
||
Provision for taxes on realized gain on investments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net realized gain (loss) on investments and debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net change in unrealized appreciation (depreciation) on: |
|
|
|
|
|
|
|
|
|
|||
Non-controlled, non-affiliated investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Controlled and non-controlled, affiliated investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Provision for taxes on unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
( |
) |
||
Debt depreciation (appreciation) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net change in unrealized appreciation (depreciation) on investments and debt |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net realized and unrealized gain (loss) from investments and debt |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net increase in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net increase in net assets resulting from operations per common share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net investment income per common share |
|
$ |
|
|
$ |
|
|
$ |
|
|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
67
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except share issue data)
|
|
Years Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Net increase in net assets from operations: |
|
|
|
|
|
|
|
|
|
|||
Net investment income |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net realized gain (loss) on investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net realized loss on debt extinguishment |
|
|
( |
) |
|
|
|
|
|
|
||
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Net change in provision for taxes on unrealized appreciation (depreciation) on investments |
|
|
|
|
|
|
|
|
( |
) |
||
Net change in provision for taxes on realized gain on investments |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net change in unrealized depreciation on debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net increase in net assets resulting from operations |
|
|
|
|
|
|
|
|
|
|||
Distributions to stockholders: |
|
|
|
|
|
|
|
|
|
|||
Distribution of net investment income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distribution of realized gains |
|
|
|
|
|
|
|
|
|
|||
Total distributions to stockholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Capital transactions |
|
|
|
|
|
|
|
|
|
|||
Public offering (See Note 1) |
|
|
|
|
|
|
|
|
|
|||
Offering costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net increase in net assets resulting from capital transactions |
|
|
|
|
|
|
|
|
|
|||
Net increase (decrease) in net assets |
|
|
|
|
|
|
|
|
|
|||
Net assets: |
|
|
|
|
|
|
|
|
|
|||
Beginning of year |
|
|
|
|
|
|
|
|
|
|||
End of year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Capital share activity: |
|
|
|
|
|
|
|
|
|
|||
Shares issued from public offering |
|
|
|
|
|
|
|
|
|
|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
68
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
|
|
Years Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|||
Net increase (decrease) in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Adjustments to reconcile net increase (decrease) in net assets resulting from |
|
|
|
|
|
|
|
|
|
|||
Net change in unrealized appreciation (depreciation) on investments |
|
|
( |
) |
|
|
|
|
|
|
||
Net change in unrealized (appreciation) depreciation on debt |
|
|
|
|
|
|
|
|
|
|||
Debt extinguishment realized loss |
|
|
|
|
|
|
|
|
|
|||
Net realized (gain) loss on investments |
|
|
( |
) |
|
|
|
|
|
|
||
Net accretion of discount and amortization of premium |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Purchases of investments |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Payment-in-kind interest |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Proceeds from dispositions of investments |
|
|
|
|
|
|
|
|
|
|||
Amortization of deferred financing costs |
|
|
|
|
|
|
|
|
|
|||
(Increase) decrease in: |
|
|
|
|
|
|
|
|
|
|||
Interest receivable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Receivable for investments sold |
|
|
|
|
|
|
|
|
|
|||
Dividend receivable |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Prepaid expenses and other assets |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Due from affiliate |
|
|
( |
) |
|
|
|
|
|
|
||
Increase (decrease) in: |
|
|
|
|
|
|
|
|
|
|||
Payable for investments purchased |
|
|
|
|
|
|
|
|
( |
) |
||
Interest payable on debt |
|
|
|
|
|
|
|
|
|
|||
Base management fee payable |
|
|
|
|
|
( |
) |
|
|
|
||
Incentive fee payable |
|
|
( |
) |
|
|
|
|
|
|
||
Deferred tax liability |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Due to affiliates |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Account payable and accrued expenses |
|
|
|
|
|
|
|
|
( |
) |
||
Net cash provided by (used in) operating activities |
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|||
Proceeds from public offering |
|
|
|
|
|
|
|
|
|
|||
Offering costs |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions paid to stockholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Repayment of 2023 notes payable |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Issuance of 2026 notes |
|
|
|
|
|
|
|
|
|
|||
Issuance of 2036 Asset-Backed Debt |
|
|
|
|
|
|
|
|
|
|||
Capitalized borrowing costs 2036 Asset-Back Debt |
|
|
( |
) |
|
|
|
|
|
|
||
Issuance of 2036-R Asset-Backed Debt |
|
|
|
|
|
|
|
|
|
|||
Capitalized borrowing costs 2036-R notes Asset-Back Debt |
|
|
( |
) |
|
|
|
|
|
|
||
Repayment of 2031 Asset-Backed Debt |
|
|
( |
) |
|
|
|
|
|
|
||
Borrowings under Credit Facility |
|
|
|
|
|
|
|
|
|
|||
Repayments under Credit Facility |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) financing activities |
|
|
|
|
|
( |
) |
|
|
|
||
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|||
Effect of exchange rate changes on cash |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, beginning of year |
|
|
|
|
|
|
|
|
|
|||
Cash and cash equivalents, end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Supplemental disclosures: |
|
|
|
|
|
|
|
|
|
|||
Interest paid |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Taxes paid |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Non-cash exchanges and conversions |
|
$ |
|
|
$ |
|
|
$ |
|
|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
69
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2024
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current Coupon |
|
|
Basis Point |
|
|
Par / Shares |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
Investments in Non-Controlled, Non-Affiliated Portfolio Companies - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
First Lien Secured Debt - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
A1 Garage Merger Sub, LLC |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||||||||
A1 Garage Merger Sub, LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
A1 Garage Merger Sub, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
ACP Avenu Buyer, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
ACP Avenu Buyer, LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
ACP Avenu Buyer, LLC - Funded Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
ACP Avenu Buyer, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
ACP Falcon Buyer, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Ad.net Acquisition, LLC |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ad.net Acquisition, LLC - Funded Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Ad.net Acquisition, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Aechelon Technology, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Aechelon Technology, Inc. - Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Aeronix, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Aeronix, Inc. - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
AFC Dell Holding Corp. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
AFC Dell Holding Corp. - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Amsive Holding Corporation (f/k/a Vision Purchaser Corporation) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Anteriad, LLC (f/k/a MeritDirect, LLC) - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Applied Technical Services, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Applied Technical Services, LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Applied Technical Services, LLC (Revolver) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Applied Technical Services, LLC (Revolver) (7),(9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Arcfield Acquisition Corp. (Revolver) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Arcfield Acquisition Corp. (Revolver) (7),(9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Archer Lewis, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Archer Lewis, LLC - Unfunded Term Loan A (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Archer Lewis, LLC - Unfunded Term Loan B (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Archer Lewis, LLC - Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
ARGANO, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
ARGANO, LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
ARGANO, LLC – Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Beacon Behavioral Support Service, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Beacon Behavioral Support Service, LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Beacon Behavioral Support Service, LLC - Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Beta Plus Technologies, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Big Top Holdings, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Big Top Holdings, LLC - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
BioDerm, Inc. (Revolver) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
BioDerm, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Blackhawk Industrial Distribution, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Blackhawk Industrial Distribution, Inc. - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Blackhawk Industrial Distribution, Inc. (Revolver) (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Blackhawk Industrial Distribution, Inc. (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
BlueHalo Financing Holdings, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Broder Bros., Co. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Burgess Point Purchaser Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
By Light Professional IT Services, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
By Light Professional IT Services, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Carisk Buyer, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Carisk Buyer, Inc. - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Carisk Buyer, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Carnegie Dartlet, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Carnegie Dartlet, LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Carnegie Dartlet, LLC - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Cartessa Aesthetics, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Cartessa Aesthetics, LLC (Revolver) (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Cartessa Aesthetics, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
CF512, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
CF512, Inc.(Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Compex Legal Services, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Compex Legal Services, Inc. (Revolver) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Compex Legal Services, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Confluent Health, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Connatix Buyer, Inc. (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Connatix Buyer, Inc. - Funded Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Connatix Buyer, Inc. (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Crane 1 Services, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Crane 1 Services, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
C5MI Holdco, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
C5MI Holdco, LLC - Funded Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
C5MI Holdco, LLC - Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
70
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
SEPTEMBER 30, 2024
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current Coupon |
|
|
Basis Point |
|
|
Par / Shares |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
DRI Holding Inc. |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||||||||
Dr. Squatch, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Dr. Squatch, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
DRS Holdings III, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
DRS Holdings III, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Duggal Acquisition, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Duggal Acquisition, LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Duggal Acquisition, LLC - Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Dynata, LLC - First-Out Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Dynata, LLC - Last-Out Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
ECL Entertainment, LLC |
|
|
Hotels, Restaurants and Leisure |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
EDS Buyer, LLC |
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EDS Buyer, LLC. (Revolver) (7), (9) |
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Efficient Collaborative Retail Marketing Company, LLC |
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(PIK |
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Eisner Advisory Group, LLC |
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ETE Intermediate II, LLC - Funded Revolver |
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ETE Intermediate II, LLC - Unfunded Revolver (9) |
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Eval Home Health Solutions Intermediate, LLC |
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Eval Home Health Solutions Intermediate, LLC - UnFunded Revolver (9) |
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Exigo Intermediate II, LLC (Revolver) (9) |
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Fairbanks Morse Defense |
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Five Star Buyer, Inc. |
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Five Star Buyer, Inc. (Revolver) (9) |
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Gauge ETE Blocker, LLC - Promissory Note |
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GGG MIDCO, LLC |
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GGG MIDCO, LLC - Unfunded Term Loan (9) |
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GGG MIDCO, LLC – Unfunded Revolver (9) |
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Global Holdings InterCo LLC |
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Graffiti Buyer, Inc. |
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Graffiti Buyer, Inc. - Unfunded Term Loan (9) |
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Graffiti Buyer, Inc. (Revolver) |
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Graffiti Buyer, Inc. (Revolver) (7), (9) |
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Hancock Roofing and Construction L.L.C. |
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Hancock Roofing and Construction L.L.C. (Revolver) (7) |
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Hancock Roofing and Construction L.L.C. (Revolver) (7), (9) |
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Harris & Co. LLC |
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Harris & Co. LLC. - Unfunded Term Loan A (9) |
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Harris & Co. LLC. - Unfunded Term Loan B (9) |
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Harris & Co. LLC - Unfunded Revolver (9) |
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HEC Purchaser Corp. |
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Hills Distribution Inc. |
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Hills Distribution Inc. - Unfunded Term Loan (9) |
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HW Holdco, LLC |
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HW Holdco, LLC (Revolver) (9) |
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IG Investments Holdings, LLC |
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IG Investments Holdings, LLC (Revolver) (7), (9) |
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Imagine Acquisitionco, LLC (Revolver) (9) |
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Infinity Home Services Holdco, Inc. |
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Infinity Home Services Holdco, Inc. (CAD) |
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Infinity Home Services Holdco, Inc. - 1st Amendment Unfunded Term Loan (9) |
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||||
Infinity Home Services Holdco, Inc. (Revolver) |
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Infinity Home Services Holdco, Inc. - Unfunded Term Loan (9) |
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— |
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— |
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|||
Infolinks Media Buyco, LLC |
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Integrative Nutrition, LLC |
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(PIK |
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ITI Holdings, Inc. (Revolver) |
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ITI Holdings, Inc. (Revolver) (7), (9) |
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— |
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|||
Inventus Power, Inc. |
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Inventus Power, Inc. - Unfunded Revolver (9) |
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( |
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Keel Platform, LLC |
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Keel Platform, LLC - Unfunded Term Loan (9) |
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— |
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— |
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||||
Kinetic Purchaser, LLC |
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Kinetic Purchaser, LLC (Revolver) (7) |
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— |
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— |
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— |
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— |
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|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
71
ANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
SEPTEMBER 30, 2024
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current Coupon |
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|
Basis Point |
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Par / Shares |
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Cost |
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|
Fair Value (2) |
|
|||||
Lash OpCo, LLC |
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$ |
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$ |
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|||||||||
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(PIK |
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|||||
Lash OpCo, LLC (Revolver) (7) |
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(PIK |
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|||||
Lash OpCo, LLC (Revolver) (7), (9) |
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— |
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— |
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— |
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( |
) |
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(PIK |
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|||||
LAV Gear Holdings, Inc. |
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LAV Gear Holdings, Inc. (Revolver) (7) |
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Ledge Lounger, Inc. |
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Ledge Lounger, Inc. (Revolver) |
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(PIK |
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Ledge Lounger, Inc. (Revolver) (7), (9) |
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— |
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— |
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— |
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( |
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Lightspeed Buyer Inc. |
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Lightspeed Buyer Inc. (Revolver) (7), (9) |
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— |
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— |
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— |
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— |
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|||
LJ Avalon Holdings, LLC |
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|||||||||
LJ Avalon Holdings, LLC - Unfunded Term Loan (9) |
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— |
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— |
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— |
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||||
LJ Avalon Holdings, LLC (Revolver) (7), (9) |
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— |
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— |
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— |
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— |
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|||
Loving Tan Intermediate II, Inc. |
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|||||||||
Loving Tan Intermediate II, Inc. - Unfunded Term Loan (9) |
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— |
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— |
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— |
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( |
) |
|||
Loving Tan Intermediate II, Inc. (Revolver) |
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|||||||||
Loving Tan Intermediate II, Inc. - Unfunded Revolver (9) |
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— |
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— |
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— |
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( |
) |
|||
LSF9 Atlantis Holdings, LLC |
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|||||||||
Lucky Bucks, LLC - First-out Term Loan |
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|||||||||
Lucky Bucks, LLC - Last-out Term Loan |
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|||||||||
MAG DS Corp. |
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|||||||||
MBS Holdings, Inc. - Funded Revolver |
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|||||||||
MBS Holdings, Inc. (Revolver) (7), (9) |
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— |
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— |
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— |
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— |
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|||
MDI Buyer, Inc. |
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|||||||||
MDI Buyer, Inc. (Revolver) |
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|||||||||
MDI Buyer, Inc. (Revolver) (7), (9) |
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— |
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— |
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— |
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— |
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|||
Meadowlark Acquirer, LLC |
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|||||||||
Meadowlark Acquirer, LLC (Revolver) (9) |
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— |
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— |
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— |
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( |
) |
|||
Medina Health, LLC |
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|||||||||
Medina Health, LLC (Revolver) (9) |
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— |
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— |
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— |
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— |
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|||
Megawatt Acquisitionco, Inc. |
|
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|||||||||
Megawatt Acquisitionco, Inc. - Funded Revolver |
|
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|
|||||||||
Megawatt Acquisitionco, Inc. - (Revolver) (9) |
|
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|
— |
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— |
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|
— |
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( |
) |
|||
Michael Baker International, LLC |
|
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|
|||||||||
Mission Critical Electronics, Inc. |
|
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|
|||||||||
Mission Critical Electronics, Inc. (Revolver) (7), (9) |
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— |
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— |
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— |
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|
— |
|
|||
MOREGroup Holdings, Inc. |
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|
|||||||||
MOREGroup Holdings, Inc. - Unfunded Term Loan (9) |
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|
— |
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|
— |
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|
— |
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|
( |
) |
|||
MOREGroup Holdings, Inc. - (Revolver) (9) |
|
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— |
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— |
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|
— |
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|
( |
) |
|||
Municipal Emergency Services, Inc. |
|
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|
|||||||||
Municipal Emergency Services, Inc. - Term Loan B |
|
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|
|||||||||
Municipal Emergency Services, Inc. - Unfunded Term Loan (9) |
|
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|
— |
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|
— |
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|
— |
|
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|
||||
Municipal Emergency Services, Inc. - Unfunded Term Loan B (9) |
|
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|
— |
|
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|
— |
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|
— |
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|
— |
|
|||
Municipal Emergency Services, Inc. (Revolver) (7), (9) |
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|
— |
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|
— |
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|
— |
|
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|
— |
|
|||
NBH Group LLC (Revolver) (7), (9) |
|
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|
— |
|
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|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
NFS - CFP Holdings LLC |
|
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|
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|
|
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|
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|
|||||||||
NFS - CFP Holdings LLC - Unfunded Term Loan (9) |
|
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|
— |
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|
— |
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|
— |
|
|
|
— |
|
|||
NFS - CFP Holdings LLC - Unfunded Revolver (9) |
|
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|
— |
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|
— |
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|
— |
|
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|
— |
|
|||
NORA Acquisition, LLC |
|
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|
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|
|||||||||
NORA Acquisition, LLC (Revolver) (7), (9) |
|
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|
— |
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|
— |
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— |
|
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— |
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|||
Omnia Exterior Solutions, LLC |
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Omnia Exterior Solutions, LLC - Unfunded Term Loan (9) |
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— |
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— |
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— |
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( |
) |
|||
Omnia Exterior Solutions, LLC - Unfunded Term Loan (9) |
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— |
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— |
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— |
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( |
) |
|||
Omnia Exterior Solutions, LLC (Revolver) (7), (9) |
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— |
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— |
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— |
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( |
) |
|||
One Stop Mailing, LLC |
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ORL Acquisition, Inc. |
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(PIK |
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|||||
ORL Acquisition, Inc. (Revolver) (7), (9) |
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— |
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— |
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— |
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( |
) |
|||
OSP Embedded Purchaser, LLC |
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OSP Embedded Purchaser, LLC (Revolver) (9) |
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— |
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— |
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— |
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( |
) |
|||
Outcomes Group Holdings, Inc |
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|||||||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
72
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
SEPTEMBER 30, 2024
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current Coupon |
|
|
Basis Point |
|
|
Par / Shares |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
Output Services Group, Inc. - First-out Term Loan |
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$ |
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|
$ |
|
|||||||||
Output Services Group, Inc. - Last-out Term Loan |
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Owl Acquisition, LLC |
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Ox Two, LLC |
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Ox Two, LLC (Revolver) |
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— |
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— |
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— |
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— |
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|||
Pacific Purchaser, LLC |
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Pacific Purchaser, LLC - Unfunded Term Loan (9) |
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— |
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— |
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— |
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||||
Pacific Purchaser, LLC - (Revolver) (9) |
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— |
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— |
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— |
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( |
) |
|||
PAR Excellence Holdings, Inc. |
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PAR Excellence Holdings, Inc. - Unfunded Revolver (9) |
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— |
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— |
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— |
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— |
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|||
PCS Midco, Inc. |
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PCS Midco, Inc. - Unfunded Term Loan (9) |
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— |
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— |
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— |
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||||
PCS Midco, Inc. - Revolver |
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PCS Midco, Inc. - (Revolver) (9) |
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— |
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— |
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— |
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— |
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|||
PH Beauty Holdings III, Inc. |
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PL Acquisitionco, LLC |
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(PIK |
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|||||
PL Acquisitionco, LLC - (Revolver) (9) |
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— |
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— |
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— |
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( |
) |
|||
PlayPower, Inc. |
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|||||||||
PlayPower, Inc. - Unfunded Revolver (9) |
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— |
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— |
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— |
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( |
) |
|||
Pragmatic Institute, LLC (Revolver), (5) |
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(PIK |
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|||||
Quantic Electronics, LLC |
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|||||||||
Quantic Electronics, LLC - Funded revolver |
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|||||||||
Quantic Electronics, LLC (Revolver) (7), (9) |
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— |
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— |
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— |
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( |
) |
|||
Rancho Health MSO, Inc. - Unfunded Term Loan (9) |
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— |
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— |
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— |
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||||
Rancho Health MSO, Inc. (Revolver) (7) |
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|||||||||
Rancho Health MSO, Inc. (Revolver) (7), (9) |
|
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— |
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— |
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— |
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— |
|
|||
Recteq, LLC |
|
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|||||||||
Recteq, LLC (Revolver) (7), (9) |
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— |
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— |
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— |
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( |
) |
|||
Riverpoint Medical, LLC |
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|||||||||
Riverpoint Medical, LLC (Revolver) (7) |
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|
|||||||||
Riverpoint Medical, LLC (Revolver) (7), (9) |
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|
— |
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— |
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— |
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— |
|
|||
RRA Corporate, LLC |
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|
|||||||||
RRA Corporate, LLC - Unfunded Term Loan 1 (9) |
|
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|
— |
|
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|
— |
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|
— |
|
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|
— |
|
|||
RRA Corporate, LLC - Unfunded Term Loan 2 (9) |
|
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|
— |
|
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|
— |
|
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|
— |
|
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|
— |
|
|||
RRA Corporate, LLC - Funded Revolver |
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|
|||||||||
RRA Corporate, LLC - Unfunded Revolver (9) |
|
|
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|
— |
|
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|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
RTIC Subsidiary Holdings, LLC |
|
|
|
|
|
|
|
|
|
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|
|
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|
|||||||||
RTIC Subsidiary Holdings, LLC - Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
|
|
|
|
|
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|
|
|
|
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|
|||||||||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Safe Haven Defense US LLC |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|||||||||
Safe Haven Defense US LLC - Unfunded Revolver (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Sales Benchmark Index LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sales Benchmark Index LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Sargent & Greenleaf Inc. |
|
|
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|
|
|
|
|
|
|
|
|
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|
|||||||||
|
|
|
|
|
|
(PIK |
|
|
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|
|
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|
|||||
Sargent & Greenleaf Inc. (Revolver) |
|
|
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|
|
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|
|||||||||
|
|
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|
(PIK |
|
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|
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|
|||||
Sargent & Greenleaf Inc. (Revolver) (9) |
|
|
|
|
— |
|
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|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Schlesinger Global, Inc. |
|
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|
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|
|||||||||
|
|
|
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|
|
(PIK |
|
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|
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|
|||||
Schlesinger Global, Inc. (Revolver) |
|
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|
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|
|||||||||
|
|
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|
(PIK |
|
|
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|
|
|
|
|
|
|||||
Schlesinger Global, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Seaway Buyer, LLC |
|
|
|
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|
|
|
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|
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|
|
|
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|
|||||||||
Sigma Defense Systems, LLC |
|
|
|
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|
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|
|
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|
|
|
|
|
|
|||||||||
Sigma Defense Systems, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Simplicity Financial Marketing Group Holdings Inc. |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|||||||||
Simplicity Financial Marketing Group Holdings Inc. - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Simplicity Financial Marketing Group Holdings Inc. - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Skopima Consilio Parent, LLC |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|||||||||
Smartronix, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Smartronix, LLC - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
73
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
September 30, 2024
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current Coupon |
|
|
Basis Point |
|
|
Par / Shares |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
Smile Brands Inc. |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Smile Brands Inc. (Revolver) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
(PIK |
|
|
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|
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|
|
|
|
|
|
|
|
|||||
Smile Brands Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Smile Brands Inc. LC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Solutionreach, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Solutionreach, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Spendmend Holdings LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Spendmend Holdings LLC - Unfunded Term Loan (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Spendmend Holdings LLC (Revolver) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Spendmend Holdings LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Summit Behavioral Healthcare, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
System Planning and Analysis, Inc. - Funded Revolver |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
System Planning and Analysis, Inc. - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
S101 Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
S101 Holdings, Inc. - Unfunded Term Loan 2 (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
TCG 3.0 Jogger Acquisitionco, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
TCG 3.0 Jogger Acquisitionco, Inc. - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Team Services Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Teneo Holdings, LLC - Initial Term Loans |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Bluebird Group LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Bluebird Group LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
The Vertex Companies, LLC (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Vertex Companies, LLC (Revolver) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Vertex Companies, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
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( |
) |
|||
TPC US Parent, LLC |
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TPCN Midco, LLC |
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TPCN Midco, LLC - Unfunded Term Loan (9) |
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— |
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— |
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— |
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( |
) |
|||
TPCN Midco, LLC - Unfunded Revolver (9) |
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— |
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— |
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— |
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( |
) |
|||
TransGo, LLC |
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TransGo, LLC (Revolver) (7), (9) |
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— |
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— |
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— |
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— |
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|||
TWS Acquisition Corporation |
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TWS Acquisition Corporation (Revolver) (7), (9) |
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— |
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— |
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— |
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— |
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|||
Tyto Athene, LLC |
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Urology Management Holdings, Inc. |
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|||||||||
Urology Management Holdings, Inc. - Unfunded Term Loan (9) |
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— |
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— |
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— |
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( |
) |
|||
Walker Edison Furniture, LLC - Term Loan (11) |
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— |
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— |
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|||||
Walker Edison Furniture Company, LLC - Unfunded Term Loan (11) |
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— |
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— |
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— |
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( |
) |
|||
Walker Edison Furniture Company, LLC - Funded Junior Revolver (11) |
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— |
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— |
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Watchtower Intermediate, LLC |
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|||||||||
Watchtower Intermediate, LLC - Unfunded Term Loan (9) |
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— |
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— |
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— |
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||||
Watchtower Intermediate, LLC (Revolver) (9) |
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— |
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— |
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— |
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( |
) |
|||
Wildcat Buyerco, Inc. |
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|||||||||
Wildcat Buyerco, Inc. - Unfunded Term Loan (9) |
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— |
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— |
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— |
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||||
Wildcat Buyerco, Inc. (Revolver) (7), (9) |
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— |
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— |
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— |
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— |
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|||
Wrench Group, LLC |
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Zips Car Wash, LLC |
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|||||||||
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|
(PIK |
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|||||
Total First Lien Secured Debt |
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|
|
|
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|
|
|
|||||
Subordinate Debt - 0.3% |
|
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|
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|
|||||
Beacon Behavioral Holdings LLC |
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— |
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|||||||
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|
(PIK |
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|||||
ORL Holdco, Inc. - Convertible Notes |
|
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— |
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|||||||
ORL Holdco, Inc. - Unfunded Convertible Notes (9) |
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— |
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— |
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— |
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( |
) |
|||
Schlesinger Global, LLC - Promissory Note |
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|||||||||
StoicLane, Inc. - Convertible Notes |
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— |
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|
|||||||
StoicLane, Inc. - Unfunded Convertible Notes (9) |
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— |
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— |
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— |
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— |
|
|||
Total Subordinate Debt |
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|||||
Preferred Equity - 2.1% (6) |
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|||||
Accounting Platform Blocker, Inc -. Preferred Equity |
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— |
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— |
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|
||||
Ad.net Holdings, Inc. |
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— |
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— |
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|
||||
AFC Acquisitions, Inc. (Preferred) (8) |
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— |
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— |
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|
||||
Anteriad Holdings, LP (f/k/a MeritDirect Holdings, LP) (7), (8) |
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— |
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— |
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|
||||
Cartessa Aesthetics, LLC (Preferred) (8) |
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— |
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— |
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|
|
|
||||
C5MI Holdco, LLC. - Preferred Equity (8) |
|
|
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— |
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— |
|
|
|
|
|
|
|
|
|
|
||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
74
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
September 30, 2024
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current Coupon |
|
|
Basis Point |
|
|
Par / Shares |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
EvAL Home Health Solutions, LLC - Preferred Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
$ |
|
|
$ |
|
||||
Gauge Schlesinger Coinvest LLC (Preferred Equity) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
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|
|
|
|
|
||||
Hancock Claims Consultants Investors, LLC (Preferred Equity) (8) |
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|
— |
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|
— |
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|
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|
||||
Imagine Topco, LP |
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— |
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|
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|
||||||
Magnolia Topco LP - Class A Preferred Equity (8) |
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|
— |
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— |
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|
||||
Magnolia Topco LP - Class B Preferred Equity (8) |
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— |
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— |
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— |
|
|||
Megawatt Acquisition Partners, LLC - Preferred A Equity |
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|
— |
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— |
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|
||||
NXOF Holdings, Inc. (Tyto Athene, LLC) (7) |
|
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|
— |
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— |
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|
||||
ORL Holdco, Inc. (7) |
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|
|
— |
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— |
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|
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|
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|
||||
PL Acquisitionco, LLC (Preferred Equity) |
|
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|
|
— |
|
|
|
— |
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|
|
|
— |
|
|||
RTIC Parent Holdings, LLC - Class A Preferred Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
RTIC Parent Holdings, LLC - Class C Preferred Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
RTIC Parent Holdings, LLC - Class D Preferred Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TPC Holding Company, LP (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TWD Parent Holdings, LLC (The Vertex Companies, LLC) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
UniTek Global Services, Inc. - Super Senior Preferred Equity (7) |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||
UniTek Global Services, Inc. - Senior Preferred Equity (7) |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||||
UniTek Global Services, Inc. (7) |
|
|
|
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||||
Total Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Common Equity/Warrants - 15.9% (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
A1 Garage Equity, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
ACP Big Top Holdings, L.P. - Common Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Ad.net Holdings, Inc. (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Aechelon InvestCo, LP - Common Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Aechelon InvestCo, LP - Unfunded (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Aftermarket Drivetrain Products Holdings, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
AG Investco LP (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
AG Investco LP (7), (8), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Altamira Intermediate Company II, Inc. (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Anteriad Holdings, LP (f/k/a MeritDirect Holdings, LP) (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Athletico Holdings, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
BioDerm Holdings, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Burgess Point Holdings, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
By Light Investco LP (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Carisk Parent, L.P. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Carnegie HoldCo, LLC - Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Connatix Parent, LLC (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Consello Pacific Aggregator, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Crane 1 Acquisition Parent Holdings, L.P. (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
C5MI Holdco, LLC. - Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
DUGGAL EQUITY, LP – Common Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
eCommission Holding Corporation (7), (10) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
EDS Topco, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Exigo, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
FedHC InvestCo LP (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
FedHC InvestCo LP (7), (8), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Five Star Parent Holdings, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge ETE Blocker, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Lash Coinvest LLC (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Loving Tan, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Schlesinger Coinvest LLC (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
GCOM InvestCo LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
GGG Topco, LLC – Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
GMP Hills, L.P. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Hancock Claims Consultants Investors, LLC (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
HPA SPQ Aggregator LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
HV Watterson Holdings, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Icon Partners V C, L.P. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Icon Partners V C, L.P. (7), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
IIN Group Holdings, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
Imagine Topco, LP (Common) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
IHS Parent Holdngs, L.P. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Ironclad Holdco, LLC (Applied Technical Services, LLC) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
ITC Infusion Co-invest, LP (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Kinetic Purchaser, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
KL Stockton Co-Invest LP (Any Hour Services) (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
LEP Pequod Holdings, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Lightspeed Investment Holdco LLC (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
LJ Avalon, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Lucky Bucks, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Magnolia Topco LP - Class A Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Magnolia Topco LP - Class B Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
MDI Aggregator, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Meadowlark Title, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
Megawatt Acquisition Partners, LLC - Common A Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Municipal Emergency Services, Inc. (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
75
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
September 30, 2024
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current Coupon |
|
|
Basis Point |
|
|
Par / Shares |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
NEPRT Parent Holdings, LLC (Recteq, LLC) (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
$ |
|
|
$ |
|
||||
New Insight Holdings, Inc. - Common Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
New Medina Health, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
NFS - CFP Holdings LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
NORA Parent Holdings, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
North Haven Saints Equity Holdings, LP (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
NXOF Holdings, Inc. (Tyto Athene, LLC) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
OceanSound Discovery Equity, LP (Holdco Sands Intermediate, LLC) (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
OES Co-Invest, LP - Class A Common Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
OHCP V BC COI, L.P. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
OHCP V BC COI, L.P. (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
( |
) |
|||
ORL Holdco, Inc |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
OSP Embedded Aggregator, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Output Services Group, Inc. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
PAR Excellence Holdings, Inc. - Common Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
PCS Parent, LP - Common Equity |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
PennantPark-TSO Senior Loan Fund, LP (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Pink Lily Holdco, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Pragmatic Institute, LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Quad (U.S.) Co-Invest, L.P. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
QuantiTech InvestCo LP (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|||||
QuantiTech InvestCo LP (7), (8), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
QuantiTech InvestCo II LP (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
RFMG Parent, LP (Rancho Health MSO, Inc.) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Safe Haven Defense MidCo, LLC - Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SBI Holdings Investments LLC (Sales Benchmark Index LLC) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Seaway Topco, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SP L2 Holdings, LLC (Ledge Lounger, Inc.) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SSC Dominion Holdings, LLC - Class B (US Dominion, Inc.) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
StellPen Holdings, LLC (CF512, Inc.) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SV Aero Holdings, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TAC LifePort Holdings, LLC (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TCG 3.0 Jogger Co-Invest, LP |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC) (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC) (8), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|||||
TPC Holding Company, LP (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TPCN Holdings, LLC - Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TWD Parent Holdings, LLC (The Vertex Companies, LLC) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
UniTek Global Services, Inc.(C) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
UniVista Insurance (7), (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Urology Partners Co., L.P. |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Walker Edison Holdco LLC |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Watchtower Holdings, LLC (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
WCP IvyRehab Coinvestment, LP (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
WCP IvyRehab QP CF Feeder, LP (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
WCP Ivyrehab QP CF Feeder, LP. - Unfunded (8), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Wildcat Parent, LP (Wildcat Buyerco, Inc.) (7) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
UniTek Global Services, Inc.(W) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Kentucky Racing Holdco, LLC (Warrants) (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Total Common Equity/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Investments in Controlled, Affiliated Portfolio Companies - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
First Lien Secured Debt - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Marketplace Events, LLC - Super Priority First Lien Term Loan (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Marketplace Events, LLC - Super Priority First Lien (7) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Marketplace Events, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
PennantPark Senior Secured Loan Fund I LLC (7), (10) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity Interests - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
New MPE Holdings, LLC - Common Equity (8) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
PennantPark Senior Secured Loan Fund I LLC (7), (10) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Total Equity Interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Investments in Controlled, Affiliated Portfolio Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Investments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and Cash Equivalents - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Money Market - BlackRock Federal FD Institutional 81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Non-Money Market Cash |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total Investments and Cash Equivalents - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||||
Liabilities in Excess of Other Assets - ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||||
Net Assets - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
76
Note: All investments are in US Companies unless noted otherwise.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
77
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 2023
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par / |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
Investments in Non-Controlled, Non-Affiliated Portfolio Companies— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
First Lien Secured Debt— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
A1 Garage Merger Sub, LLC |
|
|
|
|
% |
|
|
|
|
|
|
$ |
|
|
$ |
|
||||||||
A1 Garage Merger Sub, LLC - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
A1 Garage Merger Sub, LLC LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Ad.net Acquisition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ad.net Acquisition, LLC (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ad.net Acquisition, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Amsive Holding Corporation (f/k/a Vision Purchaser Corporation) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan |
|
|
|
|
% |
|
|
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|
|
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|
||||||||
Anteriad, LLC (f/k/a MeritDirect, LLC) (Revolver) (7), (9) |
|
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|
— |
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|
— |
|
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|
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— |
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( |
) |
|||
Any Hour Services |
|
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|
% |
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|
||||||||
Any Hour Services (Revolver) (7), (9) |
|
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— |
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— |
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— |
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( |
) |
|||
Apex Service Partners, LLC |
|
|
|
|
% |
|
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|
||||||||
Apex Service Partners, LLC Term Loan B |
|
|
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|
% |
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|
||||||||
Apex Service Partners, LLC Term Loan C |
|
|
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|
% |
|
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|
||||||||
Apex Service Partners, LLC (Revolver) (7) |
|
|
|
|
% |
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|
||||||||
Apex Service Partners, LLC (Revolver) (7), (9) |
|
|
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|
— |
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— |
|
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— |
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( |
) |
|||
Applied Technical Services, LLC |
|
|
|
|
% |
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|
||||||||
Applied Technical Services, LLC (Unfunded Term Loan) |
|
|
|
|
— |
|
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|
— |
|
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|
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|
|
— |
|
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( |
) |
|||
Applied Technical Services, LLC (Revolver) (7) |
|
|
|
|
% |
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|
||||||||
Applied Technical Services, LLC (Revolver) (7), (9) |
|
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— |
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— |
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|
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— |
|
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( |
) |
|||
Arcfield Acquisition Corp. |
|
|
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|
% |
|
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|
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|
||||||||
Arcfield Acquisition Corp. (Revolver) (9) |
|
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|
— |
|
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|
— |
|
|
|
|
|
|
— |
|
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( |
) |
|||
Beta Plus Technologies, Inc. |
|
|
|
|
% |
|
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|
|
|
|
|
|
|
|
||||||||
BioDerm, Inc. (Revolver) (7) |
|
|
|
|
% |
|
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|
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|
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|
||||||||
BioDerm, Inc. (Revolver) (9) |
|
|
|
|
— |
|
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|
— |
|
|
|
|
|
|
— |
|
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|
( |
) |
|||
Blackhawk Industrial Distribution, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Blackhawk Industrial Distribution, Inc. - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Blackhawk Industrial Distribution, Inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Blackhawk Industrial Distribution, Inc. (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Broder Bros., Co. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
By Light Professional IT Services, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
By Light Professional IT Services, LLC (Revolver) (7)(9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Cadence Aerospace, LLC (7) |
|
|
|
|
% |
|
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|
||||||||
|
|
|
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|
|
(PIK |
|
|
|
|
|
|
|
|
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|
|||||
Cartessa Aesthetics, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cartessa Aesthetics, LLC (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cartessa Aesthetics, LLC (Revolver) (7)(9) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
- |
|
||||
CF512, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
CF512, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
CHA Holdings, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Challenger Performance Optimization, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Compex Legal Services, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Compex Legal Services, Inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Compex Legal Services, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
Connatix Buyer, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Connatix Buyer, Inc. (7), (9) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
Crane 1 Services, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Crane 1 Services, Inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Crane 1 Services, Inc. (Revolver) (7) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
Dr. Squatch, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Dr. Squatch, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
DRS Holdings III, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
DRS Holdings III, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
Duraco Specialty Tapes LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
ECL Entertainment, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
eCommission Financial Services, Inc. (10) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
eCommission Financial Services, Inc. (Revolver) (7), (9), (10) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
EDS Buyer, LLC - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
EDS Buyer, LLC. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Efficient Collaborative Retail Marketing Company, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
ETE Intermediate II, LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Exigo Intermediate II, LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Five Star Buyer, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Five Star Buyer, Inc. - DDTL B Unfunded |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Five Star Buyer, Inc. (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
78
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
SEPTEMBER 30, 2023
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par / |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
Gauge ETE Blocker, LLC - Promissory Note |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
$ |
|
|
$ |
|
||||||
Global Holdings InterCo LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Graffiti Buyer, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Graffiti Buyer, Inc. (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Graffiti Buyer, Inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Graffiti Buyer, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Hancock Roofing and Construction L.L.C. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hancock Roofing and Construction L.L.C. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Hancock Roofing and Construction L.L.C. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Holdco Sands Intermediate, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Holdco Sands Intermediate, LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
HW Holdco, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
HW Holdco, LLC (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
HW Holdco, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
IG Investments Holdings, LLC (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
IG Investments Holdings, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Imagine Acquisitionco, LLC (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Imagine Acquisitionco, LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Inception Fertility Ventures, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Infinity Home Services Holdco, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Infinity Home Services Holdco, Inc. - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Infinity Home Services Holdco, Inc. (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Infolinks Media Buyco, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Infolinks Media Buyco, LLC- Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||||
Integrated Data Services (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Integrative Nutrition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Integrity Marketing Acquisition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Integrity Marketing Acquisition, LLC - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Integrity Marketing Acquisition, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
ITI Holdings, Inc. (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
ITI Holdings, Inc. (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Inventus Power, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Inventus Power, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
K2 Pure Solutions NoCal, L.P. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Kinetic Purchaser, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Kinetic Purchaser, LLC - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Lash OpCo, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Lash OpCo, LLC (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Lash OpCo, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
LAV Gear Holdings, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
LAV Gear Holdings, Inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Ledge Lounger, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ledge Lounger, Inc. (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Lightspeed Buyer Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Lightspeed Buyer Inc. (Revolver) (7) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
LJ Avalon Holdings, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
LJ Avalon Holdings, LLC - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
LJ Avalon Holdings, LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Loving Tan Intermediate II, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loving Tan Intermediate II, Inc. (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loving Tan Intermediate II, Inc. (Revolver)(7)(9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Lucky Bucks, LLC (11) |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||
Lucky Bucks, LLC - DIP |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
MAG DS Corp. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Mars Acquisition Holdings Corp. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Mars Acquisition Holdings Corp. (Revolver)(7)(9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
MBS Holdings, Inc. (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
MBS Holdings, Inc. (Revolver)(7)(9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
MDI Buyer, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
MDI Buyer, inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
MDI Buyer, inc. (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Meadowlark Acquirer, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Meadowlark Acquirer, LLC - Term Loan I (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Meadowlark Acquirer, LLC - Term Loan II (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Meadowlark Acquirer, LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Mission Critical Electronics, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Mission Critical Electronics, Inc. (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
79
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
SEPTEMBER 30, 2023
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par / |
|
|
Cost |
|
|
Fair Value (2) |
|
|||||
Mission Critical Electronics, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Municipal Emergency Services, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Municipal Emergency Services, Inc. - Unfunded Term Loan A |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Municipal Emergency Services, Inc. - Unfunded Term Loan B |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Municipal Emergency Services, Inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Municipal Emergency Services, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Neptune Flood Incorporated - Revolver Unfunded |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
NBH Group LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
NORA Acquisition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
NORA Acquisition, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
One Stop Mailing, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
ORL Acquisition, Inc. (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
ORL Acquisition, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Output Services Group, Inc. (11) |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||||
Owl Acquisition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ox Two, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Ox Two, LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Pequod Merger Sub, Inc. - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Pequod Merger Sub, Inc (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
PL Acquisitionco, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
PL Acquisitionco, LLC - (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
PlayPower, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Pragmatic Institute, LLC - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Pragmatic Institute, LLC (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Quantic Electronics, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Quantic Electronics, LLC (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Questex, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Questex, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Rancho Health MSO, Inc. (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Rancho Health MSO, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Recteq, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Recteq, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Research Now Group, Inc. and Dynata, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Riverpoint Medical, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Riverpoint Medical, LLC (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Riverpoint Medical, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Riverside Assessments, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Sales Benchmark Index LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sales Benchmark Index LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Sargent & Greenleaf Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sargent & Greenleaf Inc. (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sargent & Greenleaf Inc. (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Schlesinger Global, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Schlesinger Global, Inc. (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Schlesinger Global, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Seaway Buyer, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sigma Defense Systems, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sigma Defense Systems, LLC (Revolver) (7) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Sigma Defense Systems, LLC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Signature Systems Holding Company |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Signature Systems Holding Company (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|||
Skopima Consilio Parent, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Smile Brands Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Smile Brands Inc. (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Smile Brands Inc. LC (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Solutionreach, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Solutionreach, Inc. (Revolver) (7), (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Spendmend Holdings LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Spendmend Holdings LLC - Unfunded Term Loan |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Spendmend Holdings LLC (Revolver) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
Spendmend Holdings LLC (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
STV Group Incorporated |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
System Planning and Analysis, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
System Planning and Analysis, Inc. (Revolver) (9) |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
|||
Teneo Holdings LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
80
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
SEPTEMBER 30, 2023
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par / |
|
|
Cost |
|
|
Fair Value (2) |
|
||||||
The Aegis Technologies Group, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Bluebird Group LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Bluebird Group LLC (Revolver) (7), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
The Vertex Companies, LLC (7) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Vertex Companies, LLC (Revolver) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Vertex Companies, LLC (Revolver) (7), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
TPC Canada Parent, Inc. and TPC US Parent, LLC (5), (10) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
TWS Acquisition Corporation |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
TWS Acquisition Corporation (Revolver) (7), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
Tyto Athene, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Tyto Athene, LLC (Revolver) (7), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
Walker Edison Furniture, LLC - Term Loan |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Walker Edison Furniture Company, LLC - Funded Junior Revolver |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Walker Edison Furniture Company, LLC - Unfunded Term Loan |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
Wildcat Buyerco, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Wildcat Buyerco, Inc. (Revolver) (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
||||
Zips Car Wash, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Second Lien Secured Debt— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Mailsouth Inc. (11) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
- |
|
|||||
QuantiTech LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total Second Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Preferred Equity— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Ad.net Holdings, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Anteriad Holdings, LP (f/k/a MeritDirect Holdings, LP) (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Cartessa Aesthetics, LLC (Preferred) (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Lash Coinvest LLC (Preferred) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Schlesinger Coinvest LLC (Preferred Equity) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Imagine Topco, LP |
|
|
— |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Magnolia Topco LP - Class A Preferred Equity (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Magnolia Topco LP - Class B Preferred Equity (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Mars Intermediate Holdings II, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
NXOF Holdings, Inc. (Tyto Athene, LLC) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
ORL Holdco, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
- |
|
|||
PL Acquisitionco, LLC (Preferred Equity) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Signature CR Intermediate Holdco, Inc. (7) |
|
|
— |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
TPC Holding Company, LP (5), (7), (8), (10) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TWD Parent Holdings, LLC (The Vertex Companies, LLC) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
UniTek Global Services, Inc. - |
|
|
— |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Super Senior Preferred Equity (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
UniTek Global Services, Inc. - Senior Preferred Equity (7) |
|
|
— |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||||
UniTek Global Services, Inc. (7) |
|
|
— |
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
||||
Total Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Common Equity/Warrants— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
A1 Garage Equity, LLC(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Ad.net Holdings, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
Affinion Group Holdings, Inc. (Warrants) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||||
AG Investco LP (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
AG Investco LP (7), (8), (9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Altamira Intermediate Company II, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Anteriad Holdings, LP (f/k/a MeritDirect Holdings, LP) (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Athletico Holdings, LLC (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
BioDerm Holdings, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Burgess Point Holdings, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
By Light Investco LP (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Connatix Parent, LLC (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Crane 1 Acquisition Parent Holdings, L.P. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8),(9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
eCommission Holding Corporation (7), (10) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
EDS Topco, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Exigo, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
FedHC InvestCo LP (7),(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
FedHC InvestCo LP (7),(8),(9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Five Star Parent Holdings, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge ETE Blocker, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Lash Coinvest LLC (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Loving Tan, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge Schlesinger Coinvest LLC (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Gauge TVC Coinvest, LLC (TVC Enterprises, LLC) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
GCOM InvestCo LP (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Go Dawgs Capital III, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
(American Insulated Glass, LLC) (7), (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Hancock Claims Consultants Investors, LLC (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
HPA SPQ Aggregator LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
HV Watterson Holdings, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Icon Partners V C, L.P. |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
81
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
SEPTEMBER 30, 2023
(in thousands, except share data)
Issuer Name |
|
Maturity |
|
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par / |
|
|
Cost |
|
|
Fair Value (2) |
|
||||||
Icon Partners V C, L.P. (7), (9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
||
IIN Group Holdings, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
(Integrative Nutrition, LLC) (7), (8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Imagine Topco, LP (Common) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
IHS Parent Holdngs, L.P. |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Ironclad Holdco, LLC (Applied Technical Services, LLC) (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
ITC Infusion Co-invest, LP (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
ITC Rumba, LLC (Cano Health, LLC) (7),(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Kentucky Racing Holdco, LLC (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Kinetic Purchaser, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
KL Stockton Co-Invest LP (Any Hour Services) (7),(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Lightspeed Investment Holdco LLC (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
LJ Avalon, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Magnolia Topco LP - Class A Common Equity (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Magnolia Topco LP - Class B Common Equity (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Mars Intermediate Holdings II, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
MDI Aggregator, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Meadowlark Title, LLC (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
MSpark, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
Municipal Emergency Services, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
NEPRT Parent Holdings, LLC (Recteq, LLC) (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
NORA Parent Holdings, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
North Haven Saints Equity Holdings, LP (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
NXOF Holdings, Inc. (Tyto Athene, LLC) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
OceanSound Discovery Equity, LP (Holdco Sands Intermediate, LLC) (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
OHCP V BC COI, L.P. |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
OHCP V BC COI, L.P. (9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
( |
) |
||
ORL Holdco, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
— |
|
|||
PennantPark-TSO Senior Loan Fund, LP (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
LEP Pequod Holdings, LP |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Pink Lily Holdco, LLC (PL Acquisitions, LLC) (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Pragmatic Institute, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Quad (U.S.) Co-Invest, L.P. |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
QuantiTech InvestCo LP (7), (8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
QuantiTech InvestCo LP (7), (8), (9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
QuantiTech InvestCo II LP (7), (8), |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
RFMG Parent, LP (Rancho Health MSO, Inc.) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SBI Holdings Investments LLC (Sales Benchmark Index LLC) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Seaway Topco, LP |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||
Signature CR Intermediate Holdco, Inc. (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SP L2 Holdings, LLC (Ledge Lounger, Inc.) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
SSC Dominion Holdings, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Class B (US Dominion, Inc.) (7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
StellPen Holdings, LLC (CF512, Inc.) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TAC LifePort Holdings, LLC (7),(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC)(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC)(8) (9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
TPC Holding Company, LP (5), (7), (8), (10) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
TWD Parent Holdings, LLC (The Vertex Companies, LLC) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
UniTek Global Services, Inc.(C) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
UniTek Global Services, Inc. (W) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
UniVista Insurance (7),(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Urology Partners Co., L.P. |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Walker Edison Holdco LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
WCP IvyRehab QP CF Feeder, LP(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
WCP IvyRehab QP CF Feeder, LP (8), (9) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||
Wildcat Parent, LP (Wildcat Buyerco, Inc.) (7) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Total Common Equity/Warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Investments in Controlled, Affiliated Portfolio Companies— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
First Lien Secured Debt— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Marketplace Events, LLC - Super Priority First Lien Term Loan (7) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Marketplace Events, LLC - Super Priority First Lien (7), (9) |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
||||
Marketplace Events, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
PennantPark Senior Secured Loan Fund I LLC (7), (9), (10) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Equity Interests— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
New MPE Holdings, LLC (Marketplace Events, LLC) (7),(8) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
PennantPark Senior Secured Loan Fund I LLC (7), (9), (10) |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
||||
Total Equity Interests |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Investments in Controlled, Affiliated Portfolio Companies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Investments— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash and Cash Equivalents— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Money Market - BlackRock Federal FD Institutional 81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Investments and Cash Equivalents— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||||
Liabilities in Excess of Other Assets—( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Net Assets— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
82
Sterling Overnight Index Average, or “SONIA.” The spread may change based on the type of rate used. The terms in the Schedule of Investments disclose the actual interest rate in effect as of the reporting period. SOFR loans are typically indexed to a 30-day, 90-day or 180-day SOFR rates (1M S, 3M S, or 6M S, respectively) at the borrower’s option. SONIA loans are typically indexed daily for GBP loans with a quarterly frequency payment. All securities are subject to a SOFR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any.
Note: All investments are in US Companies unless noted otherwise.
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
83
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
1. ORGANIZATION
PennantPark Floating Rate Capital Ltd. was organized as a Maryland corporation in October 2010. We are a closed-end, externally managed, non-diversified investment company that has elected to be treated as a BDC under the 1940 Act. On April 14, 2022, listing and trading of the Company's common stock commenced on the New York Stock Exchange after the Company voluntarily withdrew the principal listing of its common stock from the Nasdaq Stock Market LLC effective at market close on April 13, 2022.
Our investment objectives are to generate both current income and capital appreciation while seeking to preserve capital. We seek to achieve our investment objective by investing primarily in floating rate loans and other investments made to U.S. middle-market private companies whose debt is rated below investment grade. Floating rate loans pay interest at variable rates, which are determined periodically, on the basis of a floating base lending rate such as SOFR, with or without a floor, plus a fixed spread. Under normal market conditions, we generally expect that at least
We execute our investment strategy directly and through our wholly owned subsidiaries, our unconsolidated joint venture and unconsolidated limited partnership. The term "subsidiary" means entities that primarily engage in investment activities in securities or other assets are wholly owned by us. The Company does not intend to create or acquire primary control of an entity which primarily engages in investment activities of securities or other assets other than entities wholly owned by the Company. We comply with the provisions of Section 17 of the 1940 Act related to affiliated transactions and custody. To the extent that the Company forms a subsidiary advised by an investment adviser other than the Investment Adviser, the investment adviser to such subsidiaries will comply with the provisions of the 1940 Act relating to investment advisory contracts, including but not limited to, Section 15, as if it were an investment adviser to the Company under Section 2(a)(20) of the 1940 Act.
We have entered into an investment management agreement, or the Investment Management Agreement with the Investment Adviser, an external adviser that manages our day-to-day operations. We have also entered into an administration agreement, or the Administration Agreement with the Administrator, which provides the administrative services necessary for us to operate.
Funding I, our wholly-owned subsidiary and a special purpose entity, was organized in Delaware as a limited liability company in May 2011. We formed Funding I in order to establish the Credit Facility. The Investment Adviser serves as the collateral manager to Funding I and has irrevocably directed that the management fee owed with respect to such services is to be paid to us so long as the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee. The Credit Facility allows Funding I to borrow up to $
We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are subject to tax as corporations. These taxable subsidiaries allow us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.
In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. See Note 4.
In November 2017, we issued $
On February 7, 2024 the Company filed a notice with the Israel Securities Authority and the TASE voluntarily requesting to de-list the Company's common stock from trading on the TASE. The last day of trading on the TASE was May 6, 2024 and the de-listing of the Company's common stock from the TASE took effect on May 8, 2024.
In September 2019, the Securitization Issuers completed the Debt Securitization. The 2031 Asset-Backed Debt is secured by a diversified portfolio of the Securitization Issuer consisting primarily of middle market loans and participation interests in middle market loans. The 2031 Asset-Backed Debt is scheduled to mature on October 15, 2031. On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly-owned subsidiaries, the Securitization Issuer transferred to us
In July 2024, the 2031 Asset-Backed Debt was refinanced through a $
On February 22, 2024, the 2036 Securitization Issuer completed the 2036 Securitization. The 2036 Asset-Backed Debt is secured by a diversified portfolio of the 2036-Securitization Issuer consisting primarily of middle market loans and participation interests in middle market loans. The 2036 Asset-Backed Debt is scheduled to mature in April 2036. On the closing date of the 2036 Securitization, in consideration of our transfer to the 2036 Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly-owned subsidiaries. See Note 11.
In March 2021 and October 2021, we issued $
84
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
In April 2021, we formed PennantPark-TSO Senior Loan Fund LP, ("PTSF") , an unconsolidated limited partnership, organized as a Delaware limited liability partnership. We sold $
On February 4, 2022, we formed PFLT Investment Holdings II, LLC, a Delaware limited liability company ("Holdings II"), as a wholly owned subsidiary. On December 31, 2022, we contributed 100% of our interests in PFLT Investment Holdings, LLC ("Holdings") to Holdings II. Effective as of January 1, 2024, Holdings II made an election to be treated as a corporation for U.S. federal income tax purposes. On January 3, 2024, we purchased an equity interest in Holdings from Holdings II and Holdings became a partnership for U.S. federal income tax purposes. The company and Holdings II entered into a limited liability company agreement with respect to Holdings that provides for certain payments and the sharing of income, gain, loss, and deductions attributable to Holdings' investments.
In July 2024, the Company established a $
During the years ended September 30, 2024, and 2023 we issued
Since inception of the ATM Programs through September 30, 2024, we issued
We are operated by a person who has claimed an exclusion from the definition of the term “commodity pool operator” under the Commodity Exchange Act of 1936, as amended, or the Commodity Exchange Act, and, therefore, is not subject to registration or regulation as a commodity pool operator under the Commodity Exchange Act.
2. SIGNIFICANT ACCOUNTING POLICIES
The preparation of our Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, or GAAP, requires management to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of income and expenses during the reported periods. In the opinion of management, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Changes in the economic and regulatory environment, financial markets, the credit worthiness of our portfolio companies and any other parameters used in determining these estimates and assumptions could cause actual results to differ from these estimates and assumptions. We may reclassify certain prior period amounts to conform to the current period presentation. We have eliminated all intercompany balances and transactions. References to the Financial Accounting Standards Board’s, or FASB’s, Accounting Standards Codification, as amended, or ASC, serve as a single source of accounting literature. Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the Consolidated Financial Statements are issued.
Our Consolidated Financial Statements are prepared in accordance with GAAP, consistent with ASC Topic 946, Financial Services – Investment Companies, and pursuant to the requirements for reporting on Form 10-K/Q and Articles 6, 10 and 12 of Regulation S-X, as appropriate. In accordance with Article 6-09 of Regulation S-X, we have provided a Consolidated Statement of Changes in Net Assets in lieu of a Consolidated Statement of Changes in Stockholders’ Equity.
Our significant accounting policies consistently applied are as follows:
(a) Investment Valuations
We expect that there may not be readily available market values for many of the investments, which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy and a consistently applied valuation process, as described in this Report. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event to corroborate or revise our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 5.
Our portfolio generally consists of illiquid securities, including debt and equity investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:
85
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
(b) Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses
Security transactions are recorded on a trade-date basis. We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments, the Credit Facility, and the 2023 Notes during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount, or OID, market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. We record prepayment penalties earned on loans and debt investments as income. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned. Litigation settlements are accounted for in accordance with the gain contingency provisions of ASC Subtopic 450-30, Gain Contingencies, or ASC 450-30.
Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if there is reasonable doubt that principal or interest will be collected. Accrued interest is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in management’s judgment, are likely to remain current. As of September 30, 2024, we had
(c) Income Taxes
We have complied with the requirements of Subchapter M of the Code and have qualified to be treated as a RIC for federal income tax purposes. In this regard, we account for income taxes using the asset and liability method prescribed by ASC Topic 740, Income Taxes, or ASC 740. Under this method, income taxes are provided for amounts currently payable and for amounts deferred as tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of existing assets and liabilities. Based upon our qualification and election to be treated as a RIC for U.S federal income tax purposes, we typically do not incur any material federal income taxes. However, we may choose to retain a portion of our calendar year income, which may result in the imposition of a federal tax, or we may incur taxes through our taxable subsidiaries, including the Taxable Subsidiary. For the years ended September 30, 2024, 2023 ,and 2022, we recorded a provision for taxes on net investment income of $
We recognize the effect of a tax position in our Consolidated Financial Statements in accordance with ASC 740 when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by the applicable tax authority. Tax positions not considered to satisfy the “more-likely-than-not” threshold would be recorded as a tax expense or benefit. Penalties or interest, if applicable, that may be assessed relating to income taxes would be classified as other operating expenses in the financial statements. There were no tax accruals relating to uncertain tax positions and no amounts accrued for any related interest or penalties with respect to the periods presented herein. The Company’s determinations regarding ASC 740 may be subject to review and adjustment at a later date based upon factors including, but not limited to, an ongoing analysis of tax laws, regulations and interpretations thereof. Although the Company files both federal and state income tax returns, the Company’s major tax jurisdiction is federal.
The Taxable Subsidiary is subject to U.S. federal, state and local corporate income taxes. The income tax expense and related tax liabilities of the Taxable Subsidiary are reflected in the Company’s consolidated financial statements.
For the year ended September 30, 2024, the Company recognized a provision for taxes of $(
During the year ended September 30, 2024, 2023 and 2022 the Company paid
The Taxable Subsidiary, which is subject to tax as a corporation, allows us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.
86
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
The Taxable Subsidiary, which is subject to tax as a corporation, allows us to hold equity securities of certain portfolio companies treated as pass-through entities for U.S. federal income tax purposes while facilitating our ability to qualify as a RIC under the Code.Because U.S. federal income tax regulations differ from GAAP, distributions in accordance with tax regulations may differ from net investment income and net realized gains recognized for financial reporting purposes. Differences between tax regulations and GAAP may be permanent or temporary. Permanent differences are reclassified among capital accounts in the consolidated financial statements of assets and liabilities to reflect their tax character. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future.
(d) Distributions and Capital Transactions
Distributions to common stockholders are recorded on the ex-dividend date. The amount to be paid, if any, as a distribution is determined by the board of directors each quarter and is generally based upon the earnings estimated by management. Net realized capital gains, if any, may be distributed at least annually. The tax attributes for distributions will generally include ordinary income and capital gains, but may also include certain tax-qualified dividends and/or a return of capital.
Capital transactions through offerings of our common stock, are recorded when issued and offering costs are charged as a reduction of capital upon issuance of our common stock.
(e) Foreign Currency Translation
Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:
Although net assets and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair value of investments and liabilities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments and liabilities.
Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S. companies or U.S. government securities.
(f) Consolidation
As permitted under Regulation S-X and as explained by ASC paragraph 946-810-45-3, PennantPark Floating Rate Capital Ltd. will generally not consolidate its investment in a company other than an investment company wholly-owned subsidiary or a controlled operating company whose business consists of providing services to us. Accordingly, we have consolidated the results of our taxable subsidiaries, including the Taxable Subsidiary, Funding I and the Securitization Issuer in our Consolidated Financial Statements. We do not consolidate our non-controlling interest in PSSL or PTSF. See further description of our investment in PSSL in Note 4.
(g) Asset Transfers and Servicing
Asset transfers that do not meet ASC Topic 860, Transfers and Servicing, requirements for sale accounting treatment are reflected in the Consolidated Statements of Assets and Liabilities and the Consolidated Schedules of Investments as investments. The creditors of Funding I have received a security interest in all its assets and such assets are not intended to be available to the creditors of PennantPark Floating Rate Capital Ltd. or any of its affiliates.
(h) Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. FASB approved an (optional) two year extension to December 31, 2024, for transitioning away from LIBOR. The Company adopted ASU 2020-04, the effect of which was not material to the consolidated financial statements and the notes thereto.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)”, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Company has adopted the new accounting standard implementing appropriate controls and procedures, the effect of which was not material to the consolidated financial statements and the notes thereto.
In June 2022, the FASB issued Accounting Standards Update No. 2022-03, or ASU, 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions, or ASU 2022-03, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early application is permitted. The Company is currently evaluating the impact the adoption of this new accounting standard will have on its consolidated financial statements, but the impact of the adoption is not expected to be material.
In November 2023, the Financial Accounting Standards Board (FASB) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures to improve reportable segment disclosure requirements through enhanced disclosures about significant segment expenses. ASU 2023-07 expands public entities' segment disclosure by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items and interim disclosure of a reportable segment's profit or loss and assets. All disclosure requirements of ASU 2023-07 are required for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning
87
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
after December 15, 2023, and interim periods for our fiscal years beginning December 15, 2024, and should be applied on a retrospective basis to all periods presented, noting early adoption is permitted. The Company is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
In December 2023, the FASB issued ASU 2023 - 09 "Improvements to Income Tax Disclosures" ("ASU 2023 - 09"). ASU 2023 - 09 intends to improve the transparency of income tax disclosures. ASU 2023 - 09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. We are currently assessing the impact of this guidance, however, we do not expect a material impact to our financial statements.
3. AGREEMENTS AND RELATED PARTY TRANSACTIONS
(a) Investment Management Agreement
The Investment Management Agreement with the Investment Adviser was reapproved by our board of directors, including a majority of our directors who are not interested persons of us or the Investment Adviser, in May 2024. Under the Investment Management Agreement, the Investment Adviser, subject to the overall supervision of our board of directors, manages the day-to-day operations of and provides investment advisory services to us. The Investment Adviser serves as the collateral manager to Funding I and has irrevocably directed that any management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee. For providing these services, the Investment Adviser receives a fee from us consisting of two components—a base management fee and an incentive fee.
Base Management Fee
The base management fee is calculated at an annual rate of
Incentive Fee
The incentive fee has two parts, as follows:
One part is calculated and payable quarterly in arrears based on our Pre-Incentive Fee Net Investment Income for the immediately preceding calendar quarter. For this purpose, Pre-Incentive Fee Net Investment Income means interest income, dividend income and any other income, including any other fees (other than fees for providing managerial assistance), such as amendment, commitment, origination, prepayment penalties, structuring, diligence and consulting fees or other fees received from portfolio companies, accrued during the calendar quarter, minus our operating expenses for the quarter (including the base management fee, any expenses payable under the Administration Agreement and any interest expense or amendment fees under any credit facility and distribution paid on any issued and outstanding preferred stock, but excluding the incentive fee). Pre-Incentive Fee Net Investment Income includes, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income not yet received in cash. Pre-Incentive Fee Net Investment Income does not include any realized capital gains, computed net of all realized capital losses or unrealized capital appreciation or depreciation. Pre-Incentive Fee Net Investment Income, expressed as a percentage of the value of our net assets at the end of the immediately preceding calendar quarter, is compared to the hurdle rate of
The second part of the incentive fee is determined and payable in arrears as of the end of each calendar year (or upon termination of the Investment Management Agreement, as of the termination date) and equals
Under GAAP, we are required to accrue a capital gains incentive fee based upon net realized capital gains and net unrealized capital appreciation and depreciation on investments held at the end of each period. In calculating the capital gains incentive fee accrual, we considered the cumulative aggregate unrealized capital appreciation in the calculation, as a capital gains incentive fee would be payable if such unrealized capital appreciation were realized, even though such unrealized capital appreciation is not permitted to be considered in calculating the fee actually payable under the Investment Management Agreement. This accrual is calculated using the aggregate cumulative realized capital gains and losses and cumulative unrealized capital appreciation or depreciation. If such amount is positive at the end of a period, then we record a capital gains incentive fee equal to
88
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
(b) Administration Agreement
The Administration Agreement with the Administrator was reapproved by our board of directors, including a majority of the directors who are not interested persons of us, in May 2024. Under the Administration Agreement, the Administrator provides administrative services and office facilities to us. For providing these services, facilities and personnel, we have agreed to reimburse the Administrator for its allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under the Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Compliance Officer, Chief Financial Officer, Corporate Counsel and their respective staffs. The Administrator also offers, on our behalf, significant managerial assistance to portfolio companies to which we are required to offer such assistance. Reimbursement for certain of these costs is included in administrative services expenses in the Consolidated Statements of Operations. For the years ended September 30, 2024, 2023, and 2022, we recorded administrative expenses of $
On July 1, 2022, the Administration Agreement with the Administrator was amended to clarify that the Administrator may be reimbursed by the Company for certain (i) tax and general legal advice and/or services provided to the Company by in-house professionals of the Administrator related to ongoing operations of the Company; and (ii) transactional legal advice and/or services provided to the Company or portfolio companies by in-house professionals of the Administrator or its affiliates on matters related to potential or actual investments and transactions, including tax structuring and/or due diligence.
(c) Other Related Party Transactions
The Company, the Investment Adviser and certain other affiliates have been granted an order for exemptive relief by the SEC for the Company to co-invest with other funds managed by the Investment Adviser. If we co-invest with other affiliated funds, our Investment Adviser would not receive compensation except to the extent permitted by the exemptive order and applicable law, including the limitations set forth in Section 57(k) of the 1940 Act.
During the years ended September 30, 2024, 2023, and 2022, the Company made no purchases from and sold
For the years ended September 30, 2024, 2023, and 2022, we sold $
For the years ended September 30, 2024 and 2023, we sold no investments to PTSF.
As of September 30, 2024 and 2023, PFLT had payable to PSSL and PTSF of
As of September 30, 2024 and 2023, PFLT had a receivable from the Administrator of $
4. INVESTMENTS
Purchases of investments, including PIK interest, for the years ended September 30, 2024, 2023, and 2022 totaled $
Investments and cash and cash equivalents consisted of the following (in thousands):
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||||||||||
Investment Classification |
|
Cost |
|
|
Fair Value |
|
|
Cost |
|
|
Fair Value |
|
||||
First lien |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
First lien in PSSL |
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Second lien |
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Subordinated Debt |
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|
||||
Equity |
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|
||||
Equity interests in PSSL |
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|
||||
Total investments |
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|
||||
Cash and cash equivalents |
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|
||||
Total investments and cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
89
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio assets (excluding cash and cash equivalents) in such industries:
Industry Classification |
|
September 30, 2024 (1) |
|
|
September 30, 2023 (1) |
|
||
Professional Services |
|
|
% |
|
|
% |
||
Aerospace and Defense |
|
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|
|
|
|
||
Healthcare Providers and Services |
|
|
|
|
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|
||
IT Services |
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|
||
Personal Products |
|
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|
|
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|
||
Diversified Consumer Services |
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|
||
Healthcare Technology |
|
|
|
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|
||
Media |
|
|
|
|
|
|
||
Leisure Products |
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|
|
|
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|
||
Construction & Engineering |
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|
||
Distributors |
|
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|
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|
||
Electronic Equipment, Instruments, and Components |
|
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|
||
Commercial Services & Supplies |
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|
||
High Tech Industries |
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|
||
Media: Diversified and Production |
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||
Business Services |
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||
Auto Components |
|
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|
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|
||
Healthcare, Education and Childcare |
|
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||
Construction and Building |
|
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|
||
Internet Software and Services |
|
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|
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|
||
Capital Equipment |
|
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|
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|
||
Chemicals, Plastics and Rubber |
|
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|
||
Diversified Financial Services |
|
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||
Marketing Services |
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|
||
Healthcare Equipment and Supplies |
|
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||
Building Products |
|
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|
||
Hotels, Restaurants and Leisure |
|
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|
||
Consumer Services |
|
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|
||
Automobiles |
|
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|
||
Food Products |
|
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|
||
Metals and Mining |
|
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|
||
Financial Services |
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|
||
Specialty Retail |
|
|
|
|
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|
||
All Other |
|
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|
|
|
|||
Total |
|
|
% |
|
|
% |
||
PennantPark Senior Secured Loan Fund I LLC
In May 2017, we and Kemper formed PSSL, an unconsolidated joint venture. PSSL invests primarily in middle-market and other corporate debt securities consistent with our strategy. PSSL was formed as a Delaware limited liability company. As of September 30, 2024 and 2023, PSSL had total assets of $
We and Kemper provide capital to PSSL in the form of first lien secured debt and equity interests. As of September 30, 2024 and 2023, we and Kemper owned
We and Kemper each appointed two members to PSSL’s
In August 2023 PSSL entered into a $
In January 2021, PSSL completed a $
90
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
owned subsidiaries and us, PennantPark CLO II, Ltd. transferred to PSSL 100% of the Preferred Shares of PennantPark CLO II, Ltd. and 100% of the Class E Notes issued by PennantPark CLO II, Ltd.
In May 2024, PSSL completed the refinancing of the 2032 Asset-Backed Debt through a $
In April 2023, PSSL completed a $
Below is a summary of PSSL’s portfolio at fair value ($ in thousands):
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||
Total investments |
|
$ |
|
|
$ |
|
||
Weighted average cost yield on income producing investments |
|
|
% |
|
|
% |
||
Number of portfolio companies in PSSL |
|
|
|
|
|
|
||
Largest portfolio company investment |
|
$ |
|
|
$ |
|
||
Total of five largest portfolio company investments |
|
$ |
|
|
$ |
|
||
91
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Below is a listing of PSSL’s individual investments as of September 30, 2024 (par and $ in thousands):
Issuer Name (7) |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par or Number |
|
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Cost |
|
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Fair Value(2) |
|
|||
First Lien Secured Debt - |
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|
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|
|
|
|
|||
A1 Garage Merger Sub, LLC |
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||||||
ACP Avenu Buyer, LLC |
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ACP Falcon Buyer, Inc. |
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Ad.net Acquisition, LLC |
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Aeronix, Inc |
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Alpine Acquisition Corp II |
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Anteriad, LLC (f/k/a MeritDirect, LLC) |
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Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan |
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Applied Technical Services, LLC |
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Arcfield Acquisition Corp. |
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Beacon Behavioral Services, LLC |
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Beta Plus Technologies, Inc. |
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Big Top Holdings, LLC |
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BioDerm, Inc. |
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Blackhawk Industrial Distribution, Inc. |
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BlueHalo Financing Holdings, LLC |
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Broder Bros., Co. |
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Burgess Point Purchaser Corporation |
|
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By Light Professional IT Services, LLC |
|
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Carnegie Dartlet, LLC |
|
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Cartessa Aesthetics, LLC |
|
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CF512, Inc. |
|
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Confluent Health, LLC |
|
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Connatix Buyer, Inc. |
|
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Crane 1 Services, Inc. |
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Dr. Squatch, LLC |
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DRI Holding Inc. |
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DRS Holdings III, Inc. |
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|
|||||||
Dynata, LLC - First Out Term Loan (6) |
|
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Dynata, LLC - Last Out Term Loan |
|
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|||||||
ECL Entertainment, LLC |
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EDS Buyer, LLC |
|
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|
|||||||
Exigo Intermediate II, LLC |
|
|
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|
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|
|||||||
ETE Intermediate II, LLC |
|
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|
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Eval Home Solutions Intermediate, LLC |
|
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|
|||||||
Fairbanks More Defense |
|
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Global Holdings InterCo LLC |
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Graffiti Buyer, Inc. |
|
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Hancock Roofing and Construction L.L.C. |
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HEC Purchaser Corp |
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Hills Distribution, Inc |
|
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HW Holdco, LLC |
|
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|
|||||||
Imagine Acquisitionco, LLC |
|
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|||||||
Infinity Home Services Holdco, Inc. |
|
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Integrative Nutrition, LLC |
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(PIK |
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|
|||
Inventus Power, Inc. |
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ITI Holdings, Inc. |
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Kinetic Purchaser, LLC |
|
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|
|||||||
Lash OpCo, LLC |
|
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|||||||
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|
(PIK |
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|
|||
LAV Gear Holdings, Inc. (6) |
|
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|
|||||||
LAV Gear Holdings, Inc. - Term Loan Incremental |
|
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|
|||||||
Lightspeed Buyer Inc. |
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|
|||||||
LJ Avalon Holdings, LLC |
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|
|||||||
Loving Tan Intermediate II, Inc. |
|
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|
|||||||
Lucky Bucks, LLC - First-Out Term Loan (6) |
|
|
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|
|
|
|
|
|
|
|
|
|
|||||||
Lucky Bucks, LLC - Last-Out Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
MAG DS Corp |
|
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|
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|
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|
|||||||
Magenta Buyer, LLC - First-Out Term Loan |
|
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|
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|
|
|
|
|
|
|
|||||||
Magenta Buyer, LLC - Second-Out Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Magenta Buyer, LLC - Third-Out Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Marketplace Events, LLC - Super Priority First Lien Term Loan (6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3)(6) |
|
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|
|
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|
|
|
|
|
||||||
Marketplace Events, LLC (6) |
|
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|
|||||||
MBS Holdings, Inc. |
|
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|
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|
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|
|
|
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|
|||||||
MBS Holdings, Inc. (New Issue) - Incremental |
|
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|
|
|
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|
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|
|
|
|||||||
MBS Holdings, Inc. (New Issue) - Second Incremental |
|
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|
|
|
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|
|||||||
MDI Buyer, Inc. |
|
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|
|
|
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|
|||||||
MDI Buyer, Inc. - Incremental |
|
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|
|
|
|
|
|
|
|||||||
Meadowlark Acquirer, LLC |
|
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|
|
|
|
|
|
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|
|||||||
Medina Health, LLC |
|
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|
|
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|
|||||||
Megawatt Acquisitionco, Inc |
|
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|
|
|
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|
|||||||
Mission Critical Electronics, Inc. |
|
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|
|
|
|
|
|||||||
MOREGroup Holdings, Inc |
|
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|
|
|
|
|
|
|
|
|
|
|
|||||||
Municipal Emergency Services, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
92
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Issuer Name (7) |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par or Number |
|
|
Cost |
|
|
Fair Value(2) |
|
|||
NBH Group LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
NORA Acquisition, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
One Stop Mailing, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
ORL Acquisitions, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|||
Output Services Group, Inc - First-Out Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Output Services Group, Inc - Last-Out Term Loan |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Owl Acquisition, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Ox Two, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Pacific Purchaser, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
PCS Midco, Inc |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
PH Beauty Holdings III, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
PL Acquisitionco, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|||
Pragmatic Institute, LLC (5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|||
Quantic Electronics, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Rancho Health MSO, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Reception Purchaser, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Recteq, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
RTIC Subsidiary Holdings, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Safe Haven Defense US, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Sales Benchmark Index LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Sargent & Greenleaf Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|||
Schlesinger Global, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|||
Seaway Buyer, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Sigma Defense Systems, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Simplicity Financial Marketing Group Holdings, Inc |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Skopima Consilio Parent, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Smartronix, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Smile Brands Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|||
Solutionreach, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Spendmend Holdings LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Summit Behavioral Healthcare, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
TCG 3.0 Jogger Acquisitionco |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Team Services Group, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Teneo Holdings, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
The Bluebird Group LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
The Vertex Companies, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Transgo, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
TWS Acquisition Corporation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Tyto Athene, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Urology Management Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Walker Edison Furniture Company LLC (4)(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (4)(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(4)(6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Watchtower Buyer, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Wildcat Buyerco, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Zips Car Wash, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Equity Securities - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
New Insight Holdings, Inc. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Lucky Bucks, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
New MPE Holdings, LLC |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Output Services Group, Inc |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Walker Edison Furniture - Common Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Investments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Cash and Cash Equivalents - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Total Investments and Cash Equivalents — |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|||
Liabilities in Excess of Other Assets — ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
||
Members' Equity— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|||
93
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Below is a listing of PSSL’s individual investments as of September 30, 2023 (Par and $ in thousands):
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
|
Basis Point |
|
Par |
|
|
Cost |
|
|
Fair Value (2) |
|
||||
First Lien Secured Debt - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
A1 Garage Merger Sub, LLC |
|
|
|
|
% |
|
|
|
|
|
$ |
|
|
$ |
|
|||||||
Ad.net Acquisition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Alpine Acquisition Corp II |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Anteriad Holdings Inc (fka MeritDirect) March 2023 |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Any Hour Services |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Apex Service Partners, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Apex Service Partners, LLC Term Loan B |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Apex Service Partners, LLC Term Loan C |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Applied Technical Services, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Applied Technical Services, LLC - DDTL Unfunded (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Arcfield Acquisition Corp. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Beta Plus Technologies, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
BioDerm, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Blackhawk Industrial Distribution, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Broder Bros., Co. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Burgess Point Purchaser Corporation |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
By Light Professional IT Services, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Cadence Aerospace, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cartessa Aesthetics, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
CF512, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
CHA Holdings, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Challenger Performance Optimization, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Confluent Health, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Connatix Buyer, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Crane 1 Services, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Dr. Squatch, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
DRI Holding Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
DRS Holdings III, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Duraco Specialty Tapes LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
ECL Entertainment, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
EDS Buyer, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Electro Rent Corporation |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Exigo Intermediate II, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
ETE Intermediate II, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Fairbanks Morse Defense |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Global Holdings InterCo LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Graffiti Buyer, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Hancock Roofing and Construction L.L.C. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Holdco Sands Intermediate, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
HW Holdco, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Imagine Acquisitionco, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Inception Fertility Ventures, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Infinity Home Services Holdco, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Integrated Data Services |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Integrative Nutrition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
||
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Integrity Marketing Acquisition, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Inventus Power, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
ITI Holdings, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
K2 Pure Solutions NoCal, L.P. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Kinetic Purchaser, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Lash OpCo, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
LAV Gear Holdings, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Lightspeed Buyer Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
LJ Avalon Holdings, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Loving Tan Intermediate II, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Lucky Bucks, LLC (4) |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
||||||
Lucky Bucks. LLC - OpCo DIP Loans |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
MAG DS Corp |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Magenta Buyer, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Marketplace Events, LLC - Super Priority First Lien Term Loan |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Marketplace Events, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Mars Acquisition Holdings Corp. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
MBS Holdings, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
MDI Buyer, Inc. |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
Meadowlark Acquirer, LLC |
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|||||||
94
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Below is a listing of PSSL’s individual investments as of September 30, 2023 (continued):
Issuer Name (6) |
|
Maturity |
|
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par |
|
|
Cost |
|
|
Fair Value (2) |
|
||||||
Output Services Group, Inc. (4) |
|
|
|
|
|
% |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|||||||
Owl Acquisition, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Ox Two, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Peaquod Merger Sub, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
PH Beauty Holdings III, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
PL Acquisitionco, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
PlayPower, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Pragmatic Institute, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Quantic Electronics, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
$ |
|
|
$ |
|
|||||||||
Rancho Health MSO, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Reception Purchaser, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Recteq, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Research Now Group, LLC and Dynata, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sales Benchmark Index LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sargent & Greenleaf Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Schlesinger Global, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
(PIK |
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Seaway Buyer, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Sigma Defense Systems, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Skopima Consilio Parent, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Smile Brands Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Solutionreach, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Spendmend Holdings LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
STV Group Incorporated |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Summit Behavioral Healthcare, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Team Services Group, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Teneo Holdings LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Aegis Technologies Group, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Bluebird Group LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
The Vertex Companies, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
TWS Acquisition Corporation |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Tyto Athene, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Urology Management Holdings, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Walker Edison Furniture Company LLC (5) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (5) |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(5) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Wildcat Buyerco, Inc. |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
Zips Car Wash, LLC |
|
|
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Equity Securities - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
New MPE Holdings, LLC |
|
|
— |
|
|
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
|
|
|
|
|||
Walker Edison Furniture - Common Equity |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Investments - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash and Cash Equivalents - |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total Investments and Cash Equivalents — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
||||||
Liabilities in Excess of Other Assets — ( |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|||||
Members' Equity— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
95
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Below are the consolidated statements of assets and liabilities for PSSL (in thousands):
|
|
September 30, 2024 |
|
|
September 30, 2023 |
|
||
Assets |
|
|
|
|
|
|
||
Investments at fair value (amortized cost—$ |
|
$ |
|
|
$ |
|
||
Cash and cash equivalents (cost—$ |
|
|
|
|
|
|
||
Interest receivable |
|
|
|
|
|
|
||
Prepaid expenses and other assets |
|
|
|
|
|
|
||
Due from affiliate |
|
|
|
|
|
|
||
Total assets |
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Credit facility payable |
|
|
|
|
|
|
||
2032 Asset-backed debt, net (par—$ |
|
|
|
|
|
|
||
2035 Asset-backed debt, net (par—$ |
|
|
|
|
|
|
||
2036 Asset-backed debt, net (par—$ |
|
|
|
|
|
|
||
Notes payable to members |
|
|
|
|
|
|
||
Payable for investments purchased |
|
|
|
|
|
|
||
Interest payable on notes to members |
|
|
|
|
|
|
||
Interest payable on Credit facility and asset backed debt |
|
|
|
|
|
|
||
Accrued expenses |
|
|
|
|
|
|
||
Due to affiliate |
|
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
|
||
(1) |
|
|
|
|
|
|
||
Members' equity |
|
|
|
|
|
|
||
Total liabilities and members' equity |
|
$ |
|
|
$ |
|
||
Below are the consolidated statements of operations for PSSL (in thousands):
|
|
Year Ended |
|
|
Year Ended |
|
||
Investment income: |
|
|
|
|
|
|
||
Interest |
|
$ |
|
|
$ |
|
||
Other income |
|
|
|
|
|
|
||
Total investment income |
|
|
|
|
|
|
||
Expenses: |
|
|
|
|
|
|
||
Interest and expenses on credit facility and asset-backed debt |
|
|
|
|
|
|
||
Interest expense on notes to members |
|
|
|
|
|
|
||
Administrative services expenses |
|
|
|
|
|
|
||
Other general and administrative expenses (1) |
|
|
|
|
|
|
||
Expenses before debt issuance costs |
|
|
|
|
|
|
||
Debt issuance costs |
|
|
|
|
|
|
||
Total expenses |
|
|
|
|
|
|
||
Net investment income |
|
|
|
|
|
|
||
Realized and unrealized (loss) gain on investments and debt: |
|
|
|
|
|
|
||
Net realized (loss) gain on investments |
|
|
( |
) |
|
|
( |
) |
Debt extinguishment |
|
|
( |
) |
|
|
|
|
Net change in unrealized (depreciation) appreciation on investments |
|
|
|
|
|
( |
) |
|
Net realized and unrealized gain (loss) on investments and debt |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in members' equity resulting from operations |
|
$ |
|
|
$ |
|
||
5. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value, as defined under ASC 820 is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:
Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
96
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments, our 2036 Asset-Backed Debt, 2036-R Asset-Backed Debt, 2031 Asset-Backed Debt, 2023 Notes and the Credit Facility are classified as Level 3. Our 2026 Notes are classified as Level 2 as they are financial instruments with readily observable market inputs. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.
The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable orderly market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.
Our investments are generally structured as floating rate loans, mainly first lien secured debt, but also may include second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by our Investment Adviser and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments valued using unobservable inputs are included in Level 3 of the fair value hierarchy.
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.
In addition to using the above inputs to value cash equivalents, investments, our 2023 Notes, our 2026 Notes, our 2031 Asset-Backed Debt, our 2036 Asset-Backed Debt, our 2036-R Asset-Backed Debt and the Credit Facility, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.
As outlined in the table below, some of our Level 3 investments using a market approach valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Investment Adviser assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such bids do not reflect the fair value of an investment, it may independently value such investment by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available. In accordance with ASC 820, we do not categorize any investments for which fair value is measured using the net asset value per share as a practical expedient within the fair value hierarchy.
The remainder of our investment portfolio and our long-term Credit Facility are valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may take into account in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an earnings before interest, taxes, depreciation and amortization, or EBITDA, multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA multiple will have the opposite effect.
Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes ($ in thousands):
Asset Category |
|
Fair value at September 30, 2024 |
|
|
Valuation Technique |
|
Unobservable Input |
|
Range of Input |
|
First lien |
|
$ |
|
|
Market Comparable |
|
Broker/Dealer bids or quotes |
|
N/A |
|
First lien |
|
|
|
|
Market Comparable |
|
Market yield |
|
||
First lien |
|
|
|
|
Enterprise Market Value |
|
EBITDA multiple |
|
||
Subordinated debt |
|
|
|
|
Market Comparable |
|
Market yield |
|
||
Subordinated debt |
|
|
|
|
Enterprise Market Value |
|
EBITDA multiple |
|
||
Equity |
|
|
|
|
Enterprise Market Value |
|
EBITDA multiple |
|
||
Total Level 3 investments |
|
$ |
|
|
|
|
|
|
|
|
Long-Term Credit Facility |
|
$ |
|
|
Market Comparable |
|
Market Yield |
|
||
97
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
Asset Category |
|
Fair value at September 30, 2023 |
|
|
Valuation Technique |
|
Unobservable Input |
|
Range of Input |
|
First lien |
|
$ |
|
|
Market Comparable |
|
Broker/Dealer bids |
|
N/A |
|
First lien |
|
|
|
|
Market Comparable |
|
Market Yield |
|
||
First lien |
|
|
|
|
Enterprise Market Value |
|
EBITDA multiple |
|
||
Second lien |
|
|
|
|
Market Comparable |
|
Market Yield |
|
||
Second lien |
|
|
|
|
Enterprise Market Value |
|
EBITDA multiple |
|
||
Equity |
|
|
|
|
Enterprise Market Value |
|
EBITDA multiple |
|
||
Equity |
|
|
|
|
Enterprise Market Value |
|
DLOM |
|
||
Total Level 3 investments |
|
$ |
|
|
|
|
|
|
|
|
Long-Term Credit Facility and 2023 Notes |
|
$ |
|
|
Market Comparable |
|
Market Yield |
|
||
Our investments, cash and cash equivalents, Credit Facility, as applicable, 2023 Notes, 2026 Notes, 2031 Asset-Backed Debt, 2036-R Asset-Backed Debt, and 2036 Asset-Backed Debt were categorized as follows in the fair value hierarchy for ASC 820 purposes ($ in thousands):
|
|
Fair Value at September 30, 2024 |
|
|||||||||||||||||
Description |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Measured at Net |
|
|||||
First lien |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Second lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total investments and cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Credit Facility payable |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
2026 Notes payable (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2036 Asset-Backed Debt(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2036-R Asset-Backed Debt(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
|
|
Fair Value at September 30, 2023 |
|
|||||||||||||||||
Description |
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Measured at Net |
|
|||||
First lien |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Second lien |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Cash and cash equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total investments and cash and cash equivalents |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Credit Facility payable |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
2023 Notes payable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2026 Notes payable (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2031 Asset-Backed Debt(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total debt |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
98
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
The tables below show a reconciliation of the beginning and ending balances for fair valued investments measured using significant unobservable inputs (Level 3) ($ in thousands):
|
|
Year Ended September 30, 2024 |
|
|||||||||
Description |
|
First Lien |
|
|
Second lien, |
|
|
Totals |
|
|||
Beginning Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
( |
) |
|
|
|
|
|
|
|||
Net change in unrealized depreciation |
|
|
( |
) |
|
|
|
|
|
|
||
Purchases, PIK interest, net discount accretion and non-cash exchanges |
|
|
|
|
|
|
|
|
|
|||
Sales, repayments and non-cash exchanges |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Transfers in and/or out of Level 3 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Ending Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
. |
|
$ |
( |
) |
|
$ |
|
|
$ |
|
||
|
|
Year Ended September 30, 2023 |
|
|||||||||
Description |
|
First Lien |
|
|
Second lien, |
|
|
Totals |
|
|||
Beginning Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net change in unrealized depreciation |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Purchases, PIK interest, net discount accretion and non-cash exchanges |
|
|
|
|
|
|
|
|
|
|||
Sales, repayments and non-cash exchanges |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Transfers in and/or out of Level 3 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Ending Balance |
|
$ |
|
|
$ |
|
|
$ |
|
|||
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
The table below shows a reconciliation of the beginning and ending balances for liabilities recognized at fair value and measured using significant unobservable inputs (Level 3) ($ in thousands):
|
|
Years Ended September 30, |
|
|||||
Long-Term Credit Facility and 2023 Notes |
|
2024 |
|
|
2023 |
|
||
Beginning Balance (cost – $ |
|
$ |
|
|
$ |
|
||
Net change in unrealized (depreciation) appreciation included in earnings |
|
|
|
|
|
|
||
Borrowings |
|
|
|
|
|
|
||
Repayments |
|
|
( |
) |
|
|
( |
) |
Net realized (gain) loss |
|
|
|
|
|
( |
) |
|
Transfers in and/or out of Level 3 |
|
|
|
|
|
|
||
Ending Balance (cost – $ |
|
$ |
|
|
$ |
|
||
As of September 30, 2024, we had outstanding non-U.S. dollar borrowings on our Credit Facility. Net change in fair value from foreign currency translation on outstanding borrowings is listed below (CAD and $ in thousands):
Foreign Currency |
|
Amount |
|
|
Borrowing Cost |
|
|
Current Value |
|
|
Reset Date |
|
Change in Fair |
|
||||
Canadian Dollar |
|
|
CAD |
|
|
$ |
|
|
$ |
|
|
|
$ |
|
||||
As of September 30, 2023, we did not have any outstanding non-U.S. dollar borrowings on the Credit Facility.
Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to the Credit Facility and the 2023 Notes. We elected to use the fair value option for the Credit Facility and the 2023 Notes to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we incurred expenses of $
For the years ended September 30, 2024, 2023, and 2022, the Credit Facility or our Prior Credit Facility, as applicable, the 2023 Notes had a net change in unrealized (appreciation) depreciation of approximately zero, $(
99
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
the Credit Facility and the 2023 Notes totaled approximately zero and zero, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility and 2023 Notes in a manner consistent with the valuation process that the board of directors uses to value our investments.
6. TRANSACTIONS WITH AFFILIATED COMPANIES
An affiliated portfolio company is a company in which we have ownership of
Name of Investment |
|
Fair Value at September 30, 2023 |
|
|
Gross Additions |
|
|
Sale of/ Distribution from Affiliates |
|
|
Net Change in |
|
|
Fair Value at September 30, 2024 |
|
|
Interest Income |
|
|
Dividend/Other Income |
|
|
Net Realized |
|
||||||||
Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Marketplace Events, LLC |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||||
PennantPark Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loan Fund I LLC * |
|
|
|
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|||||
Total Controlled Affiliates |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||||
*
Name of Investment |
|
Fair Value at September 30, 2022 |
|
|
Gross Additions |
|
|
Sale of/ Distribution from Affiliates |
|
|
Net Change in |
|
|
Fair Value at September 30, 2023 |
|
|
Interest Income |
|
|
Dividend/Other Income |
|
|
Net Realized |
|
||||||||
Controlled Affiliates |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Marketplace Events, LLC |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
||||||
PennantPark Senior Secured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Loan Fund I LLC * |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||||
Total Controlled Affiliates |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
— |
|
|||||
* We and Kemper are the members of PSSL, a joint venture formed as a Delaware limited liability company that is not consolidated by us for financial reporting purposes. The members of PSSL make investments in the PSSL in the form of first lien secured debt and equity interests, and all portfolio and other material decisions regarding PSSL must be submitted to PSSL’s board of directors or investment committee, both of which are comprised of two members appointed by each of us and Kemper. Because management of PSSL is shared equally between us and Kemper, we do not believe we control PSSL for purposes of the 1940 Act or otherwise
7. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE
The following information sets forth the computation of basic and diluted per share net increase (decrease) in net assets resulting from operations:
|
|
Years Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Numerator for net increase in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Denominator for basic and diluted weighted average shares |
|
|
|
|
|
|
|
|
|
|||
Basic and diluted net increase in net assets per share resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
8. TAXES AND DISTRIBUTIONS
Distributions from net investment income and net realized capital gains are determined in accordance with U.S. federal tax regulations, which may materially differ from amounts determined in accordance with GAAP. These book-to-tax differences are either temporary or permanent in nature. To the extent these differences are permanent, they are reclassified to undistributed net investment income, accumulated net realized gain or paid-in-capital, as appropriate. Distributions from net realized capital gains, if any, are normally declared and paid annually, but the Company may make distributions on a more frequent basis to comply with the distribution requirements for RICs under the Code.
As of September 30, 2024 and 2023, the cost of investments for federal income tax purposes approximates amortized cost reported in the Consolidated Schedule of Investments.
The following amounts were reclassified for tax purposes (in thousands):
|
|
Years Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Decrease in paid-in capital |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Decrease in accumulated net realized loss |
|
|
|
|
|
( |
) |
|
|
|
||
Increase in undistributed net investment income |
|
|
|
|
|
|
|
|
( |
) |
||
100
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
The following reconciles net increase in net assets resulting from operations to taxable income:
|
|
Years Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2022 |
|
|
2021 |
|
|||
Net increase in net assets resulting from operations |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Net realized gain (loss) on investments |
|
|
( |
) |
|
|
|
|
|
|
||
Net realized gain (loss) on debt |
|
|
|
|
|
|
|
|
|
|||
Net change in unrealized depreciation (appreciation) on investments and debt |
|
|
( |
) |
|
|
|
|
|
|
||
Other book-to-tax differences |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Other non-deductible expenses |
|
|
|
|
|
|
|
|
|
|||
Taxable income before dividends paid deduction |
|
$ |
|
|
$ |
|
|
$ |
|
|||
The components of undistributed taxable income on a tax basis and reconciliation to accumulated deficit on a book basis are as follows (in thousands):
|
|
As of September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Undistributed ordinary income – tax basis |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Short-term realized loss carried forward |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Long-term realized loss carried forward |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distributions payable and other book to tax differences |
|
|
( |
) |
|
|
( |
) |
|
|
|
|
Net unrealized appreciation (depreciation) of investments and debt |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total accumulated deficit – book basis |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The tax characteristics of distributions declared are as follows (in thousands):
|
|
Years Ended September 30, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Ordinary income (including short-term gains, if any) |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Long-term capital gain |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total distributions |
|
$ |
|
|
$ |
|
|
$ |
|
|||
Total distributions per share based on weighted average shares |
|
$ |
|
|
$ |
|
|
$ |
|
|||
9. CASH AND CASH EQUIVALENTS
Cash equivalents represent cash in money market funds pending investment in longer-term portfolio holdings. Our portfolio may consist of temporary investments in U.S. Treasury Bills (of varying maturities), repurchase agreements, money market funds or repurchase agreement-like treasury securities. These temporary investments with original maturities of 90 days or less are deemed cash equivalents and are included in the Consolidated Schedule of Investments. At the end of each fiscal quarter, we may take proactive steps to preserve investment flexibility for the next quarter by investing in cash equivalents, which is dependent upon the composition of our total assets at quarter-end. We may accomplish this in several ways, including purchasing U.S. Treasury Bills and closing out positions on a net cash basis after quarter-end, temporarily drawing down on the Credit Facility, or utilizing repurchase agreements or other balance sheet transactions as are deemed appropriate for this purpose. These amounts are excluded from average adjusted gross assets for purposes of computing the Investment Adviser’s management fee. U.S. Treasury Bills with maturities greater than 60 days from the time of purchase are valued consistent with our valuation policy. As of September 30, 2024 and 2023, cash and cash equivalents consisted of money market funds, and non-money market in the amounts of $
101
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
10. FINANCIAL HIGHLIGHTS
Below are the financial highlights for the years ended September 30 ($ in thousands, except share and per share data):
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|
2021 |
|
|
2020 |
|
|||||
Per Share Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net asset value, beginning of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Net investment income (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Net change in realized and unrealized (loss) gain (1) |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
|
|
|
( |
) |
||
Net increase in net assets resulting from operations (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Distributions to stockholders (1), (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Distribution of net investment income |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Distribution of realized gains |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
— |
|
||||
Total distributions to stockholders |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
(Dilutive) effect of common stock issuance |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
— |
|
|||
Net asset value, end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Per share market value, end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Total return (3) |
|
|
% |
|
|
% |
|
|
( |
)% |
|
|
% |
|
|
( |
)% |
|||
Shares outstanding at end of year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Ratios / Supplemental Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Ratio of operating expenses to average net assets (4) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|||||
Ratio of debt related expenses to average net assets (5) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|||||
Ratio of total expenses to average net assets (5) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|||||
Ratio of net investment income to average net assets (5) |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|||||
Net assets at end of year |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Weighted average debt outstanding |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Weighted average debt per share (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Asset coverage per unit (6) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
Portfolio turnover ratio |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
*The expense and investment income ratios do not reflect the Company's proportionate share of income and expenses of PSSL and PTSF |
|
|
|
|
||||||||||||||||
102
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
11. DEBT
The annualized weighted average cost of debt for the years ended September 30, 2024, 2023, and 2022, inclusive of the fee on the undrawn commitment on the Credit Facility or the Prior Credit Facility, as applicable, amendment costs and debt issuance costs, was
On April 5, 2018, our board of directors approved the application of the modified asset coverage requirements set forth in Section 61(a)(2) of the 1940 Act, as amended by the Consolidated Appropriations Act of 2018 (which includes the Small Business Credit Availability Act, or SBCAA). As a result, the asset coverage requirement applicable to us for senior securities was reduced from
Credit Facility
Maximum borrowings under Funding I’s multi-currency Credit Facility with affiliates of Truist Bank (formerly SunTrust Bank), or the Lenders upsized during the year and was $
During the revolving period, the
The Credit Facility contains covenants, including, but not limited to, restrictions of loan size, industry requirements, average life of loans, geographic and individual portfolio concentrations, minimum portfolio yield and loan payment frequency. Additionally, the Credit Facility requires the maintenance of a minimum equity investment in Funding I and income ratio as well as restrictions on certain payments and issuance of debt. The Credit Facility compliance reporting is prepared on a basis of accounting other than GAAP. As of September 30, 2024, we were in compliance with the covenants relating to the Credit Facility.
We own
Our interest in Funding I (other than the management fee) is subordinate in priority of payment to every other obligation of Funding I and is subject to certain payment restrictions set forth in the Credit Facility. We may receive cash distributions on our equity interests in Funding I only after it has made all required payments of (1) cash interest and, if applicable, principal to the Lenders, (2) administrative expenses and (3) claims of other unsecured creditors of Funding I. The Investment Adviser has irrevocably directed that any management fee owed with respect to such services is to be paid to the Company so long as the Investment Adviser remains the collateral manager.
2023 Notes
In November 2017, we issued $
The 2023 Notes paid interest at a rate of
The 2023 Notes were general, unsecured obligations, rank equal in right of payment with all of PennantPark Floating Rate Capital Ltd.’s existing and future senior unsecured indebtedness and are generally redeemable at our option. The deed of trust governing the 2023 Notes includes certain customary covenants, including minimum equity requirements, and events of default. Please refer to the deed of trust filed as Exhibit (d)(8) to our post-effective amendment filed on December 13, 2017 for more information. In connection with this offering, we dual listed our common stock on the TASE. On February 7, 2024, the Company filed a notice with the Israel Securities Authority and the TASE voluntarily requesting to de-list the Company's common stock form trading on the TASE. The last day of trading on the TASE was May 6, 2024 and the de-listing of the Company's stock from the TASE took effect on May 8, 2024.
The 2023 Notes have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent registration under the Securities Act or in transactions exempt from, or not subject to, such registration requirements.
2026 Notes
In March 2021 and in October 2021, we issued $
103
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
assets securing such indebtedness and structurally subordinated to all of our existing and future indebtedness and other obligations of any of our subsidiaries, financing vehicles, or similar facilities. We do not intend to list the 2026 Notes on any securities exchange or automated dealer quotation system.
2031 Asset-Backed Debt / 2036-R Asset-Backed Debt
In September 2019, the Company completed the $
On the closing date of the Debt Securitization, in consideration of our transfer to the Securitization Issuer of the initial closing date loan portfolio, which included loans distributed to us by certain of our wholly-owned subsidiaries, the Securitization Issuer transferred to us
The 2031 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Class D Secured Deferrable Floating Rate Notes and the Preferred Shares of the Securitization Issuer were eliminated in consolidation. As of September 30, 2024 and 2023, the Company had zero and $
Our Investment Adviser serves as collateral manager to the Securitization Issuer pursuant to the Collateral Management Agreement. For so long as our Investment Adviser serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreement.
On July 25, 2024, the Company closed the refinancing and upsize of a four-year reinvestment period, twelve-year final maturity $
2036 Asset-Backed Debt
In February 2024, the Company completed the $
The 2036 Asset-Backed Debt is included in the Consolidated Statement of Assets and Liabilities as debt of the Company and the Subordinated Notes of the 2036-Securitization Issuer were eliminated in consolidation. As of September 30, 2024, the Company had $
104
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
SEPTEMBER 30, 2024
12. COMMITMENTS AND CONTINGENCIES
From time to time, we, the Investment Adviser or the Administrator may be a party to legal proceedings, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Unfunded debt and equity investments, if any, are disclosed in the Consolidated Schedules of Investments. As of September 30, 2024 and 2023, we had $
13. UNCONSOLIDATED SIGNIFICANT SUBSIDIARIES
We must determine which, if any, of our unconsolidated controlled portfolio companies is a "significant subsidiary" within the meaning of Regulation S-X. We have determined that, as of September 30, 2024, PennantPark Senior Secured Loan Fund I LLC triggered at least one of the significance tests. As a result and in accordance with Rule 3-09 of Regulation S-X, separate audited financial statements of PennantPark Senior Secured Loan Fund I LLC for the years ended September 30, 2024, 2023, and 2022 are being filed herewith as Exhibit 99.3 and Exhibit 99.4.
105
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
As of September 30, 2024, we, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that, our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.
(b) Management’s Report on Internal Control Over Financial Reporting
Management’s Report on Internal Control Over Financial Reporting, which appears on page [60] of this Form 10-K, is incorporated by reference herein.
(c) Changes in Internal Controls Over Financial Reporting
As of September 30, 2024, management remediated the material weakness previously identified as of September 30, 2023 relating to (a) the operation of our internal controls relating to the quarterly cash and investment reconciliations and (b) in the operating of our internal controls over financial reporting relating to our review of interest income and non-accrual classification of investments. Although this material weakness did not result in any material misstatement of our consolidated financial statements, there is a possibility it could have led to a material misstatement of account balances or disclosures that were not prevented or detected.
Management remediated the material weaknesses identified as of September 30, 2023 by enhancing (a) the appropriate review of the quarterly cash and investment reconciliation and that it is adequately documented so as to provide evidence that the controls are operating effectively, (b) existing controls to ensure that our internal controls over financial reporting relating to our analysis of interest income and assessment of investments for classification as non-accrual investments are operating effectively and (c) policies and procedures to demonstrate a commitment to improving our overall control environment.
As a result of the remediation activities, management has determined that management’s controls were designed appropriately and at a sufficient level of precision, and have been operating effectively for a sufficient period of time, such that the material weakness previously identified as of September 30, 2023 has been remediated as of September 30, 2024.
Except as noted above, there have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our most recently completed fiscal quarter, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information
10b5-1 Disclosure
None of the officers or directors of the Company have
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable
PART III
We will file a definitive Proxy Statement for our 2025 Annual Meeting of Stockholders with the SEC, pursuant to Regulation 14A, not later than 120 days after the end of our fiscal year. Accordingly, certain information required by Part III has been omitted under General Instruction G(3) to Form 10-K. Only those sections of our definitive Proxy Statement that specifically address the items set forth herein are incorporated by reference.
Item 10. Directors, Executive Officers and Corporate Governance
The information required by Item 10 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
Item 11. Executive Compensation
The information required by Item 11 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by Item 12 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
The information required by Item 13 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
Item 14. Principal Accountant Fees and Services
The information required by Item 14 is hereby incorporated by reference from our definitive Proxy Statement relating to our 2025 Annual Meeting of Stockholders, to be filed with the SEC within 120 days following the end of our fiscal year.
PART IV
Item 15. Exhibits and Financial Statement Schedules
The following documents are filed as part of this Annual Report:
3.1 |
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||
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3.2 |
|
||
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|
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4.1 |
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||
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4.2 |
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||
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4.3 |
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||
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|
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4.4 |
|
||
|
|
|
|
4.5 |
|
Form of 4.25% Notes due 2026 (Incorporated by reference to Exhibit 4.5 hereto). |
|
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|
|
4.6 |
|
||
|
|
|
|
10.1 |
|
||
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10.2 |
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||
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10.3 |
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||
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10.4 |
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||
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10.5 |
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||
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10.6 |
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||
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10.7 |
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||
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|
|
10.8 |
|
||
|
|
|
|
10.9 |
|
Amended and Restated Purchase and Contribution Agreement, dated as of August 12, 2021, among PennantPark Floating Rate Capital Ltd., as the seller, and PennantPark Floating Rate Funding I, LLC, as the buyer. (Incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K (File No. 814-00891), filed on August 18, 2021). |
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|
|
10.10
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||
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10.11 |
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||
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10.12 |
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10.13 |
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10.14 |
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10.15 |
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10.16 |
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10.17 |
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10.18 |
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10.19 |
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10.20 |
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10.21 |
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10.22 |
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10.23 |
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14.1 |
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19.1 |
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21.1* |
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23.1* |
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31.1* |
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31.2* |
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|
|
32.1* |
|
Certification of Chief Executive Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.2* |
|
Certification of Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
99.1 |
|
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|
|
99.2* |
|
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|
99.3* |
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99.4* |
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|
|
97.1 |
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|
|
101.INS* |
|
Inline XBRL Instance Document |
|
|
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema |
|
|
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
|
|
|
104 |
|
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) |
|
|
|
* Filed herewith
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on November 25, 2024.
By: |
|
/s/ ARTHUR H. PENN |
Name: |
|
Arthur H. Penn |
Title: |
|
Chief Executive Officer and Chairman of the Board of Directors |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature |
|
Title |
|
Date |
|
|
|
|
|
/s/ ARTHUR H. PENN |
|
Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) |
|
November 25, 2024 |
Arthur H. Penn |
|
|
||
|
|
|
|
|
/s/ RICHARD T. ALLORTO, JR. |
|
Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |
|
November 25, 2024 |
Richard T. Allorto, Jr. |
|
|
||
|
|
|
|
|
/s/ ADAM K. BERNSTEIN |
|
Director |
|
November 25, 2024 |
Adam K. Bernstein |
|
|
||
|
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|
|
|
/s/ JEFFREY FLUG |
|
Director |
|
November 25, 2024 |
Jeffrey Flug |
|
|
||
|
|
|
|
|
/s/ MARSHALL BROZOST |
|
Director |
|
November 25, 2024 |
Marshall Brozost |
|
|
||
|
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|
|
/s/ SAMUEL L. KATZ |
|
Director |
|
November 25, 2024 |
Samuel L. Katz |
|
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||
|
|
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|
|
/s/ JOSÉ A. BRIONES, JR. |
|
Director |
|
November 25, 2024 |
José A. Briones |
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|
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|
|
EXHIBIT 21.1
Subsidiaries of the Registrant
Name of entity and place of jurisdiction |
|
Voting Securities |
|
PennantPark Floating Rate Funding I, LLC (Delaware) |
|
100 |
% |
PennantPark Floating Rate Funding II, LLC (Delaware) |
|
100 |
% |
PennantPark CLO I, LLC (Delaware) |
|
100 |
% |
PennantPark CLO I, Ltd. (Cayman Islands) |
|
100 |
% |
PennantPark CLO I Depositor, LLC (Delaware) |
|
100 |
% |
PennantPark CLO VIII, LLC (Delaware) |
|
100 |
% |
PFLT Investment Holdings, LLC (Delaware) |
|
100 |
% |
PFLT Investment Holdings II, LLC (Delaware) |
|
100 |
% |
PennantPark Senior Secured Loan Fund I LLC |
|
100 |
% (1) |
EXHIBIT 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statement on Form N-2 of PennantPark Floating Rate Capital Ltd. and Subsidiaries (the Company) of our reports dated November 25, 2024, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting of the Company, appearing in the Annual Report on Form 10-K of the Company for the year ended September 30, 2024. We also consent to the use in such Registration Statement of our report dated November 25, 2024, relating to the senior securities table appearing as Exhibit 99.2 in the accompanying Form 10-K of the Company for the year ended September 30, 2024.
We also consent to the use in such Registration Statement of our report dated November 25, 2024, relating to the consolidated financial statements of PennantPark Senior Secured Loan Fund I LLC as of and for the years ended September 30, 2024 and 2023, appearing as Exhibit 99.3 and our report dated December 7, 2023, relating to the consolidated financial statements of PennantPark Senior Secured Loan Fund I LLC as of and for the years ended September 30, 2023 and 2022, appearing as Exhibit 99.4 in the accompanying Form 10-K of the Company for the year ended September 30, 2024.
We also consent to the reference to our firm under the headings “Senior Securities” in the accompanying Form 10-K and “Independent Registered Public Accounting Firm” in such Registration Statement on Form N-2.
/s/ RSM US LLP
New York, New York
November 25, 2024
EXHIBIT 31.1
CERTIFICATION PURSUANT TO SECTION 302
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Arthur H. Penn, Chief Executive Officer of PennantPark Floating Rate Capital Ltd., certify that:
1. I have reviewed this Annual Report on Form 10-K of PennantPark Floating Rate Capital Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 25, 2024
/s/ Arthur H. Penn |
||
Name: |
|
Arthur H. Penn |
Title: |
|
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATION PURSUANT TO SECTION 302
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Richard T. Allorto, Jr., Chief Financial Officer of PennantPark Floating Rate Capital Ltd., certify that:
1. I have reviewed this Annual Report on Form 10-K of PennantPark Floating Rate Capital Ltd.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: November 25, 2024
/s/ Richard T. Allorto, Jr. |
||
Name: |
|
Richard T. Allorto, Jr. |
Title: |
|
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
In connection with the Annual Report on Form 10-K of PennantPark Floating Rate Capital Ltd. (the “Company”) for the annual period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Arthur H. Penn, as Chief Executive Officer of the Registrant hereby certify, to the best of my knowledge that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
/s/ Arthur H. Penn |
||
Name: |
|
Arthur H. Penn |
Title: |
|
Chief Executive Officer |
Date: |
|
November 25, 2024 |
EXHIBIT 32.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. 1350)
In connection with the Annual Report on Form 10-K of PennantPark Floating Rate Capital Ltd. (the “Company”) for the annual period ended September 30, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Richard T. Allorto Jr., as Chief Financial Officer of the Registrant hereby certify, to the best of my knowledge that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.
/s/ Richard T. Allorto, Jr. |
||
Name: |
|
Richard T. Allorto, Jr. |
Title: |
|
Chief Financial Officer |
Date: |
|
November 25, 2024 |
EXHIBIT 99.2
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
PennantPark Floating Rate Capital Ltd. and Subsidiaries
Our audits of the consolidated financial statements and internal control over financial reporting referred to in our report dated November 25, 2024, (appearing in the accompanying Form 10-K) also included an audit of the senior securities table of PennantPark Floating Rate Capital Ltd and Subsidiaries (the Company) appearing in Part II, Item 7 in this Form 10-K. This table is the responsibility of the Company’s management. Our responsibility is to express an opinion based on our audits of the consolidated financial statements.
In our opinion, the senior securities table, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ RSM US LLP
New York, New York
November 25, 2024
Exhibit 99.3
PennantPark Senior Secured Loan Fund I LLC
Consolidated Financial Statements and
Independent Auditor’s Report
September 30, 2024 and 2023
Contents
Independent Auditor’s Report |
1 |
|
|
Financial Statements: |
|
|
|
Consolidated Statements of Assets, Liabilities and Members’ Equity as of September 30, 2024 and 2023 |
3 |
|
|
Consolidated Statements of Operations for the years ended September 30, 2024 and 2023 |
4 |
|
|
Consolidated Statements of Changes in Members’ Equity for the years ended September 30, 2024 and 2023 |
5 |
|
|
Consolidated Statements of Cash Flows for the years ended September 30, 2024 and 2023 |
6 |
|
|
Consolidated Schedules of Investments as of September 30, 2024 and 2023 |
7 |
|
|
Notes to Consolidated Financial Statements |
12 |
|
|
Independent Auditor’s Report
Board of Directors
PennantPark Senior Secured Loan Fund I LLC
Opinion
We have audited the consolidated financial statements of PennantPark Senior Secured Loan Fund I LLC and its subsidiaries (the Fund), which comprise the consolidated statements of assets, liabilities and members’ equity, including the consolidated schedule of investments, as of September 30, 2024 and 2023, the related consolidated statements of operations, changes in members’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2024 and 2023, and the results of its operations, changes in members’ equity and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Fund and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Fund’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
1
In performing an audit in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ RSM US LLP
New York, New York
November 25, 2024
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Assets, Liabilities and Members' Equity |
|
||||||||
($ in thousands) |
|
||||||||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
|
|
September 30, 2024 |
|
|
|
September 30, 2023 |
|
||
Assets |
|
|
|
|
|
|
|
||
Investments at fair value (amortized cost—$928,983 and $804,608, respectively) |
$ |
|
913,281 |
|
|
$ |
|
785,859 |
|
Cash and cash equivalents (cost—$68,429 and $77,446, respectively) |
|
|
68,429 |
|
|
|
|
77,446 |
|
Interest receivable |
|
|
4,722 |
|
|
|
|
5,179 |
|
Due from affiliate |
|
|
48 |
|
|
|
|
436 |
|
Prepaid expenses and other assets |
|
|
1,642 |
|
|
|
|
490 |
|
Total assets |
|
|
988,122 |
|
|
|
|
869,410 |
|
Liabilities |
|
|
|
|
|
|
|
||
Credit facility payable |
|
|
146,100 |
|
|
|
|
48,600 |
|
2032 Asset-backed debt, net (par—$0 and $246,000, respectively) |
|
|
— |
|
|
|
|
243,973 |
|
2035 Asset-backed debt, net (par—$246,000 and $246,000, respectively) |
|
|
243,934 |
|
|
|
|
243,483 |
|
2036 Asset-backed debt, net (par—$246,000 and $0, respectively) |
|
|
244,372 |
|
|
|
|
— |
|
Notes payable to members |
|
|
271,600 |
|
|
|
|
240,100 |
|
Interest payable on credit facility and asset backed debt |
|
|
9,281 |
|
|
|
|
14,291 |
|
Payable for investments purchased |
|
|
86 |
|
|
|
|
13,466 |
|
Interest payable on notes to members |
|
|
7,315 |
|
|
|
|
6,488 |
|
Accrued expenses |
|
|
822 |
|
|
|
|
859 |
|
Due to affiliate |
|
|
65 |
|
|
|
|
— |
|
Total liabilities |
|
|
923,575 |
|
|
|
|
811,260 |
|
Commitments and contingencies (See Note 11) |
|
|
|
|
|
|
|
||
Members' equity |
|
|
64,547 |
|
|
|
|
58,150 |
|
Total liabilities and members' equity |
$ |
|
988,122 |
|
|
$ |
|
869,410 |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Operations |
|
|||||||
($ in thousands) |
|
|||||||
|
|
|
|
|
|
|
||
|
|
Year ended September 30, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Investment income: |
|
|
|
|
|
|
||
Interest |
|
$ |
109,094 |
|
|
$ |
89,547 |
|
Other income |
|
|
1,191 |
|
|
|
1,297 |
|
Total investment income |
|
|
110,285 |
|
|
|
90,844 |
|
Expenses: |
|
|
|
|
|
|
||
Interest and expense on credit facility and asset-backed debt |
|
|
54,814 |
|
|
|
42,797 |
|
Interest expense on notes to members |
|
|
34,186 |
|
|
|
30,325 |
|
Administration fees |
|
|
2,354 |
|
|
|
2,103 |
|
General and administrative expenses |
|
|
1,464 |
|
|
|
1,116 |
|
Expenses before debt issuance costs |
|
|
92,818 |
|
|
|
76,341 |
|
Debt issuance costs |
|
|
999 |
|
|
|
— |
|
Total expenses |
|
|
93,817 |
|
|
|
76,341 |
|
Net investment income |
|
|
16,468 |
|
|
|
14,503 |
|
Realized and unrealized gain (loss) on investments and debt: |
|
|
|
|
|
|
||
Net realized gain (loss) on investments |
|
|
(8,914 |
) |
|
|
(6,328 |
) |
Realized loss on debt extinguishment |
|
|
(705 |
) |
|
|
— |
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
3,048 |
|
|
|
(3,171 |
) |
Net realized and unrealized gain (loss) on investments and debt |
|
|
(6,571 |
) |
|
|
(9,499 |
) |
Net increase (decrease) in members' equity resulting from operations |
|
$ |
9,897 |
|
|
$ |
5,004 |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Changes in Members’ Equity |
|
|||||||||
($ in thousands) |
|
|||||||||
|
|
|
|
|
|
|
|
|
||
|
|
Year ended September 30, |
|
|||||||
|
|
2024 |
|
|
2023 |
|
||||
Net change in members’ equity resulting from operations: |
|
|
|
|
|
|
|
|
||
Net investment income |
|
$ |
|
16,468 |
|
|
$ |
|
14,503 |
|
Net realized gain (loss) on investments |
|
|
|
(8,914 |
) |
|
|
|
(6,328 |
) |
Realized loss on debt extinguishment |
|
|
|
(705 |
) |
|
|
|
— |
|
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
3,048 |
|
|
|
|
(3,171 |
) |
Net increase (decrease) in members’ equity resulting from operations |
|
|
|
9,897 |
|
|
|
|
5,004 |
|
Capital Transactions |
|
|
|
|
|
|
|
|
||
Capital contributions |
|
|
|
13,500 |
|
|
|
|
9,750 |
|
Distributions |
|
|
|
(17,000 |
) |
|
|
|
(13,100 |
) |
Net increase (decrease) in members’ equity |
|
|
|
6,397 |
|
|
|
|
1,654 |
|
Members’ equity |
|
|
|
|
|
|
|
|
||
Beginning of year |
|
|
|
58,150 |
|
|
|
|
56,496 |
|
End of year |
|
$ |
|
64,547 |
|
|
$ |
|
58,150 |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Cash Flows |
|
|||||||||
($ in thousands) |
|
|||||||||
|
|
|||||||||
|
|
|
Year ended September 30, |
|
||||||
|
|
|
2024 |
|
|
|
2023 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
||
Net increase (decrease) in members’ equity resulting from operations |
|
$ |
|
9,897 |
|
|
$ |
|
5,004 |
|
Adjustments to reconcile net increase (decrease) in members’ equity resulting from operations to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
||
Net change in unrealized (appreciation) depreciation on investments |
|
|
|
(3,048 |
) |
|
|
|
3,171 |
|
Net realized (gain) loss on investments |
|
|
|
8,914 |
|
|
|
|
6,328 |
|
Net realized (gain) loss on extinguishment of debt |
|
|
|
705 |
|
|
|
— |
|
|
Net accretion of discount and amortization of premium |
|
|
|
(3,797 |
) |
|
|
|
(3,917 |
) |
Purchases of investments |
|
|
|
(286,191 |
) |
|
|
|
(190,871 |
) |
Payment-in-kind interest |
|
|
|
(3,407 |
) |
|
|
|
(1,055 |
) |
Proceeds from disposition of investments |
|
|
|
160,106 |
|
|
|
|
155,207 |
|
Amortization of deferred financing costs |
|
|
|
1,952 |
|
|
|
|
796 |
|
(Increase) Decrease in: |
|
|
|
|
|
|
|
|
||
Receivable for investments sold |
|
|
— |
|
|
|
|
3,637 |
|
|
Interest receivable |
|
|
|
457 |
|
|
|
|
(2,154 |
) |
Prepaid expenses and other assets |
|
|
|
(1,152 |
) |
|
|
|
1,232 |
|
Due from affiliate |
|
|
|
388 |
|
|
|
|
3,117 |
|
Increase (Decrease) in: |
|
|
|
|
|
|
|
|
||
Payables for investments purchased |
|
|
|
(13,380 |
) |
|
|
|
3,052 |
|
Interest payable on credit facility and asset backed debt |
|
|
|
(5,010 |
) |
|
|
|
10,474 |
|
Interest payable on notes to members |
|
|
|
827 |
|
|
|
|
1,769 |
|
Due to affiliate |
|
|
|
65 |
|
|
|
— |
|
|
Accrued expenses |
|
|
|
(37 |
) |
|
|
|
(291 |
) |
Net cash provided by (used in) operating activities |
|
|
|
(132,711 |
) |
|
|
|
(4,501 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
||
Members’ capital contributions |
|
|
|
13,500 |
|
|
|
|
9,750 |
|
Distributions to members |
|
|
|
(17,000 |
) |
|
|
|
(13,100 |
) |
Notes issued to members |
|
|
|
31,500 |
|
|
|
|
22,750 |
|
Repayment of 2032 Asset-backed debt |
|
|
|
(246,000 |
) |
|
|
— |
|
|
Proceeds from 2035 Asset-backed debt issued |
|
|
— |
|
|
|
|
246,000 |
|
|
Payment of fees and expenses on 2035 Asset-backed debt issued |
|
|
— |
|
|
|
|
(2,705 |
) |
|
Proceeds from 2036 Asset-backed debt issued |
|
|
|
246,000 |
|
|
|
— |
|
|
Payment of fees and expenses on 2036 Asset-backed debt issued |
|
|
|
(1,806 |
) |
|
|
— |
|
|
Borrowings under credit facility |
|
|
|
196,500 |
|
|
|
|
41,600 |
|
Repayments under credit facility |
|
|
|
(99,000 |
) |
|
|
|
(252,500 |
) |
Net cash provided by (used in) financing activities |
|
|
|
123,694 |
|
|
|
|
51,795 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
(9,017 |
) |
|
|
|
47,294 |
|
Cash and cash equivalents, beginning of year |
|
|
|
77,446 |
|
|
|
|
30,152 |
|
Cash and cash equivalents, end of year |
|
$ |
|
68,429 |
|
|
$ |
|
77,446 |
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
||
Interest paid on credit facility and asset-backed debt |
|
$ |
|
59,824 |
|
|
$ |
|
32,323 |
|
Interest paid on notes to members |
|
$ |
|
33,359 |
|
|
$ |
|
28,556 |
|
Non-Cash Operating and Financing activity: |
|
|
|
|
|
|
|
|
||
Non-Cash exchanges and conversions |
|
$ |
|
19,841 |
|
|
$ |
|
3,393 |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
PennantPark Senior Secured Loan Fund I LLC |
||||||||||||||
Consolidated Schedule of Investments |
||||||||||||||
September 30, 2024 |
||||||||||||||
($ in thousands) |
||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuer Name (7) |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par or Number of Shares |
|
Cost |
|
Fair Value(2) |
First Lien Secured Debt - 1,404.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A1 Garage Merger Sub, LLC |
|
12/22/2028 |
|
Commercial Services & Supplies |
|
10.95% |
|
SOFR+610 |
|
2,903 |
|
$2,855 |
|
$2,903 |
ACP Avenu Buyer, LLC |
|
10/2/2029 |
|
Business Services |
|
10.58% |
|
SOFR+525 |
|
9,925 |
|
9,771 |
|
9,602 |
ACP Falcon Buyer, Inc. |
|
8/1/2029 |
|
Business Services |
|
10.83% |
|
SOFR+550 |
|
18,762 |
|
18,434 |
|
18,837 |
Ad.net Acquisition, LLC |
|
5/7/2026 |
|
Media |
|
11.28% |
|
SOFR+626 |
|
8,708 |
|
8,658 |
|
8,708 |
Aeronix, Inc |
|
12/18/2028 |
|
Aerospace and Defense |
|
9.85% |
|
SOFR+525 |
|
15,880 |
|
15,665 |
|
15,880 |
Alpine Acquisition Corp II |
|
11/30/2026 |
|
Containers and Packaging |
|
11.30% |
|
SOFR+610 |
|
12,722 |
|
12,481 |
|
12,213 |
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
6/30/2026 |
|
Media: Advertising, Printing & Publishing |
|
10.50% |
|
SOFR+590 |
|
4,717 |
|
4,613 |
|
4,717 |
Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan |
|
6/30/2026 |
|
Media: Advertising, Printing & Publishing |
|
10.50% |
|
SOFR+590 |
|
4,625 |
|
4,584 |
|
4,625 |
Applied Technical Services, LLC |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
10.50% |
|
SOFR+590 |
|
11,155 |
|
11,058 |
|
10,988 |
Arcfield Acquisition Corp. |
|
8/3/2029 |
|
Aerospace and Defense |
|
11.56% |
|
SOFR+625 |
|
11,115 |
|
10,967 |
|
11,059 |
Beacon Behavioral Services, LLC |
|
6/21/2029 |
|
Healthcare and Pharmaceuticals |
|
9.85% |
|
SOFR+525 |
|
9,975 |
|
9,836 |
|
9,825 |
Beta Plus Technologies, Inc. |
|
7/1/2029 |
|
Business Services |
|
10.35% |
|
SOFR+575 |
|
4,900 |
|
4,828 |
|
4,753 |
Big Top Holdings, LLC |
|
2/28/2030 |
|
Business Services |
|
11.18% |
|
SOFR+625 |
|
15,423 |
|
15,167 |
|
15,423 |
BioDerm, Inc. |
|
1/31/2028 |
|
Healthcare and Pharmaceuticals |
|
11.70% |
|
SOFR+650 |
|
8,888 |
|
8,797 |
|
8,776 |
Blackhawk Industrial Distribution, Inc. |
|
9/17/2026 |
|
Distributors |
|
11.00% |
|
SOFR+640 |
|
14,974 |
|
14,779 |
|
14,718 |
BlueHalo Financing Holdings, LLC |
|
10/31/2025 |
|
Aerospace and Defense |
|
10.60% |
|
SOFR+600 |
|
5,546 |
|
5,523 |
|
5,435 |
Broder Bros., Co. |
|
12/4/2025 |
|
Consumer Products |
|
10.97% |
|
SOFR+611 |
|
2,274 |
|
2,274 |
|
2,274 |
Burgess Point Purchaser Corporation |
|
9/26/2029 |
|
Automotive |
|
10.20% |
|
SOFR+535 |
|
442 |
|
417 |
|
416 |
By Light Professional IT Services, LLC |
|
5/16/2025 |
|
High Tech Industries |
|
12.18% |
|
SOFR+698 |
|
13,084 |
|
13,059 |
|
13,084 |
Carnegie Dartlet, LLC |
|
2/7/2030 |
|
Media: Advertising, Printing & Publishing |
|
10.60% |
|
SOFR+550 |
|
15,243 |
|
15,025 |
|
15,015 |
Cartessa Aesthetics, LLC |
|
6/14/2028 |
|
Distributors |
|
10.35% |
|
SOFR+575 |
|
9,539 |
|
9,431 |
|
9,539 |
CF512, Inc. |
|
8/20/2026 |
|
Media |
|
11.21% |
|
SOFR+619 |
|
6,751 |
|
6,682 |
|
6,649 |
Confluent Health, LLC |
|
10/28/2028 |
|
Healthcare and Pharmaceuticals |
|
8.96% |
|
SOFR+400 |
|
6,708 |
|
6,506 |
|
6,540 |
Connatix Buyer, Inc. |
|
7/13/2027 |
|
Media |
|
10.53% |
|
SOFR+561 |
|
3,775 |
|
3,734 |
|
3,775 |
Crane 1 Services, Inc. |
|
8/16/2027 |
|
Commercial Services & Supplies |
|
10.71% |
|
SOFR+586 |
|
2,068 |
|
2,051 |
|
2,052 |
Dr. Squatch, LLC |
|
8/31/2027 |
|
Personal Products |
|
9.95% |
|
SOFR+535 |
|
14,562 |
|
14,398 |
|
14,562 |
DRI Holding Inc. |
|
12/21/2028 |
|
Media |
|
10.20% |
|
SOFR+535 |
|
2,600 |
|
2,420 |
|
2,509 |
DRS Holdings III, Inc. |
|
11/3/2025 |
|
Consumer Goods: Durable |
|
11.20% |
|
SOFR+635 |
|
13,805 |
|
13,788 |
|
13,694 |
Dynata, LLC - First Out Term Loan (6) |
|
7/15/2028 |
|
Diversified Consumer Services |
|
10.38% |
|
SOFR+526 |
|
1,360 |
|
1,264 |
|
1,358 |
Dynata, LLC - Last Out Term Loan |
|
10/15/2028 |
|
Diversified Consumer Services |
|
10.88% |
|
SOFR+576 |
|
8,439 |
|
8,439 |
|
7,769 |
ECL Entertainment, LLC |
|
8/31/2030 |
|
Hotel, Gaming and Leisure |
|
8.85% |
|
SOFR+400 |
|
4,963 |
|
4,894 |
|
4,973 |
EDS Buyer, LLC |
|
1/10/2029 |
|
Electronic Equipment, Instruments, and Components |
|
10.35% |
|
SOFR+575 |
|
8,865 |
|
8,763 |
|
8,732 |
Exigo Intermediate II, LLC |
|
3/15/2027 |
|
Software |
|
11.20% |
|
SOFR+635 |
|
12,546 |
|
12,418 |
|
12,484 |
ETE Intermediate II, LLC |
|
5/29/2029 |
|
Diversified Consumer Services |
|
11.56% |
|
SOFR+650 |
|
12,249 |
|
12,032 |
|
12,249 |
Eval Home Solutions Intermediate, LLC |
|
5/10/2030 |
|
Healthcare and Pharmaceuticals |
|
10.60% |
|
SOFR+575 |
|
9,268 |
|
9,132 |
|
9,176 |
Fairbanks More Defense |
|
6/17/2028 |
|
Aerospace and Defense |
|
9.65% |
|
SOFR+450 |
|
10,117 |
|
10,071 |
|
10,128 |
Global Holdings InterCo LLC |
|
3/16/2026 |
|
Diversified Financial Services |
|
11.43% |
|
SOFR+615 |
|
3,696 |
|
3,689 |
|
3,511 |
Graffiti Buyer, Inc. |
|
8/10/2027 |
|
Trading Companies & Distributors |
|
10.45% |
|
SOFR+560 |
|
3,723 |
|
3,686 |
|
3,685 |
Hancock Roofing and Construction L.L.C. |
|
12/31/2026 |
|
Insurance |
|
10.20% |
|
SOFR+560 |
|
2,153 |
|
2,131 |
|
2,110 |
HEC Purchaser Corp |
|
6/17/2029 |
|
Healthcare and Pharmaceuticals |
|
9.75% |
|
SOFR+550 |
|
3,691 |
|
3,648 |
|
3,665 |
Hills Distribution, Inc |
|
11/8/2029 |
|
Business Services |
|
11.11% |
|
SOFR+600 |
|
8,957 |
|
8,835 |
|
8,868 |
HW Holdco, LLC |
|
5/10/2026 |
|
Media |
|
11.18% |
|
SOFR+590 |
|
3,486 |
|
3,475 |
|
3,486 |
Imagine Acquisitionco, LLC |
|
11/15/2027 |
|
Software |
|
10.20% |
|
SOFR+510 |
|
9,154 |
|
9,018 |
|
9,108 |
Infinity Home Services Holdco, Inc. |
|
12/28/2028 |
|
Commercial Services & Supplies |
|
11.45% |
|
SOFR+685 |
|
6,029 |
|
5,932 |
|
6,089 |
Integrative Nutrition, LLC |
|
1/31/2025 |
|
Diversified Consumer Services |
|
11.75% |
|
SOFR+715 |
|
11,287 |
|
11,274 |
|
9,707 |
|
|
|
|
|
|
(PIK 2.25%) |
|
|
|
|
|
|
|
|
Inventus Power, Inc. |
|
6/30/2025 |
|
Consumer Goods: Durable |
|
12.46% |
|
SOFR+761 |
|
8,164 |
|
8,094 |
|
8,041 |
ITI Holdings, Inc. |
|
3/3/2028 |
|
IT Services |
|
10.58% |
|
SOFR+565 |
|
3,900 |
|
3,855 |
|
3,900 |
Kinetic Purchaser, LLC |
|
11/10/2027 |
|
Personal Products |
|
10.75% |
|
SOFR+615 |
|
13,492 |
|
13,289 |
|
13,492 |
Lash OpCo, LLC |
|
2/18/2027 |
|
Personal Products |
|
12.94% |
|
SOFR+785 |
|
14,731 |
|
14,539 |
|
14,584 |
|
|
|
|
|
|
(PIK 5.10%) |
|
|
|
|
|
|
|
|
LAV Gear Holdings, Inc. (6) |
|
10/31/2025 |
|
Capital Equipment |
|
11.42% |
|
SOFR+643 |
|
12,125 |
|
12,102 |
|
11,907 |
LAV Gear Holdings, Inc. - Term Loan Incremental |
|
10/31/2025 |
|
Capital Equipment |
|
11.64% |
|
SOFR+640 |
|
2,861 |
|
2,856 |
|
2,810 |
Lightspeed Buyer Inc. |
|
2/3/2026 |
|
Healthcare Providers and Services |
|
10.15% |
|
SOFR+535 |
|
11,330 |
|
11,258 |
|
11,330 |
LJ Avalon Holdings, LLC |
|
1/31/2030 |
|
Environmental Industries |
|
10.48% |
|
SOFR+525 |
|
2,559 |
|
2,516 |
|
2,559 |
Loving Tan Intermediate II, Inc. |
|
5/31/2028 |
|
Consumer Products |
|
11.10% |
|
SOFR+650 |
|
7,407 |
|
7,288 |
|
7,296 |
Lucky Bucks, LLC - First-Out Term Loan (6) |
|
10/2/2028 |
|
Hotel, Gaming and Leisure |
|
12.77% |
|
SOFR+765 |
|
259 |
|
259 |
|
259 |
Lucky Bucks, LLC - Last-Out Term Loan |
|
10/2/2029 |
|
Hotel, Gaming and Leisure |
|
12.77% |
|
SOFR+765 |
|
518 |
|
518 |
|
518 |
MAG DS Corp |
|
4/1/2027 |
|
Aerospace and Defense |
|
10.20% |
|
SOFR+550 |
|
2,218 |
|
2,143 |
|
2,085 |
Magenta Buyer, LLC - First-Out Term Loan |
|
7/31/2028 |
|
Software |
|
12.13% |
|
SOFR+701 |
|
357 |
|
357 |
|
337 |
Magenta Buyer, LLC - Second-Out Term Loan |
|
7/31/2028 |
|
Software |
|
12.38% |
|
SOFR+801 |
|
452 |
|
452 |
|
310 |
Magenta Buyer, LLC - Third-Out Term Loan |
|
7/31/2028 |
|
Software |
|
11.63% |
|
SOFR+726 |
|
1,675 |
|
1,675 |
|
490 |
Marketplace Events, LLC - Super Priority First Lien Term Loan (6) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
10.38% |
|
SOFR+540 |
|
1,845 |
|
1,845 |
|
1,845 |
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3)(6) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
0.00% |
|
|
|
564 |
|
- |
|
- |
Marketplace Events, LLC (6) |
|
9/30/2026 |
|
Media: Diversified and Production |
|
10.53% |
|
SOFR+525 |
|
4,837 |
|
4,068 |
|
4,837 |
MBS Holdings, Inc. |
|
4/16/2027 |
|
Internet Software and Services |
|
10.59% |
|
SOFR+585 |
|
7,256 |
|
7,183 |
|
7,256 |
MBS Holdings, Inc. (New Issue) - Incremental |
|
4/16/2027 |
|
Internet Software and Services |
|
11.34% |
|
SOFR+660 |
|
523 |
|
514 |
|
528 |
MBS Holdings, Inc. (New Issue) - Second Incremental |
|
4/16/2027 |
|
Internet Software and Services |
|
11.09% |
|
SOFR+635 |
|
551 |
|
543 |
|
554 |
MDI Buyer, Inc. |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
10.60% |
|
SOFR+575 |
|
4,900 |
|
4,829 |
|
4,851 |
MDI Buyer, Inc. - Incremental |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
11.25% |
|
SOFR+600 |
|
1,416 |
|
1,395 |
|
1,409 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
PennantPark Senior Secured Loan Fund I LLC |
Consolidated Schedule of Investments |
September 30, 2024 ($ in thousands) |
Issuer Name (7) |
|
Maturity |
|
Industry |
|
Current |
|
|
Basis Point |
|
Par or Number of Shares |
|
|
Cost |
|
|
Fair Value(2) |
|
||||
Meadowlark Acquirer, LLC |
|
12/10/2027 |
|
Professional Services |
|
|
10.50 |
% |
|
SOFR+590 |
|
|
2,348 |
|
|
|
2,319 |
|
|
|
2,289 |
|
Medina Health, LLC |
|
10/20/2028 |
|
Healthcare and Pharmaceuticals |
|
|
10.85 |
% |
|
SOFR+625 |
|
|
19,199 |
|
|
|
18,911 |
|
|
|
19,199 |
|
Megawatt Acquisitionco, Inc |
|
3/1/2030 |
|
Electronic Equipment, Instruments, and Components |
|
|
9.85 |
% |
|
SOFR+525 |
|
|
15,671 |
|
|
|
15,453 |
|
|
|
14,794 |
|
Mission Critical Electronics, Inc. |
|
3/31/2025 |
|
Capital Equipment |
|
|
10.50 |
% |
|
SOFR+590 |
|
|
5,551 |
|
|
|
5,551 |
|
|
|
5,551 |
|
MOREGroup Holdings, Inc |
|
1/16/2030 |
|
Business Services |
|
|
10.35 |
% |
|
SOFR+575 |
|
|
13,067 |
|
|
|
12,891 |
|
|
|
12,871 |
|
Municipal Emergency Services, Inc. |
|
9/28/2027 |
|
Distributors |
|
|
9.75 |
% |
|
SOFR+515 |
|
|
3,395 |
|
|
|
3,355 |
|
|
|
3,395 |
|
NBH Group LLC |
|
8/19/2026 |
|
Healthcare, Education & Childcare |
|
|
11.05 |
% |
|
SOFR+585 |
|
|
10,602 |
|
|
|
10,504 |
|
|
|
10,284 |
|
NORA Acquisition, LLC |
|
8/31/2029 |
|
Healthcare Providers and Services |
|
|
10.95 |
% |
|
SOFR+635 |
|
|
21,274 |
|
|
|
20,913 |
|
|
|
21,274 |
|
One Stop Mailing, LLC |
|
5/7/2027 |
|
Air Freight and Logistics |
|
|
11.21 |
% |
|
SOFR+636 |
|
|
15,682 |
|
|
|
15,480 |
|
|
|
15,682 |
|
ORL Acquisitions, Inc. |
|
9/3/2027 |
|
Consumer Finance |
|
|
14.00 |
% |
|
SOFR+940 |
|
|
2,140 |
|
|
|
2,124 |
|
|
|
1,819 |
|
|
|
|
|
|
|
(PIK 7.50%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Output Services Group, Inc - First-Out Term Loan |
|
11/30/2028 |
|
Business Services |
|
|
13.75 |
% |
|
SOFR+843 |
|
|
821 |
|
|
|
821 |
|
|
|
821 |
|
Output Services Group, Inc - Last-Out Term Loan |
|
5/30/2028 |
|
Business Services |
|
|
12.00 |
% |
|
SOFR+668 |
|
|
1,667 |
|
|
|
1,667 |
|
|
|
1,667 |
|
Owl Acquisition, LLC |
|
2/4/2028 |
|
Professional Services |
|
|
10.20 |
% |
|
SOFR+535 |
|
|
3,893 |
|
|
|
3,842 |
|
|
|
3,825 |
|
Ox Two, LLC |
|
5/18/2026 |
|
Construction and Building |
|
|
11.12 |
% |
|
SOFR+651 |
|
|
4,307 |
|
|
|
4,282 |
|
|
|
4,307 |
|
Pacific Purchaser, LLC |
|
9/30/2028 |
|
Business Services |
|
|
11.51 |
% |
|
SOFR+625 |
|
|
11,938 |
|
|
|
11,745 |
|
|
|
11,914 |
|
PCS Midco, Inc |
|
3/1/2030 |
|
Diversified Consumer Services |
|
|
10.81 |
% |
|
SOFR+575 |
|
|
3,871 |
|
|
|
3,818 |
|
|
|
3,871 |
|
PH Beauty Holdings III, Inc. |
|
9/29/2025 |
|
Wholesale |
|
|
10.17 |
% |
|
SOFR+543 |
|
|
9,391 |
|
|
|
9,289 |
|
|
|
9,302 |
|
PL Acquisitionco, LLC |
|
11/9/2027 |
|
Textiles, Apparel and Luxury Goods |
|
|
11.99 |
% |
|
SOFR+725 |
|
|
7,816 |
|
|
|
7,733 |
|
|
|
6,253 |
|
|
|
|
|
|
|
(PIK 4.00%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Pragmatic Institute, LLC (5) |
|
7/6/2028 |
|
Education |
|
|
12.35 |
% |
|
SOFR+750 |
|
|
11,855 |
|
|
|
11,480 |
|
|
|
7,261 |
|
|
|
|
|
|
|
(PIK 12.35%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Quantic Electronics, LLC |
|
11/19/2026 |
|
Aerospace and Defense |
|
|
10.95 |
% |
|
SOFR+635 |
|
|
2,775 |
|
|
|
2,758 |
|
|
|
2,761 |
|
Rancho Health MSO, Inc. |
|
12/18/2025 |
|
Healthcare Providers and Services |
|
|
10.85 |
% |
|
SOFR+560 |
|
|
1,016 |
|
|
|
1,016 |
|
|
|
1,016 |
|
Reception Purchaser, LLC |
|
2/28/2028 |
|
Air Freight and Logistics |
|
|
10.75 |
% |
|
SOFR+615 |
|
|
4,875 |
|
|
|
4,828 |
|
|
|
3,656 |
|
Recteq, LLC |
|
1/29/2026 |
|
Leisure Products |
|
|
11.75 |
% |
|
SOFR+715 |
|
|
4,825 |
|
|
|
4,796 |
|
|
|
4,777 |
|
RTIC Subsidiary Holdings, LLC |
|
5/3/2029 |
|
Consumer Goods: Durable |
|
|
10.35 |
% |
|
SOFR+575 |
|
|
9,975 |
|
|
|
9,830 |
|
|
|
9,776 |
|
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
6/15/2029 |
|
High Tech Industries |
|
|
10.35 |
% |
|
SOFR+575 |
|
|
4,336 |
|
|
|
4,266 |
|
|
|
4,282 |
|
Safe Haven Defense US, LLC |
|
5/23/2029 |
|
Construction and Building |
|
|
9.85 |
% |
|
SOFR+525 |
|
|
9,973 |
|
|
|
9,830 |
|
|
|
9,873 |
|
Sales Benchmark Index LLC |
|
1/3/2025 |
|
Professional Services |
|
|
10.80 |
% |
|
SOFR+620 |
|
|
9,268 |
|
|
|
9,260 |
|
|
|
9,268 |
|
Sargent & Greenleaf Inc. |
|
12/20/2024 |
|
Wholesale |
|
|
12.45 |
% |
|
SOFR+760 |
|
|
4,916 |
|
|
|
4,906 |
|
|
|
4,916 |
|
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Schlesinger Global, Inc. |
|
7/14/2025 |
|
Business Services |
|
|
13.20 |
% |
|
SOFR+835 |
|
|
12,388 |
|
|
|
12,387 |
|
|
|
12,078 |
|
|
|
|
|
|
|
(PIK 0.50%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Seaway Buyer, LLC |
|
6/13/2029 |
|
Chemicals, Plastics and Rubber |
|
|
10.75 |
% |
|
SOFR+615 |
|
|
4,900 |
|
|
|
4,842 |
|
|
|
4,729 |
|
Sigma Defense Systems, LLC |
|
12/18/2027 |
|
Aerospace and Defense |
|
|
11.50 |
% |
|
SOFR+690 |
|
|
18,620 |
|
|
|
18,370 |
|
|
|
18,434 |
|
Simplicity Financial Marketing Group Holdings, Inc |
|
12/2/2026 |
|
Diversified Financial Services |
|
|
11.00 |
% |
|
SOFR+640 |
|
|
11,359 |
|
|
|
11,206 |
|
|
|
11,472 |
|
Skopima Consilio Parent, LLC |
|
5/17/2028 |
|
Business Services |
|
|
9.46 |
% |
|
SOFR+461 |
|
|
1,290 |
|
|
|
1,268 |
|
|
|
1,289 |
|
Smartronix, LLC |
|
11/23/2028 |
|
Aerospace and Defense |
|
|
10.35 |
% |
|
SOFR+610 |
|
|
4,863 |
|
|
|
4,800 |
|
|
|
4,863 |
|
Smile Brands Inc. |
|
10/14/2025 |
|
Healthcare and Pharmaceuticals |
|
|
10.20 |
% |
|
SOFR+550 |
|
|
11,887 |
|
|
|
11,860 |
|
|
|
10,520 |
|
|
|
|
|
|
|
(PIK 1.50%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Solutionreach, Inc. |
|
7/17/2025 |
|
Healthcare and Pharmaceuticals |
|
|
12.40 |
% |
|
SOFR+715 |
|
|
4,582 |
|
|
|
4,560 |
|
|
|
4,582 |
|
Spendmend Holdings LLC |
|
3/1/2028 |
|
Healthcare Technology |
|
|
10.25 |
% |
|
SOFR+565 |
|
|
4,070 |
|
|
|
4,017 |
|
|
|
4,070 |
|
Summit Behavioral Healthcare, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
|
9.31 |
% |
|
SOFR+425 |
|
|
1,777 |
|
|
|
1,700 |
|
|
|
1,653 |
|
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
8/16/2027 |
|
Aerospace and Defense |
|
|
10.26 |
% |
|
SOFR+500 |
|
|
14,588 |
|
|
|
14,445 |
|
|
|
14,558 |
|
TCG 3.0 Jogger Acquisitionco |
|
1/23/2029 |
|
Media |
|
|
11.10 |
% |
|
SOFR+650 |
|
|
19,626 |
|
|
|
19,312 |
|
|
|
19,430 |
|
Team Services Group, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
|
9.95 |
% |
|
SOFR+500 |
|
|
343 |
|
|
|
332 |
|
|
|
338 |
|
Teneo Holdings, LLC |
|
3/13/2031 |
|
Business Services |
|
|
9.60 |
% |
|
SOFR+475 |
|
|
5,473 |
|
|
|
5,418 |
|
|
|
5,490 |
|
The Bluebird Group LLC |
|
7/27/2026 |
|
Professional Services |
|
|
11.25 |
% |
|
SOFR+665 |
|
|
8,521 |
|
|
|
8,427 |
|
|
|
8,521 |
|
The Vertex Companies, LLC |
|
8/31/2027 |
|
Construction and Engineering |
|
|
10.95 |
% |
|
SOFR+610 |
|
|
7,636 |
|
|
|
7,538 |
|
|
|
7,639 |
|
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
11/24/2025 |
|
Consumer Goods: Non-Durable |
|
|
10.84 |
% |
|
SOFR+565 |
|
|
16,524 |
|
|
|
16,394 |
|
|
|
16,524 |
|
Transgo, LLC |
|
12/29/2028 |
|
Automotive |
|
|
10.60 |
% |
|
SOFR+575 |
|
|
18,552 |
|
|
|
18,293 |
|
|
|
18,552 |
|
TWS Acquisition Corporation |
|
6/16/2025 |
|
Diversified Consumer Services |
|
|
11.33 |
% |
|
SOFR+640 |
|
|
943 |
|
|
|
943 |
|
|
|
943 |
|
Tyto Athene, LLC |
|
4/1/2028 |
|
IT Services |
|
|
10.23 |
% |
|
SOFR+490 |
|
|
14,670 |
|
|
|
14,585 |
|
|
|
14,376 |
|
Urology Management Holdings, Inc. |
|
6/15/2026 |
|
Healthcare and Pharmaceuticals |
|
|
10.76 |
% |
|
SOFR+550 |
|
|
6,823 |
|
|
|
6,742 |
|
|
|
6,755 |
|
Walker Edison Furniture Company LLC (4)(6) |
|
3/1/2029 |
|
Wholesale |
|
|
0.00 |
% |
|
|
|
|
5,441 |
|
|
|
4,986 |
|
|
|
490 |
|
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (4)(6) |
|
3/1/2029 |
|
Wholesale |
|
|
0.00 |
% |
|
|
|
|
1,667 |
|
|
|
1,667 |
|
|
|
1,667 |
|
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(4)(6) |
|
3/1/2029 |
|
Wholesale |
|
|
0.00 |
% |
|
|
|
|
83 |
|
|
|
- |
|
|
|
(76 |
) |
Watchtower Buyer, LLC |
|
12/3/2029 |
|
Diversified Consumer Services |
|
|
10.60 |
% |
|
SOFR+600 |
|
|
12,189 |
|
|
|
12,007 |
|
|
|
12,067 |
|
Wildcat Buyerco, Inc. |
|
2/27/2027 |
|
Electronic Equipment, Instruments, and Components |
|
|
10.60 |
% |
|
SOFR+575 |
|
|
16,014 |
|
|
|
15,916 |
|
|
|
16,014 |
|
Zips Car Wash, LLC |
|
12/31/2024 |
|
Automobiles |
|
|
12.46 |
% |
|
SOFR+740 |
|
|
16,736 |
|
|
|
16,722 |
|
|
|
15,983 |
|
|
|
|
|
|
|
(PIK 1.50%) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
920,485 |
|
|
|
906,532 |
|
||
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
PennantPark Senior Secured Loan Fund I LLC |
Consolidated Schedule of Investments |
September 30, 2024 ($ in thousands) |
Issuer Name (7) |
|
Maturity |
|
|
Industry |
|
Current |
|
|
Basis Point |
|
|
Par or Number of Shares |
|
|
Cost |
|
|
Fair Value(2) |
|
||||||
Equity Securities - 10.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
New Insight Holdings, Inc. |
|
|
— |
|
|
Diversified Consumer Services |
|
|
— |
|
|
|
— |
|
|
|
116 |
|
|
|
2,031 |
|
|
|
2,031 |
|
Lucky Bucks, LLC |
|
|
— |
|
|
Hotel, Gaming and Leisure |
|
|
— |
|
|
|
— |
|
|
|
74 |
|
|
|
2,062 |
|
|
|
904 |
|
New MPE Holdings, LLC |
|
|
— |
|
|
Media: Diversified and Production |
|
|
— |
|
|
|
— |
|
|
|
- |
|
|
|
- |
|
|
|
2,710 |
|
Output Services Group, Inc |
|
|
— |
|
|
Business Services |
|
|
— |
|
|
|
— |
|
|
|
126 |
|
|
|
1,012 |
|
|
|
1,104 |
|
Walker Edison Furniture - Common Equity |
|
|
— |
|
|
Wholesale |
|
|
— |
|
|
|
— |
|
|
|
36 |
|
|
|
3,393 |
|
|
|
- |
|
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,498 |
|
|
|
6,749 |
|
||||
Total Investments - 1,415.0% |
|
|
|
|
|
|
|
|
|
|
|
928,983 |
|
|
|
913,281 |
|
|||||||||
Cash and Cash Equivalents - 106.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,429 |
|
|
|
68,429 |
|
||||
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
68,429 |
|
|
|
68,429 |
|
||||
Total Investments and Cash Equivalents —1,521.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
997,412 |
|
|
$ |
981,710 |
|
||||
Liabilities in Excess of Other Assets — (1,421.0)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(917,163 |
) |
|||||
Members' Equity—100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
64,547 |
|
|||||
(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable Secured Overnight Financing Rate or "SOFR". The spread may change based on the type of rate used. The terms in the Consolidated Schedule of Investments disclose the actual interest rate in effect as of the reporting period. All securities are subject to a SOFR floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any. |
(2) Valued based on PSSL’s accounting policy. |
(3) Represents the purchase of a security with a delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded. (4) Non-accrual security. (5) Partial PIK non-accrual security. (6) The securities, or a portion thereof, are not 1) pledged as collateral under the Credit Facility and held through Funding I; or, 2) securing the 2035 Asset-Backed Debt and held through PennantPark CLO VI, LLC, or, 3) securing the 2036 Asset-Backed Debt and held through PennantPark CLO II, Ltd. (7) All investments are in US Companies unless noted otherwise. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9
PennantPark Senior Secured Loan Fund I LLC
Consolidated Schedule of Investments
September 30, 2023
($ in thousand)
Issuer Name (6) |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par or Number of Shares |
|
Cost |
|
Fair Value (2) |
First Lien Secured Debt - 1,347.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A1 Garage Merger Sub, LLC |
|
12/22/2028 |
|
Commercial Services & Supplies |
|
11.84% |
|
SOFR+660 |
|
2,940 |
|
$2,886 |
|
$2,925 |
Ad.net Acquisition, LLC |
|
5/7/2026 |
|
Media |
|
11.65% |
|
SOFR+626 |
|
8,798 |
|
8,723 |
|
8,754 |
Alpine Acquisition Corp II |
|
11/30/2026 |
|
Containers and Packaging |
|
11.24% |
|
SOFR+600 |
|
12,852 |
|
12,535 |
|
12,338 |
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
5/23/2024 |
|
Media: Advertising, Printing & Publishing |
|
11.04% |
|
SOFR+550 |
|
5,001 |
|
4,971 |
|
4,913 |
Anteriad Holdings Inc (fka MeritDirect) March 2023 |
|
5/23/2024 |
|
Media: Advertising, Printing & Publishing |
|
12.04% |
|
SOFR+650 |
|
4,875 |
|
4,817 |
|
4,814 |
Any Hour Services |
|
7/21/2027 |
|
Professional Services |
|
11.59% |
|
SOFR+585 |
|
7,510 |
|
7,348 |
|
7,360 |
Apex Service Partners, LLC |
|
7/31/2025 |
|
Diversified Consumer Services |
|
10.52% |
|
SOFR+525 |
|
1,002 |
|
1,002 |
|
1,000 |
Apex Service Partners, LLC Term Loan B |
|
7/31/2025 |
|
Diversified Consumer Services |
|
11.04% |
|
SOFR+550 |
|
2,187 |
|
2,187 |
|
2,181 |
Apex Service Partners, LLC Term Loan C |
|
7/31/2025 |
|
Diversified Consumer Services |
|
10.69% |
|
SOFR+525 |
|
11,013 |
|
10,972 |
|
10,985 |
Applied Technical Services, LLC |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
11.54% |
|
SOFR+615 |
|
9,579 |
|
9,475 |
|
9,387 |
Applied Technical Services, LLC - DDTL Unfunded (3) |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
|
|
|
|
194 |
|
- |
|
(2) |
Arcfield Acquisition Corp. |
|
8/3/2029 |
|
Aerospace and Defense |
|
11.62% |
|
SOFR+625 |
|
9,218 |
|
9,093 |
|
9,126 |
Beta Plus Technologies, Inc. |
|
7/1/2029 |
|
Business Services |
|
11.14% |
|
SOFR+575 |
|
4,950 |
|
4,863 |
|
4,604 |
BioDerm, Inc. |
|
1/31/2028 |
|
Healthcare and Pharmaceuticals |
|
11.83% |
|
SOFR+650 |
|
8,978 |
|
8,874 |
|
8,933 |
Blackhawk Industrial Distribution, Inc. |
|
9/17/2026 |
|
Distributors |
|
11.79% |
|
SOFR+640 |
|
15,132 |
|
14,928 |
|
14,905 |
Broder Bros., Co. |
|
12/4/2025 |
|
Consumer Products |
|
11.50% |
|
SOFR+626 |
|
2,349 |
|
2,349 |
|
2,349 |
Burgess Point Purchaser Corporation |
|
9/26/2029 |
|
Automotive |
|
10.67% |
|
SOFR+525 |
|
447 |
|
418 |
|
420 |
By Light Professional IT Services, LLC |
|
5/16/2025 |
|
High Tech Industries |
|
12.43% |
|
SOFR+688 |
|
13,821 |
|
13,778 |
|
13,579 |
Cadence Aerospace, LLC (5) |
|
11/14/2023 |
|
Aerospace and Defense |
|
12.07% |
|
SOFR+665 |
|
4,011 |
|
4,010 |
|
4,011 |
|
|
|
|
|
|
(PIK 2.00%) |
|
|
|
|
|
|
|
|
Cartessa Aesthetics, LLC |
|
6/14/2028 |
|
Distributors |
|
11.39% |
|
SOFR+600 |
|
9,636 |
|
9,509 |
|
9,636 |
CF512, Inc. |
|
8/20/2026 |
|
Media |
|
11.60% |
|
SOFR+619 |
|
6,820 |
|
6,722 |
|
6,684 |
CHA Holdings, Inc. |
|
4/10/2025 |
|
Construction and Engineering |
|
10.15% |
|
SOFR+476 |
|
5,499 |
|
5,455 |
|
5,499 |
Challenger Performance Optimization, Inc. (5) |
|
8/31/2024 |
|
Business Services |
|
12.18% |
|
SOFR+675 |
|
9,232 |
|
9,201 |
|
8,955 |
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
Confluent Health, LLC |
|
10/28/2028 |
|
Healthcare and Pharmaceuticals |
|
9.32% |
|
SOFR+400 |
|
6,797 |
|
6,559 |
|
6,445 |
Connatix Buyer, Inc. |
|
7/13/2027 |
|
Media |
|
11.16% |
|
SOFR+576 |
|
3,815 |
|
3,762 |
|
3,681 |
Crane 1 Services, Inc. |
|
8/16/2027 |
|
Commercial Services & Supplies |
|
10.90% |
|
SOFR+551 |
|
2,089 |
|
2,067 |
|
2,079 |
Dr. Squatch, LLC |
|
8/31/2027 |
|
Personal Products |
|
11.24% |
|
SOFR+585 |
|
14,712 |
|
14,511 |
|
14,712 |
DRI Holding Inc. |
|
12/21/2028 |
|
Media |
|
10.67% |
|
SOFR+525 |
|
2,627 |
|
2,418 |
|
2,394 |
DRS Holdings III, Inc. |
|
11/3/2025 |
|
Consumer Goods: Durable |
|
11.79% |
|
SOFR+640 |
|
14,429 |
|
14,376 |
|
14,256 |
Duraco Specialty Tapes LLC |
|
6/30/2024 |
|
Containers and Packaging |
|
11.89% |
|
SOFR+650 |
|
10,904 |
|
10,838 |
|
10,740 |
ECL Entertainment, LLC |
|
8/31/2030 |
|
Hotel, Gaming and Leisure |
|
10.07% |
|
SOFR+475 |
|
5,000 |
|
4,900 |
|
4,985 |
EDS Buyer, LLC |
|
1/10/2029 |
|
Electronic Equipment, Instruments, and Components |
|
11.64% |
|
SOFR+625 |
|
8,955 |
|
8,833 |
|
8,821 |
Electro Rent Corporation |
|
1/17/2024 |
|
Electronic Equipment, Instruments, and Components |
|
11.00% |
|
SOFR+550 |
|
2,219 |
|
2,200 |
|
2,171 |
Exigo Intermediate II, LLC |
|
3/15/2027 |
|
Software |
|
11.17% |
|
SOFR+585 |
|
12,675 |
|
12,505 |
|
12,422 |
ETE Intermediate II, LLC |
|
5/29/2029 |
|
Diversified Consumer Services |
|
11.89% |
|
SOFR+650 |
|
12,404 |
|
12,154 |
|
12,193 |
Fairbanks Morse Defense |
|
6/17/2028 |
|
Aerospace and Defense |
|
10.40% |
|
SOFR+475 |
|
10,195 |
|
10,143 |
|
10,114 |
Global Holdings InterCo LLC |
|
3/16/2026 |
|
Diversified Financial Services |
|
11.96% |
|
SOFR+660 |
|
3,736 |
|
3,724 |
|
3,549 |
Graffiti Buyer, Inc. |
|
8/10/2027 |
|
Trading Companies & Distributors |
|
10.99% |
|
SOFR+575 |
|
2,345 |
|
2,316 |
|
2,322 |
Hancock Roofing and Construction L.L.C. |
|
12/31/2026 |
|
Insurance |
|
10.92% |
|
SOFR+560 |
|
2,250 |
|
2,217 |
|
2,194 |
Holdco Sands Intermediate, LLC |
|
11/23/2028 |
|
Aerospace and Defense |
|
11.32% |
|
SOFR+585 |
|
4,913 |
|
4,838 |
|
4,913 |
HW Holdco, LLC |
|
12/10/2024 |
|
Media |
|
11.75% |
|
SOFR+640 |
|
3,014 |
|
2,988 |
|
2,968 |
Imagine Acquisitionco, LLC |
|
11/15/2027 |
|
Software |
|
10.72% |
|
SOFR+535 |
|
9,248 |
|
9,075 |
|
9,110 |
Inception Fertility Ventures, LLC |
|
12/31/2024 |
|
Healthcare Providers and Services |
|
12.51% |
|
SOFR+715 |
|
16,453 |
|
16,257 |
|
16,453 |
Infinity Home Services Holdco, Inc. |
|
12/28/2028 |
|
Commercial Services & Supplies |
|
12.24% |
|
SOFR+685 |
|
6,090 |
|
5,979 |
|
6,090 |
Integrated Data Services |
|
8/1/2029 |
|
Business Services |
|
11.87% |
|
SOFR+650 |
|
18,904 |
|
18,532 |
|
18,463 |
Integrative Nutrition, LLC |
|
1/31/2025 |
|
Diversified Consumer Services |
|
12.54% |
|
SOFR+700 |
|
11,105 |
|
11,083 |
|
10,439 |
|
|
|
|
|
|
(PIK 2.25%) |
|
|
|
|
|
|
|
|
Integrity Marketing Acquisition, LLC |
|
8/27/2026 |
|
Insurance |
|
11.57% |
|
SOFR+575 |
|
5,906 |
|
5,851 |
|
5,847 |
Inventus Power, Inc. |
|
6/30/2025 |
|
Consumer Goods: Durable |
|
12.93% |
|
SOFR+761 |
|
8,246 |
|
8,104 |
|
8,080 |
ITI Holdings, Inc. |
|
3/3/2028 |
|
IT Services |
|
11.06% |
|
SOFR+560 |
|
3,940 |
|
3,886 |
|
3,861 |
K2 Pure Solutions NoCal, L.P. |
|
12/20/2023 |
|
Chemicals, Plastics and Rubber |
|
13.42% |
|
SOFR+810 |
|
15,509 |
|
15,487 |
|
15,509 |
Kinetic Purchaser, LLC |
|
11/10/2027 |
|
Personal Products |
|
11.54% |
|
SOFR+615 |
|
16,662 |
|
16,346 |
|
16,412 |
Lash OpCo, LLC |
|
2/18/2027 |
|
Personal Products |
|
12.13% |
|
SOFR+675 |
|
14,210 |
|
13,989 |
|
14,068 |
LAV Gear Holdings, Inc. |
|
10/31/2024 |
|
Capital Equipment |
|
11.74% |
|
SOFR+643 |
|
15,042 |
|
14,997 |
|
14,862 |
Lightspeed Buyer Inc. |
|
2/3/2026 |
|
Healthcare Providers and Services |
|
10.70% |
|
SOFR+535 |
|
12,056 |
|
11,911 |
|
11,935 |
LJ Avalon Holdings, LLC |
|
1/31/2030 |
|
Environmental Industries |
|
11.77% |
|
SOFR+640 |
|
2,585 |
|
2,537 |
|
2,534 |
Loving Tan Intermediate II, Inc. |
|
5/26/2028 |
|
Consumer Products |
|
12.39% |
|
SOFR+700 |
|
7,481 |
|
7,337 |
|
7,369 |
Lucky Bucks, LLC (4) |
|
7/20/2027 |
|
Hotel, Gaming and Leisure |
|
0.00% |
|
|
|
4,489 |
|
4,207 |
|
1,182 |
Lucky Bucks. LLC - OpCo DIP Loans (5) |
|
9/30/2025 |
|
Hotel, Gaming and Leisure |
|
15.33% |
|
SOFR+1000 |
|
160 |
|
158 |
|
160 |
MAG DS Corp |
|
4/1/2027 |
|
Aerospace and Defense |
|
10.99% |
|
SOFR+550 |
|
2,097 |
|
2,007 |
|
1,986 |
Magenta Buyer, LLC |
|
7/31/2028 |
|
Software |
|
10.63% |
|
SOFR+500 |
|
3,006 |
|
2,845 |
|
2,228 |
Marketplace Events, LLC - Super Priority First Lien Term Loan (5) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
10.94% |
|
SOFR+525 |
|
647 |
|
647 |
|
647 |
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3)(5) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
|
|
|
|
589 |
|
- |
|
- |
Marketplace Events, LLC (5) |
|
9/30/2026 |
|
Media: Diversified and Production |
|
10.94% |
|
SOFR+525 |
|
4,837 |
|
3,782 |
|
4,837 |
Mars Acquisition Holdings Corp. |
|
5/14/2026 |
|
Media |
|
11.04% |
|
SOFR+565 |
|
11,588 |
|
11,476 |
|
11,472 |
MBS Holdings, Inc. |
|
4/16/2027 |
|
Internet Software and Services |
|
11.17% |
|
SOFR+585 |
|
7,859 |
|
7,758 |
|
7,749 |
MDI Buyer, Inc. |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
11.32% |
|
SOFR+600 |
|
6,380 |
|
6,271 |
|
6,244 |
Meadowlark Acquirer, LLC |
|
12/10/2027 |
|
Professional Services |
|
11.04% |
|
SOFR+565 |
|
2,372 |
|
2,336 |
|
2,312 |
Mission Critical Electronics, Inc. |
|
3/28/2024 |
|
Capital Equipment |
|
11.29% |
|
SOFR+515 |
|
5,769 |
|
5,763 |
|
5,740 |
Municipal Emergency Services, Inc. |
|
9/28/2027 |
|
Distributors |
|
11.04% |
|
SOFR+565 |
|
3,430 |
|
3,380 |
|
3,355 |
NBH Group LLC |
|
8/19/2026 |
|
Healthcare, Education & Childcare |
|
10.93% |
|
SOFR+525 |
|
10,711 |
|
10,572 |
|
10,497 |
Neptune Flood Incorporated |
|
5/9/2029 |
|
Insurance |
|
11.97% |
|
SOFR+650 |
|
5,042 |
|
4,970 |
|
5,042 |
New Milani Group LLC |
|
6/6/2024 |
|
Consumer Goods: Non-Durable |
|
10.92% |
|
SOFR+550 |
|
14,213 |
|
14,194 |
|
14,213 |
One Stop Mailing, LLC |
|
5/7/2027 |
|
Air Freight and Logistics |
|
11.68% |
|
SOFR+636 |
|
15,849 |
|
15,588 |
|
15,849 |
ORL Acquisitions, Inc. |
|
9/3/2027 |
|
Consumer Finance |
|
12.84% |
|
SOFR+725 |
|
2,223 |
|
2,202 |
|
2,023 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10
PennantPark Senior Secured Loan Fund I LLC
Consolidated Schedule of Investments
September 30, 2023
($ in thousands)
Issuer Name (6) |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par or Number of Shares |
|
Cost |
|
Fair Value (2) |
Output Services Group, Inc. (4) |
|
6/27/2026 |
|
Business Services |
|
0.00% |
|
— |
|
7,759 |
|
7,689 |
|
1,513 |
Owl Acquisition, LLC |
|
2/4/2028 |
|
Professional Services |
|
10.80% |
|
SOFR+575 |
|
3,893 |
|
3,832 |
|
3,834 |
Ox Two, LLC |
|
5/18/2026 |
|
Construction and Building |
|
12.90% |
|
SOFR+751 |
|
4,345 |
|
4,306 |
|
4,269 |
Peaquod Merger Sub, Inc. |
|
12/2/2026 |
|
Diversified Financial Services |
|
11.79% |
|
SOFR+640 |
|
11,474 |
|
11,267 |
|
11,244 |
PH Beauty Holdings III, Inc. |
|
9/29/2025 |
|
Wholesale |
|
10.68% |
|
SOFR+500 |
|
9,493 |
|
9,282 |
|
7,974 |
PL Acquisitionco, LLC |
|
11/9/2027 |
|
Textiles, Apparel and Luxury Goods |
|
12.42% |
|
SOFR+710 |
|
7,565 |
|
7,467 |
|
6,809 |
|
|
|
|
|
|
(PIK 4.00%) |
|
|
|
|
|
|
|
|
PlayPower, Inc. |
|
5/8/2026 |
|
Consumer Goods: Durable |
|
10.57% |
|
SOFR+565 |
|
2,551 |
|
2,491 |
|
2,436 |
Pragmatic Institute, LLC |
|
7/6/2028 |
|
Education |
|
11.17% |
|
SOFR+575 |
|
11,138 |
|
10,999 |
|
10,636 |
Quantic Electronics, LLC |
|
11/19/2026 |
|
Aerospace and Defense |
|
11.74% |
|
SOFR+635 |
|
2,803 |
|
$2,776 |
|
$2,761 |
Rancho Health MSO, Inc. |
|
12/18/2025 |
|
Healthcare Providers and Services |
|
11.22% |
|
SOFR+585 |
|
1,029 |
|
1,029 |
|
1,029 |
Reception Purchaser, LLC |
|
2/28/2028 |
|
Air Freight and Logistics |
|
11.54% |
|
SOFR+600 |
|
4,938 |
|
4,876 |
|
4,740 |
Recteq, LLC |
|
1/29/2026 |
|
Leisure Products |
|
12.54% |
|
SOFR+700 |
|
4,875 |
|
4,825 |
|
4,729 |
Research Now Group, LLC and Dynata, LLC |
|
12/20/2024 |
|
Diversified Consumer Services |
|
11.13% |
|
SOFR+576 |
|
12,432 |
|
12,322 |
|
10,878 |
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
6/15/2029 |
|
High Tech Industries |
|
11.52% |
|
SOFR+625 |
|
3,749 |
|
3,676 |
|
3,692 |
Sales Benchmark Index LLC |
|
1/3/2025 |
|
Professional Services |
|
11.59% |
|
SOFR+620 |
|
9,522 |
|
9,474 |
|
9,475 |
Sargent & Greenleaf Inc. |
|
12/20/2024 |
|
Wholesale |
|
12.92% |
|
SOFR+760 |
|
5,167 |
|
5,148 |
|
5,116 |
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
Schlesinger Global, Inc. |
|
7/14/2025 |
|
Business Services |
|
12.52% |
|
SOFR+715 |
|
11,791 |
|
11,777 |
|
11,407 |
|
|
|
|
|
|
(PIK 0.50%) |
|
|
|
|
|
|
|
|
Seaway Buyer, LLC |
|
6/13/2029 |
|
Chemicals, Plastics and Rubber |
|
11.54% |
|
SOFR+615 |
|
4,950 |
|
4,884 |
|
4,802 |
Sigma Defense Systems, LLC |
|
12/18/2025 |
|
Aerospace and Defense |
|
14.04% |
|
SOFR+865 |
|
13,787 |
|
13,579 |
|
13,580 |
Skopima Consilio Parent, LLC |
|
5/17/2028 |
|
Business Services |
|
9.93% |
|
SOFR+450 |
|
1,300 |
|
1,274 |
|
1,272 |
Smile Brands Inc. |
|
10/14/2025 |
|
Healthcare and Pharmaceuticals |
|
9.70% |
|
SOFR+450 |
|
11,796 |
|
11,739 |
|
10,598 |
Solutionreach, Inc. |
|
7/17/2025 |
|
Healthcare and Pharmaceuticals |
|
12.37% |
|
SOFR+700 |
|
4,582 |
|
4,577 |
|
4,563 |
Spendmend Holdings LLC |
|
3/1/2028 |
|
Healthcare Technology |
|
11.04% |
|
SOFR+565 |
|
4,112 |
|
4,047 |
|
4,022 |
STV Group Incorporated |
|
12/11/2026 |
|
Construction and Building |
|
10.67% |
|
SOFR+535 |
|
9,075 |
|
9,025 |
|
8,894 |
Summit Behavioral Healthcare, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
10.43% |
|
SOFR+475 |
|
1,786 |
|
1,696 |
|
1,779 |
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
8/16/2027 |
|
Aerospace and Defense |
|
11.49% |
|
SOFR+600 |
|
14,738 |
|
14,540 |
|
14,575 |
Team Services Group, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
10.75% |
|
SOFR+500 |
|
346 |
|
333 |
|
339 |
Teneo Holdings LLC |
|
7/18/2025 |
|
Business Services |
|
10.67% |
|
SOFR+535 |
|
2,262 |
|
2,261 |
|
2,259 |
The Aegis Technologies Group, LLC |
|
10/31/2025 |
|
Aerospace and Defense |
|
12.04% |
|
SOFR+665 |
|
5,602 |
|
5,560 |
|
5,518 |
The Bluebird Group LLC |
|
7/27/2026 |
|
Professional Services |
|
12.79% |
|
SOFR+700 |
|
5,403 |
|
5,336 |
|
5,382 |
The Vertex Companies, LLC |
|
8/31/2027 |
|
Construction and Engineering |
|
11.72% |
|
SOFR+635 |
|
7,716 |
|
7,591 |
|
7,656 |
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
11/24/2025 |
|
Consumer Goods: Non-Durable |
|
10.95% |
|
SOFR+565 |
|
8,654 |
|
8,556 |
|
8,654 |
TWS Acquisition Corporation |
|
6/16/2025 |
|
Diversified Consumer Services |
|
11.80% |
|
SOFR+625 |
|
4,316 |
|
4,310 |
|
4,316 |
Tyto Athene, LLC |
|
4/1/2028 |
|
IT Services |
|
10.90% |
|
SOFR+550 |
|
14,670 |
|
14,565 |
|
13,379 |
Urology Management Holdings, Inc. |
|
6/15/2026 |
|
Healthcare and Pharmaceuticals |
|
11.79% |
|
SOFR+665 |
|
6,892 |
|
6,775 |
|
6,749 |
Walker Edison Furniture Company LLC (5) |
|
3/31/2027 |
|
Wholesale |
|
12.18% |
|
SOFR+685 |
|
3,521 |
|
3,521 |
|
3,521 |
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility (5) |
|
3/31/2027 |
|
Wholesale |
|
11.68% |
|
SOFR+635 |
|
1,667 |
|
1,667 |
|
1,667 |
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)(5) |
|
3/31/2027 |
|
Wholesale |
|
|
|
|
|
333 |
|
|
|
|
Wildcat Buyerco, Inc. |
|
2/27/2026 |
|
Electronic Equipment, Instruments, and Components |
|
10.54% |
|
SOFR+515 |
|
10,565 |
|
10,491 |
|
10,460 |
Zips Car Wash, LLC |
|
3/1/2024 |
|
Automobiles |
|
12.67% |
|
SOFR+735 |
|
16,732 |
|
16,660 |
|
16,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
801,215 |
|
783,598 |
Equity Securities - 3.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New MPE Holdings, LLC |
|
— |
|
Media: Diversified and Production |
|
— |
|
— |
|
- |
|
- |
|
495 |
Walker Edison Furniture - Common Equity |
|
— |
|
Wholesale |
|
|
|
|
|
36 |
|
3,393 |
|
1,766 |
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
3,393 |
|
2,261 |
Total Investments - 1,351.4% |
|
|
|
|
|
|
|
804,608 |
|
785,859 |
||||
Cash and Cash Equivalents - 133.2% |
|
|
|
|
|
|
|
|
|
|
||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
77,446 |
|
77,446 |
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
77,446 |
|
77,446 |
Total Investments and Cash Equivalents —1,484.6% |
|
|
|
|
|
|
|
|
|
|
|
$882,054 |
|
$863,305 |
Liabilities in Excess of Other Assets — (1,384.6)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(805,155) |
Members' Equity—100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
$58,150 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable Secured Overnight Financing Rate or "SOFR". The spread may change based on the type of rate used. The terms in the Consolidated Schedule of Investments disclose the actual interest rate in effect as of the reporting period. All securities are subject to a SOFR floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any. |
(2) Valued based on PSSL’s accounting policy. |
(3) Represents the purchase of a security with a delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded. (4) Non-accrual security. (5) The securities, or a portion thereof, are not 1) pledged as collateral under the Credit Facility and held through Funding I; or, 2) securing the 2032 Asset-Backed Debt and held through PennantPark CLO II, Ltd., or, 3) securing the 2035 Asset-Backed Debt and held through PennantPark CLO VI, LLC. (6) All investments are in US Companies unless noted otherwise. |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
PennantPark Senior Secured Loan Fund I LLC ("PSSL"), is organized as a Delaware limited liability company and commenced operations in May 2017. PSSL is a joint venture between PennantPark Floating Rate Capital Ltd. ("PFLT") and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation (NYSE: KMPR), ("Kemper"). In this report, except where the context suggests otherwise, the terms “Company,” “we,” “our,” or “us” refer to PSSL and its consolidated subsidiary.
The Company's investment objectives are to generate current income and capital appreciation while seeking to preserve capital. We seek to achieve our investment objective by investing primarily in loans bearing a variable-rate of interest, or floating rate loans, and other investments made to U.S. middle-market companies whose debt is rated below investment grade. Floating rate loans pay interest at variable rates, which are determined periodically, on the basis of a floating base lending rate such as the Secured Overnight Financing Rate ("SOFR"), with or without a floor, plus a fixed spread.
PFLT and Kemper (individually a "Member" and collectively the "Members") provide capital to PSSL in the form of notes and equity interests. As of September 30, 2024 and 2023, PFLT and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding notes and equity interests. The administrative agent of the Company is PennantPark Investment Administration, LLC, (the "Administrative Agent"). The Bank of New York Mellon Corporation, or the Sub-Administrator, provides certain services to the Administrative Agent with respect to certain accounting matters and has the responsibility for the official books and records.
PFLT and Kemper each appointed two members to PSSL’s four-person board of directors and investment committee. All material decisions with respect to PSSL, including those involving its investment portfolio, require unanimous approval of a quorum of the board of directors or investment committee. Quorum is defined as (i) the presence of two members of the board of directors or investment committee; provided that at least one individual is present that was elected, designated or appointed by each of the Members; (ii) the presence of three members of the board of directors or investment committee, provided that the individual that was elected, designated or appointed by the Member with only one individual present shall be entitled to cast two votes on each matter; and (iii) the presence of four members of the board of directors or investment committee shall constitute a quorum, provided that two individuals are present that were elected, designated or appointed by each of the Members.
Pennant Park Senior Secured Loan Facility II, LLC ("PSSL II"), a wholly-owned subsidiary of PSSL, was formed in January 2021 for the purpose of entering into a senior secured revolving credit facility with Ally Bank (see Note 10).
PennantPark CLO II, Ltd. ("CLO II") is a wholly-owned subsidiary and was formed in January 2021 for the purpose of executing a debt securitization (See Note 10).
PennantPark CLO VI, LLC ("CLO VI") is a wholly-owned subsidiary and was formed in April 2023 for the purpose of executing a debt securitization (See Note 10).
2. SIGNIFICANT ACCOUNTING POLICIES
PSSL is considered an investment company under U.S. generally accepted accounting principles ("GAAP") and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. References to the Accounting Standards Codification, as amended ("ASC"), serves as a source of accounting literature. Subsequent events are evaluated and recognized or disclosed as appropriate for events occurring through the date the consolidated financial statements are available to be issued. The preparation of our consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reported periods. In the opinion of the Company, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. All intercompany balances and transactions have been eliminated in consolidation.
12
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
Our significant accounting policies consistently applied are as follows:
(a) Investment Valuations
We expect that there may not be readily available market values for many of our investments, which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy, described herein, and a consistently applied valuation process. With respect to investments for which there is no readily available market value, the factors that the board of directors may consider in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event in determining our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 4.
Our portfolio generally consists of illiquid securities, including debt investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:
Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at bid prices obtained from at least two brokers or dealers, if available, or otherwise from a principal market maker or a primary market dealer. PennantPark Investment Advisers, LLC assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
(b) Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses
Security transactions are recorded on a trade date basis. We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual payment-in-kind, or PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable, interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount ("OID"), market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as
13
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
interest expense. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned.
Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if there is reasonable doubt that principal or interest will be collected. Accrued interest receivable is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon the Company’ judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in the Company’ judgment, are likely to remain current. As of September 30, 2024, we had two portfolio companies on non-accrual, representing 2.0% and 1.0% of our overall portfolio on a cost and fair value basis. As of September 30, 2023, we had two portfolio companies on non-accrual, representing 1.5% and 0.3% of our overall portfolio on a cost and fair value basis.
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
(c) Income Taxes
PSSL is classified as a partnership for U.S. federal income tax purposes and is not subject to U.S. federal income tax. Accordingly, no provisions for U.S. income taxes have been made. The Members are responsible for reporting their share of the PSSL’s income or loss on their U.S. income tax returns.
In accordance with FASB ASC Topic 740, the Company is required to determine whether a tax position of PSSL is more likely than not, based on the technical merits of the position, to be sustained upon examination including resolution of any related appeals or litigation processes. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in PSSL recording a tax liability that would reduce members’ capital.
As of and for the years ended September 30, 2024 and 2023, management has determined that there were no material uncertain income tax positions.
(d) Foreign Currency Translation
Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:
Although Members’ capital and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair values of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S. companies or U.S. government securities.
14
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
(e) Consolidation
As explained by ASC paragraph 946-810-45, PSSL will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to us.
(f) Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update, or ASU, No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” or ASU 2020-04. The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company utilized the optional expedients and exceptions provided by ASU 2020-04 during the year ended September 30, 2023, the effect of which was not material to the consolidated financial statements and the notes thereto.
In June 2022, the FASB issued Accounting Standards Update No. 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions," or ASU 2022-03, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early application is permitted. The Company is currently evaluating the impact the adoption of this new accounting standard will have on its consolidated financial statements, but the impact of the adoption is not expected to be material.
3. AGREEMENTS AND RELATED PARTY TRANSACTIONS
On June 10, 2022, the Company issued a capital call to PFLT totaling $28.4 million consisting of Member notes of $19.9 million and equity interest of $8.5 million. PFLT fulfilled the capital call by contributing $28.0 million of securities and $0.4 million in cash to the Company.
For the years ended September 30, 2024 and 2023, PSSL purchased $253.6 million and $158.2 million, in investments from PFLT, respectively.
As of September 30, 2024 and 2023, PSSL had a receivable from PFLT of none and and $0.4 million, respectively,
presented as a due from affiliate on the consolidated statements of assets, liabilities and members' equity. These amounts are related to cash owed to PSSL from PFLT in connection with trades between funds. Additionally, PSSL had a receivable from the Administrative Agent of $0.1 million as of September 30, 2024 related to loan agency fees received by the Administrative Agent and owed to PSSL.
For the years ended September 30, 2024 and 2023, PSSL incurred $2.4 million and $2.1 million of administration fees to the Administrative Agent, respectively. The Administrative Agent provides administration services to PSSL at an annual rate of 0.25% of average gross assets payable quarterly in arrears and calculated based on average gross assets measured at cost at the end of the two recently completed calendar quarters.
For the years ended September 30, 2024 and 2023, PSSL incurred $34.2 million and $30.3 million of interest expense related to the notes outstanding with the Members, respectively.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including
15
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:
Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments are classified as Level 3. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.
The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.
Our investments are generally structured as debt in the form of first lien secured debt, but may also include second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by the Members and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy.
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.
In addition to using the above inputs in valuing cash equivalents and investments, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.
As outlined in the table below, some of our Level 3 investments using a market comparable valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Members assess the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
Some of our investments can also be valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may consider in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or
16
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an EBITDA multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA will have the opposite effect.
Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes:
|
|
|
|
|
|
|
|
|
|
|
|
Asset Category |
|
Fair value at September 30, 2024 |
|
|
Valuation Technique |
|
Unobservable Input |
|
Range of Input |
||
First Lien |
|
$ |
|
95,950 |
|
|
Market Comparable |
|
Broker/Dealer bids or quotes |
|
N/A |
First Lien |
|
|
|
787,361 |
|
|
Market Comparable |
|
Market Yield |
|
7.9% – 21.4% (10.2%) |
First Lien |
|
|
|
23,221 |
|
|
Enterprise Market Value |
|
EBITDA Multiple |
|
0.8x – 8.4x (3.2x) |
Equity |
|
|
|
6,749 |
|
|
Enterprise Market Value |
|
EBITDA Multiple |
|
4.3x – 8.6x (6.9x) |
Total Level 3 investments |
|
$ |
|
913,281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Category |
|
Fair value at September 30, 2023 |
|
|
Valuation Technique |
|
Unobservable Input |
|
Range of Input |
||
First Lien |
|
$ |
|
91,489 |
|
|
Market Comparable |
|
Broker/Dealer bids or quotes |
|
N/A |
First Lien |
|
|
|
691,949 |
|
|
Market Comparable |
|
Market Yield |
|
10.0% – 18.8% (12.3%) |
First Lien |
|
|
|
160 |
|
|
Market Comparable |
|
EBITDA Multiple |
|
2.8x |
Equity |
|
|
|
2,261 |
|
|
Enterprise Market Value |
|
EBITDA Multiple |
|
5.3x – 10.9x (6.5x) |
Total Level 3 investments |
|
$ |
|
785,859 |
|
|
|
|
|
|
|
(1) The weighted averages disclosed in the table above were weighted by their relative fair value.
Our investments and cash and cash equivalents were categorized as follows in the fair value hierarchy for ASC 820 purposes:
17
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
|
|
Fair Value at September 30, 2024 |
|
||||||||||||||||||
Description |
|
Level 1 |
|
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
First lien |
|
$ |
|
— |
|
|
|
$ |
|
— |
|
|
$ |
|
906,532 |
|
|
$ |
|
906,532 |
|
Equity |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
6,749 |
|
|
|
|
6,749 |
|
Total investments |
|
|
— |
|
|
|
|
— |
|
|
|
|
913,281 |
|
|
|
|
913,281 |
|
||
Cash and cash equivalents |
|
|
|
68,429 |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
68,429 |
|
Total investments, cash and cash equivalents |
|
$ |
|
68,429 |
|
|
|
$ |
— |
|
|
$ |
|
913,281 |
|
|
$ |
|
981,710 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Fair Value at September 30, 2023 |
|
||||||||||||||||||
Description |
|
Level 1 |
|
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
First lien |
|
$ |
|
— |
|
|
|
$ |
|
— |
|
|
$ |
|
783,598 |
|
|
$ |
|
783,598 |
|
Equity |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
2,261 |
|
|
|
|
2,261 |
|
Total investments |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
785,859 |
|
|
|
|
785,859 |
|
Cash and cash equivalents |
|
|
|
77,446 |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
77,446 |
|
Total investments, cash and cash equivalents |
|
$ |
|
77,446 |
|
|
|
$ |
|
— |
|
|
$ |
|
785,859 |
|
|
$ |
|
863,305 |
|
For the year ended September 30, 2024, the amount of Level 3 purchases, including PIK interest, net discount accretion and non-cash exchanges for the year were $293.4 million. There were no Level 3 transfers.
For the year ended September 30, 2023, the amount of Level 3 purchases, including PIK interest, net discount accretion and non-cash exchanges for the year were $195.8 million. There were no Level 3 transfers.
5. CASH AND CASH EQUIVALENTS
Cash equivalents represent cash invested in overnight money market funds. These temporary investments with original maturities of 90 days or less are deemed cash equivalents. Cash deposited at financial institutions is insured by the Federal Deposit Insurance Corporation (“FDIC”), up to specified limits. At times, such balances may exceed FDIC insured amounts. As of September 30, 2024, the entire amount of $68.4 million included in the cash and cash equivalents balance on the Consolidated Statement of Assets, Liabilities and Members' Equity is comprised of money market funds, which are not subject to FDIC insurance. As of September 30, 2023, cash and cash equivalents consisted of money market funds in the amounts of $77.4 million at fair value. PSSL believes it is not exposed to any significant risk of loss on its cash and cash equivalents.
6. MEMBERS’ EQUITY
PFLT and Kemper provide capital to PSSL in the form of equity interests. As of September 30, 2024 and 2023, PFLT and Kemper owned 87.5% and 12.5%, respectively, of equity interests in PSSL.
As of September 30, 2024 and 2023, PFLT had commitments to fund equity interests to PSSL of $101.9 million and $101.9 million, respectively, of which none and $11.8 million, respectively, were unfunded.
As of September 30, 2024 and 2023, Kemper had commitments to fund equity interests to PSSL of $14.6 million and $14.6 million, respectively, of which none and $1.7 million, respectively, were unfunded.
7. NOTES PAYABLE TO MEMBERS
PFLT and Kemper provide capital to PSSL in the form of first lien secured debt (“Member Notes”). The Member Notes were previously subordinated debt that were modified during the year ended September 30, 2018 to eliminate the subordination provision. The Member Notes bear an interest rate of 3-month LIBOR plus 8.0% through June 30, 2023 and 3-month SOFR plus 8.0% after June 30, 2023 and mature on May 4, 2029. As of September 30, 2024 and 2023, PFLT and Kemper owned 87.5% and 12.5% of the Member Notes, respectively.
18
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
As of September 30, 2024 and 2023, PFLT had commitments to fund Member Notes to PSSL of $237.7 million and $237.7 million, respectively, of which none and $27.6 million, respectively, were unfunded.
As of September 30, 2024 and 2023, Kemper had commitments to fund Member Notes to PSSL of $34.0 million and $34.0 million, respectively, of which none and $3.9 million, respectively, were unfunded.
8. RISKS AND UNCERTAINTIES
Investment risk
PSSL seeks investment opportunities that offer the possibility of attaining income generation, capital preservation and capital appreciation including investments in private companies. Certain events particular to each industry in which PSSL’s investments conduct their operations, as well as general economic and political conditions, may have a significant negative impact on the investee’s operations and profitability. Such events are beyond PSSL’s controls, and the likelihood that they may occur cannot be predicted. Furthermore, investments of PSSL are made in private companies and there are generally no public markets for these securities at the current time. The ability of PSSL to liquidate these investments and realize value is subject to significant limitations and uncertainties.
Leverage Risk
PSSL may borrow funds in order to increase the amount of capital available for investment. The use of leverage can improve the return on invested equity, however, such use may also magnify the potential for loss on invested equity capital. If the value of PSSL’s assets decreases, leveraging would cause Members’ equity to decline more sharply than it otherwise would have had PSSL not used leverage. Similarly, any decrease in PSSL’s income would cause Members’ equity to decline more sharply than it would have had PSSL not borrowed. Borrowings will usually be from credit facilities and/or debt securitization which will typically be secured by PSSL’s securities and other assets. Under certain circumstances, such debt may demand an increase in the collateral that secures PSSL’s obligations and if PSSL was unable to provide additional collateral, the debt could liquidate assets held in the account to satisfy PSSL’s obligations. Liquidation in this manner could have adverse consequences. Additionally, the amount of PSSL’s borrowings and the interest rates on those borrowings, which will fluctuate, could have a significant effect on PSSL’s profitability.
Credit Risk
PSSL primarily invests in first lien secured debt to middle-market companies. A majority of the investments held by PSSL are subject to restrictions on their resale or are otherwise illiquid. PSSL assumes the credit risk of the borrower. In the event that the borrower becomes insolvent or enters bankruptcy, PSSL may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
9. FINANCIAL HIGHLIGHTS
The Members are responsible for all investment making and business decisions, therefore, there is no requirement to show financial highlights per ASC 946, which have been omitted accordingly.
10. LEVERAGE
Credit Facility
On January 26, 2021, PSSL II entered into a $125.0 million senior secured revolving credit facility with Ally Bank (the "Ally Credit Facility"). Between June 3, 2021 and May 2, 2022, the Ally Credit Facility was amended to increase the total commitment to $325 million. On August 16, 2023, the total commitment was decreased to $260 million. Interest on the Ally Credit Facility changed from LIBOR plus 2.5% to SOFR plus 2.6%. On January 26, 2024, the maturity was extended and the Interest changed to SOFR plus 2.8%. The Ally credit facility matures on January 26, 2029 and is secured by substantially all of the assets held by PSSL II. As of September 30, 2024 and 2023, there were $146.1 million and $48.6 million, respectively, in outstanding borrowings under the Ally Credit Facility and we were in compliance with all required covenants in the facility. As of September 30, 2024 and 2023,
19
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
there were $113.9 million and $211.4 million, respectively, in unfunded commitments under the Ally Credit Facility. As of September 30, 2024 and 2023, the weighted average interest rate was 7.6% and 7.8%, respectively.
Asset - Backed Debt
In January 2021, CLO II completed a $300.7 million debt securitization in the form of a collateralized loan obligation (the "2032 Asset-Backed Debt”). In May 2024, the 2032 Asset-Backed Debt was refinanced by a $300.7 million debt securitization in the form of a collateralized loan obligation, (the "2024 Debt Securitization" or the “2036 Asset-Backed Debt”). The 2036 Asset-Backed Debt is secured by a diversified portfolio, CLO II, consisting primarily of middle market loans and participation interests in middle market loans. The 2036 Asset-Backed Debt is scheduled to mature in April 2036. The 2024 Debt Securitization was executed through a private placement of: (i) $174.0 million Class A-1R Senior Secured Floating Rate Loans and Notes maturing 2036, which bear interest at the three-month SOFR plus 1.93%, (ii) $5.0 million Class A-2R Senior Secured Floating Rate Notes due 2036, which bear interest at three month SOFR plus 2.20%, (iii) $25.0 million Class B-R Senior Secured Floating Rate Notes due 2036, which bear interest at the three-month SOFR plus 2.35%, (iv) $24.0 million Class C-R Secured Deferrable Floating Rate Notes due 2036, which bear interest at the three-month SOFR plus 3.10%, (v) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2036, which bear interest at the three-month SOFR plus 4.95%, and (vi) $18.0 million Class E Secured Deferrable Floating Rate Notes due 2036, which bear interest at the three-month SOFR plus 7.5%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent.
On the closing date of the 2024 Debt Securitization, PSSL retained 100% of the Preferred Shares of CLO II, 100% of the Class E Notes issued by CLO II, and a portion of the net cash proceeds received from the sale of the 2036 Asset-Backed Debt. The Preferred Shares do not bear interest and had a stated value of approximately $36.7 million at the closing of the 2024 Debt Securitization. As part of the 2024 Debt Securitization, there was debt modification resulting in debt issuance costs of $1.0 million included in the Consolidated Statements of Operations. There was also debt extinguishment resulting in realized loss on debt extinguishment in the amount of $0.7 million included in the Consolidated Statements of Operations. The remaining fees continue to be amortized and are included in amortization of deferred financing costs in the Consolidated Statements of Cash Flows.
As of September 30, 2024 and 2023, there was $246.0 million and $246.0 million (2032 Asset-Backed Debt), respectively, of 2036 Asset-Backed Debt and there was $1.6 million and $2.0 million (2032 Asset-Backed Debt) of un-amortized financing costs, respectively. As of September 30, 2024 and 2023, the weighted average interest rate was 7.6% and 8.0% (2032 Asset-Backed Debt), respectively.
The 2036 Asset-Backed Debt is included in the Consolidated Statement of Assets, Liabilities and Members' Equity as debt of the Company and the Class E Notes and the Preferred Shares have been eliminated in consolidation.
In April 2023, CLO VI completed a $297.8 million debt securitization in the form of a collateralized loan obligation (the "2023 Debt Securitization" or the "2035 Asset-Backed Debt”). The 2035 Asset-Backed Debt is secured by a diversified portfolio consisting primarily of middle market loans. The 2023 Debt Securitization was executed through a private placement of: (i) $171.0 million Class A-1 Senior Secured Floating Rate Loans maturing 2035, which bear interest at the three-month SOFR plus 2.68%, (ii) $28.0 million Class B-1 Senior Secured Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 3.75%, (iii) $5.0 million Class B-2 Senior Secured Fixed Rate Notes due 2035, which bear interest of 7.634%, (v) $24.0 million Class C Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 5.25%, and (vi) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 7.0%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and Wilmington Trust, as collateral agent and as loan agent. As of September 30, 2024 and 2023, there was $246.0 million and $246.0 million, of 2035 Asset-Backed Debt and there was $2.1 million and $2.5 million, respectively, of un-amortized financing costs. As of September 30, 2024 and 2023, the weighted average interest rate was 8.6% and 8.5%, respectively.
On the closing date of the 2023 Debt Securitization, in consideration of our transfer to CLO VI of the initial closing date loan portfolio, PSSL received 100% of the Preferred Shares of CLO VI from the sale of the 2035 Asset-Backed Debt. The Preferred Shares do not bear interest and had a stated value of approximately $51.8 million at the closing of the 2023 Debt Securitization.
The 2035 Asset-Backed Debt is included in the Consolidated Statement of Assets, Liabilities and Members' Equity as debt of the Company and the Preferred Shares have been eliminated in consolidation.
PennantPark Investment Adviser, LLC serves as collateral manager of the 2023 Debt Securitization and the 2024 Debt Securitization pursuant to a Collateral Management Agreement. For so long as PennantPark Investment Advisor, LLC serves as
20
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2024
collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreements.
11. COMMITMENTS AND CONTINGENCY
As of September 30, 2024 and September 30, 2023, the Company had $0.6 million and $1.1 million, respectively, of unfunded commitments to fund existing investments.
The Company has provided general indemnifications to the Members, affiliates of the Members, and any person acting on behalf of the Members or that affiliate when they act, in good faith, in the best interest of the Company. The Company is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim but expects the risk of having to make any payments under these general business indemnifications to be remote.
12. SUBSEQUENT EVENTS
Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the consolidated financial statements were available to be issued, November 25, 2024. There were no events that required disclosure.
21
Exhibit 99.4
PennantPark Senior Secured Loan Fund I LLC
Consolidated Financial Statements and
Independent Auditor’s Report
September 30, 2023 and 2022
Contents
Independent Auditor’s Report |
1 |
|
|
Financial Statements: |
|
|
|
Consolidated Statements of Assets, Liabilities and Members’ Equity as of September 30, 2023 and 2022 |
3 |
|
|
Consolidated Statements of Operations for the years ended September 30, 2023 and 2022 |
4 |
|
|
Consolidated Statements of Changes in Members’ Equity for the years ended September 30, 2023 and 2022 |
5 |
|
|
Consolidated Statements of Cash Flows for the years ended September 30, 2023 and 2022 |
6 |
|
|
Consolidated Schedules of Investments as of September 30, 2023 and 2022 |
7 |
|
|
Notes to Consolidated Financial Statements |
11 |
|
|
Independent Auditor’s Report
Board of Directors
PennantPark Senior Secured Loan Fund I LLC
Opinion
We have audited the consolidated financial statements of PennantPark Senior Secured Loan Fund I LLC and its subsidiaries (the Fund), which comprise the consolidated statements of assets, liabilities and members’ equity, including the consolidated schedule of investments, as of September 30, 2023 and 2022, the related consolidated statements of operations, changes in members’ equity and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2023 and 2022, and the results of its operations, changes in members’ equity and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Fund and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Emphasis of Matter
As discussed in Note 2 of the consolidated financial statements, the 2022 financial statements have been restated to reclassify certain amounts presented within. Our opinion is not modified with respect to this matter.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Fund’s ability to continue as a going concern within one year after the date that the financial statements are issued or available to be issued.
1
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
/s/ RSM US LLP
New York, New York
December 7, 2023
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Assets, Liabilities and Members' Equity |
|
||||||||
($ in thousands) |
|
||||||||
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
||
|
|
September 30, 2023 |
|
|
|
September 30, 2022 |
|
||
Assets |
|
|
|
|
|
|
|
||
Investments at fair value (amortized cost—$804,608 and $770,280, respectively) |
$ |
|
785,859 |
|
|
$ |
|
754,722 |
|
Cash and cash equivalents (cost—$77,446 and $30,152, respectively) |
|
|
77,446 |
|
|
|
|
30,152 |
|
Interest receivable |
|
|
5,179 |
|
|
|
|
3,025 |
|
Receivable for investment sold |
|
|
— |
|
|
|
|
3,637 |
|
Prepaid expenses and other assets |
|
|
490 |
|
|
|
|
1,722 |
|
Due from affiliate (See Note 3) |
|
|
436 |
|
|
|
|
3,553 |
|
Total assets |
|
|
869,410 |
|
|
|
|
796,811 |
|
Liabilities |
|
|
|
|
|
|
|
||
Credit facility payable |
|
|
48,600 |
|
|
|
|
259,500 |
|
2032 Asset-backed debt, net (par—$246,000) |
|
|
243,973 |
|
|
|
|
243,365 |
|
2035 Asset-backed debt, net (par—$246,000) |
|
|
243,483 |
|
|
|
|
— |
|
Notes payable to members |
|
|
240,100 |
|
|
|
|
217,350 |
|
Interest payable on Credit facility and asset backed debt |
|
|
14,291 |
|
|
|
|
3,817 |
|
Payable for investments purchased |
|
|
13,466 |
|
|
|
|
10,414 |
|
Interest payable on notes to members |
|
|
6,488 |
|
|
|
|
4,719 |
|
Accrued expenses |
|
|
859 |
|
|
|
|
1,150 |
|
Total liabilities |
|
|
811,260 |
|
|
|
|
740,315 |
|
Commitments and contingencies (See Note 11) |
|
|
|
|
|
|
|
||
Members' equity |
|
|
58,150 |
|
|
|
|
56,496 |
|
Total liabilities and members' equity |
$ |
|
869,410 |
|
|
$ |
|
796,811 |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Operations |
|
||||||||
($ in thousands) |
|
||||||||
|
|
|
|
|
|
|
|
||
|
|
|
Year Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
Investment income: |
|
|
|
|
|
|
|
||
Interest |
|
|
$ |
89,547 |
|
|
$ |
53,006 |
|
Other income |
|
|
|
1,297 |
|
|
|
1,188 |
|
Total investment income |
|
|
|
90,844 |
|
|
|
54,194 |
|
Expenses: |
|
|
|
|
|
|
|
||
Interest and expense on credit facility and asset-backed debt |
|
|
|
42,797 |
|
|
|
18,410 |
|
Interest expense on notes to members |
|
|
|
30,325 |
|
|
|
17,468 |
|
Administration fees |
|
|
|
2,103 |
|
|
|
1,835 |
|
General and administrative expenses |
|
|
|
1,116 |
|
|
|
1,156 |
|
Total expenses |
|
|
|
76,341 |
|
|
|
38,869 |
|
Net investment income |
|
|
|
14,503 |
|
|
|
15,325 |
|
Realized and unrealized gain (loss) on investments: |
|
|
|
|
|
|
|
||
Net realized gain (loss) on investments |
|
|
|
(6,328 |
) |
|
|
(14,948 |
) |
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
(3,171 |
) |
|
|
(3,695 |
) |
Net realized and unrealized gain (loss) on investments |
|
|
|
(9,499 |
) |
|
|
(18,643 |
) |
Net increase (decrease) in members' equity resulting from operations |
|
|
$ |
5,004 |
|
|
$ |
(3,318 |
) |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Changes in Members’ Equity |
|
|||||||||
($ in thousands) |
|
|||||||||
|
|
|
|
|
|
|
|
|
||
|
|
Year Ended September 30, |
|
|||||||
|
|
2023 |
|
|
2022 |
|
||||
Net change in members’ equity resulting from operations: |
|
|
|
|
|
|
|
|
||
Net investment income |
|
$ |
|
14,503 |
|
|
$ |
|
15,325 |
|
Net realized gain (loss) on investments |
|
|
|
(6,328 |
) |
|
|
|
(14,948 |
) |
Net change in unrealized appreciation (depreciation) on investments |
|
|
|
(3,171 |
) |
|
|
|
(3,695 |
) |
Net increase (decrease) in members’ equity resulting from operations |
|
|
|
5,004 |
|
|
|
|
(3,318 |
) |
Capital contributions |
|
|
|
9,750 |
|
|
|
|
24,150 |
|
Distributions |
|
|
|
(13,100 |
) |
|
|
|
(15,600 |
) |
Net increase (decrease) in members’ equity |
|
|
|
1,654 |
|
|
|
|
5,232 |
|
Members’ equity |
|
|
|
|
|
|
|
|
||
Beginning of year |
|
|
|
56,496 |
|
|
|
|
51,264 |
|
End of year |
|
$ |
|
58,150 |
|
|
$ |
|
56,496 |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5
PennantPark Senior Secured Loan Fund I LLC
Consolidated Statements of Cash Flows |
|
|||||||||
($ in thousands) |
|
|||||||||
|
|
|||||||||
|
|
|
Year Ended September 30, |
|
||||||
|
|
|
2023 |
|
|
|
2022 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
||
Net increase (decrease) in members’ equity resulting from operations |
|
$ |
|
5,004 |
|
|
$ |
|
(3,318 |
) |
Adjustments to reconcile net increase (decrease) in members’ equity resulting from operations to net cash provided by (used in) operating activities: |
|
|
|
|
|
|
|
|
||
Net change in unrealized (appreciation) depreciation on investments |
|
|
|
3,171 |
|
|
|
|
3,695 |
|
Net realized (gain) loss on investments |
|
|
|
6,328 |
|
|
|
|
14,948 |
|
Net accretion of discount and amortization of premium |
|
|
|
(3,917 |
) |
|
|
|
(3,186 |
) |
Purchases of investments |
|
|
|
(190,871 |
) |
|
|
|
(278,807 |
) |
Payment-in-kind interest |
|
|
|
(1,055 |
) |
|
|
|
(1,069 |
) |
Proceeds from disposition of investments |
|
|
|
155,207 |
|
|
|
|
102,436 |
|
Amortization of deferred financing costs |
|
|
|
796 |
|
|
|
|
608 |
|
(Increase) Decrease in: |
|
|
|
|
|
|
|
|
||
Receivable for investments sold |
|
|
|
3,637 |
|
|
|
|
3,686 |
|
Interest receivable |
|
|
|
(2,154 |
) |
|
|
|
(1,612 |
) |
Prepaid expenses and other assets |
|
|
|
1,232 |
|
|
|
|
(57 |
) |
Due from affiliate |
|
|
|
3,117 |
|
|
|
|
(3,553 |
) |
Increase (Decrease) in: |
|
|
|
|
|
|
|
|
||
Payables for investments purchased |
|
|
|
3,052 |
|
|
|
|
(21,550 |
) |
Interest payable on credit facility and asset backed debt |
|
|
|
10,474 |
|
|
|
|
2,077 |
|
Interest payable on notes to members |
|
|
|
1,769 |
|
|
|
|
2,065 |
|
Accrued expenses |
|
|
|
(291 |
) |
|
|
|
972 |
|
Net cash provided by (used in) operating activities |
|
|
|
(4,501 |
) |
|
|
|
(182,665 |
) |
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
||
Members’ capital contributions |
|
|
|
9,750 |
|
|
|
|
15,763 |
|
Distributions to members |
|
|
|
(13,100 |
) |
|
|
|
(15,600 |
) |
Notes issued to members |
|
|
|
22,750 |
|
|
|
|
36,780 |
|
Proceeds from 2035 asset backed debt issued |
|
|
|
246,000 |
|
|
|
— |
|
|
Discount on 2035 asset backed debt issued |
|
|
|
(2,705 |
) |
|
|
— |
|
|
Borrowings under credit facility |
|
|
|
41,600 |
|
|
|
|
220,500 |
|
Repayments under credit facility |
|
|
|
(252,500 |
) |
|
|
|
(73,000 |
) |
Net cash provided by (used in) financing activities |
|
|
|
51,795 |
|
|
|
|
184,443 |
|
Net increase (decrease) in cash and cash equivalents |
|
|
|
47,294 |
|
|
|
|
1,778 |
|
Cash and cash equivalents, beginning of year |
|
|
|
30,152 |
|
|
|
|
28,374 |
|
Cash and cash equivalents, end of year |
|
$ |
|
77,446 |
|
|
$ |
|
30,152 |
|
|
|
|
|
|
|
|
|
|
||
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
||
Interest paid on credit facility and asset-backed debt |
|
$ |
|
32,323 |
|
|
$ |
|
16,334 |
|
Interest paid on notes to members |
|
$ |
|
28,556 |
|
|
$ |
|
15,403 |
|
Non-Cash Operating and Financing activity: |
|
|
|
|
|
|
|
|
||
Purchase of investments from non-cash equity contribution |
|
$ |
|
— |
|
|
$ |
|
(27,957 |
) |
Non-Cash equity contribution |
|
$ |
|
— |
|
|
$ |
|
8,387 |
|
Non-Cash proceeds from notes issued to Members |
|
$ |
|
— |
|
|
$ |
|
19,570 |
|
Non-Cash exchanges and conversions |
|
$ |
|
3,393 |
|
|
$ |
|
— |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6
PennantPark Senior Secured Loan Fund I LLC |
||||||||||||||
Consolidated Schedule of Investments |
||||||||||||||
September 30, 2023 |
||||||||||||||
($ in thousands) |
||||||||||||||
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par |
|
Cost |
|
Fair Value (2) |
First Lien Secured Debt - 1,347.5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A1 Garage Merger Sub, LLC |
|
12/22/2028 |
|
Commercial Services & Supplies |
|
11.84% |
|
SOFR+660 |
|
2,940 |
|
$2,886 |
|
$2,925 |
Ad.net Acquisition, LLC |
|
5/7/2026 |
|
Media |
|
11.65% |
|
SOFR+626 |
|
8,798 |
|
8,723 |
|
8,754 |
Alpine Acquisition Corp II |
|
11/30/2026 |
|
Containers and Packaging |
|
11.24% |
|
SOFR+600 |
|
12,852 |
|
12,535 |
|
12,338 |
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
5/23/2024 |
|
Media: Advertising, Printing & Publishing |
|
11.04% |
|
SOFR+550 |
|
5,001 |
|
4,971 |
|
4,913 |
Anteriad Holdings Inc (fka MeritDirect) March 2023 |
|
5/23/2024 |
|
Media: Advertising, Printing & Publishing |
|
12.04% |
|
SOFR+650 |
|
4,875 |
|
4,817 |
|
4,814 |
Any Hour Services |
|
7/21/2027 |
|
Professional Services |
|
11.59% |
|
SOFR+585 |
|
7,510 |
|
7,348 |
|
7,360 |
Apex Service Partners, LLC |
|
7/31/2025 |
|
Diversified Consumer Services |
|
10.52% |
|
SOFR+525 |
|
1,002 |
|
1,002 |
|
1,000 |
Apex Service Partners, LLC Term Loan B |
|
7/31/2025 |
|
Diversified Consumer Services |
|
11.04% |
|
SOFR+550 |
|
2,187 |
|
2,187 |
|
2,181 |
Apex Service Partners, LLC Term Loan C |
|
7/31/2025 |
|
Diversified Consumer Services |
|
10.69% |
|
SOFR+525 |
|
11,013 |
|
10,972 |
|
10,985 |
Applied Technical Services, LLC |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
11.54% |
|
SOFR+615 |
|
9,579 |
|
9,475 |
|
9,387 |
Applied Technical Services, LLC - DDTL Unfunded (3) |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
|
|
|
|
194 |
|
- |
|
(2) |
Arcfield Acquisition Corp. |
|
8/3/2029 |
|
Aerospace and Defense |
|
11.62% |
|
SOFR+625 |
|
9,218 |
|
9,093 |
|
9,126 |
Beta Plus Technologies, Inc. |
|
7/1/2029 |
|
Business Services |
|
11.14% |
|
SOFR+575 |
|
4,950 |
|
4,863 |
|
4,604 |
BioDerm, Inc. |
|
1/31/2028 |
|
Healthcare and Pharmaceuticals |
|
11.83% |
|
SOFR+650 |
|
8,978 |
|
8,874 |
|
8,933 |
Blackhawk Industrial Distribution, Inc. |
|
9/17/2026 |
|
Distributors |
|
11.79% |
|
SOFR+640 |
|
15,132 |
|
14,928 |
|
14,905 |
Broder Bros., Co. |
|
12/4/2025 |
|
Consumer Products |
|
11.50% |
|
SOFR+626 |
|
2,349 |
|
2,349 |
|
2,349 |
Burgess Point Purchaser Corporation |
|
9/26/2029 |
|
Automotive |
|
10.67% |
|
SOFR+525 |
|
447 |
|
418 |
|
420 |
By Light Professional IT Services, LLC |
|
5/16/2025 |
|
High Tech Industries |
|
12.43% |
|
SOFR+688 |
|
13,821 |
|
13,778 |
|
13,579 |
Cadence Aerospace, LLC |
|
11/14/2023 |
|
Aerospace and Defense |
|
12.07% |
|
SOFR+665 |
|
4,011 |
|
4,010 |
|
4,011 |
|
|
|
|
|
|
(PIK 2.00%) |
|
|
|
|
|
|
|
|
Cartessa Aesthetics, LLC |
|
6/14/2028 |
|
Distributors |
|
11.39% |
|
SOFR+600 |
|
9,636 |
|
9,509 |
|
9,636 |
CF512, Inc. |
|
8/20/2026 |
|
Media |
|
11.60% |
|
SOFR+619 |
|
6,820 |
|
6,722 |
|
6,684 |
CHA Holdings, Inc. |
|
4/10/2025 |
|
Construction and Engineering |
|
10.15% |
|
SOFR+476 |
|
5,499 |
|
5,455 |
|
5,499 |
Challenger Performance Optimization, Inc. |
|
8/31/2024 |
|
Business Services |
|
12.18% |
|
SOFR+675 |
|
9,232 |
|
9,201 |
|
8,955 |
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
Confluent Health, LLC |
|
10/28/2028 |
|
Healthcare and Pharmaceuticals |
|
9.32% |
|
SOFR+400 |
|
6,797 |
|
6,559 |
|
6,445 |
Connatix Buyer, Inc. |
|
7/13/2027 |
|
Media |
|
11.16% |
|
SOFR+576 |
|
3,815 |
|
3,762 |
|
3,681 |
Crane 1 Services, Inc. |
|
8/16/2027 |
|
Commercial Services & Supplies |
|
10.90% |
|
SOFR+551 |
|
2,089 |
|
2,067 |
|
2,079 |
Dr. Squatch, LLC |
|
8/31/2027 |
|
Personal Products |
|
11.24% |
|
SOFR+585 |
|
14,712 |
|
14,511 |
|
14,712 |
DRI Holding Inc. |
|
12/21/2028 |
|
Media |
|
10.67% |
|
SOFR+525 |
|
2,627 |
|
2,418 |
|
2,394 |
DRS Holdings III, Inc. |
|
11/3/2025 |
|
Consumer Goods: Durable |
|
11.79% |
|
SOFR+640 |
|
14,429 |
|
14,376 |
|
14,256 |
Duraco Specialty Tapes LLC |
|
6/30/2024 |
|
Containers and Packaging |
|
11.89% |
|
SOFR+650 |
|
10,904 |
|
10,838 |
|
10,740 |
ECL Entertainment, LLC |
|
8/31/2030 |
|
Hotel, Gaming and Leisure |
|
10.07% |
|
SOFR+475 |
|
5,000 |
|
4,900 |
|
4,985 |
EDS Buyer, LLC |
|
1/10/2029 |
|
Electronic Equipment, Instruments, and Components |
|
11.64% |
|
SOFR+625 |
|
8,955 |
|
8,833 |
|
8,821 |
Electro Rent Corporation |
|
1/17/2024 |
|
Electronic Equipment, Instruments, and Components |
|
11.00% |
|
SOFR+550 |
|
2,219 |
|
2,200 |
|
2,171 |
Exigo Intermediate II, LLC |
|
3/15/2027 |
|
Software |
|
11.17% |
|
SOFR+585 |
|
12,675 |
|
12,505 |
|
12,422 |
ETE Intermediate II, LLC |
|
5/29/2029 |
|
Diversified Consumer Services |
|
11.89% |
|
SOFR+650 |
|
12,404 |
|
12,154 |
|
12,193 |
Fairbanks Morse Defense |
|
6/17/2028 |
|
Aerospace and Defense |
|
10.40% |
|
SOFR+475 |
|
10,195 |
|
10,143 |
|
10,114 |
Global Holdings InterCo LLC |
|
3/16/2026 |
|
Diversified Financial Services |
|
11.96% |
|
SOFR+660 |
|
3,736 |
|
3,724 |
|
3,549 |
Graffiti Buyer, Inc. |
|
8/10/2027 |
|
Trading Companies & Distributors |
|
10.99% |
|
SOFR+575 |
|
2,345 |
|
2,316 |
|
2,322 |
Hancock Roofing and Construction L.L.C. |
|
12/31/2026 |
|
Insurance |
|
10.92% |
|
SOFR+560 |
|
2,250 |
|
2,217 |
|
2,194 |
Holdco Sands Intermediate, LLC |
|
11/23/2028 |
|
Aerospace and Defense |
|
11.32% |
|
SOFR+585 |
|
4,913 |
|
4,838 |
|
4,913 |
HW Holdco, LLC |
|
12/10/2024 |
|
Media |
|
11.75% |
|
SOFR+640 |
|
3,014 |
|
2,988 |
|
2,968 |
Imagine Acquisitionco, LLC |
|
11/15/2027 |
|
Software |
|
10.72% |
|
SOFR+535 |
|
9,248 |
|
9,075 |
|
9,110 |
Inception Fertility Ventures, LLC |
|
12/31/2024 |
|
Healthcare Providers and Services |
|
12.51% |
|
SOFR+715 |
|
16,453 |
|
16,257 |
|
16,453 |
Infinity Home Services Holdco, Inc. |
|
12/28/2028 |
|
Commercial Services & Supplies |
|
12.24% |
|
SOFR+685 |
|
6,090 |
|
5,979 |
|
6,090 |
Integrated Data Services |
|
8/1/2029 |
|
Business Services |
|
11.87% |
|
SOFR+650 |
|
18,904 |
|
18,532 |
|
18,463 |
Integrative Nutrition, LLC |
|
1/31/2025 |
|
Diversified Consumer Services |
|
12.54% |
|
SOFR+700 |
|
11,105 |
|
11,083 |
|
10,439 |
|
|
|
|
|
|
(PIK 2.25%) |
|
|
|
|
|
|
|
|
Integrity Marketing Acquisition, LLC |
|
8/27/2026 |
|
Insurance |
|
11.57% |
|
SOFR+575 |
|
5,906 |
|
5,851 |
|
5,847 |
Inventus Power, Inc. |
|
6/30/2025 |
|
Consumer Goods: Durable |
|
12.93% |
|
SOFR+761 |
|
8,246 |
|
8,097 |
|
8,081 |
ITI Holdings, Inc. |
|
3/3/2028 |
|
IT Services |
|
11.06% |
|
SOFR+560 |
|
3,940 |
|
3,886 |
|
3,861 |
K2 Pure Solutions NoCal, L.P. |
|
12/20/2023 |
|
Chemicals, Plastics and Rubber |
|
13.42% |
|
SOFR+810 |
|
15,509 |
|
15,487 |
|
15,509 |
Kinetic Purchaser, LLC |
|
11/10/2027 |
|
Personal Products |
|
11.54% |
|
SOFR+615 |
|
16,662 |
|
16,346 |
|
16,412 |
Lash OpCo, LLC |
|
2/18/2027 |
|
Personal Products |
|
12.13% |
|
SOFR+675 |
|
14,210 |
|
13,989 |
|
14,068 |
LAV Gear Holdings, Inc. |
|
10/31/2024 |
|
Capital Equipment |
|
11.74% |
|
SOFR+643 |
|
15,042 |
|
14,997 |
|
14,862 |
Lightspeed Buyer Inc. |
|
2/3/2026 |
|
Healthcare Providers and Services |
|
10.70% |
|
SOFR+535 |
|
12,056 |
|
11,911 |
|
11,935 |
LJ Avalon Holdings, LLC |
|
1/31/2030 |
|
Environmental Industries |
|
11.77% |
|
SOFR+640 |
|
2,585 |
|
2,537 |
|
2,534 |
Loving Tan Intermediate II, Inc. |
|
5/26/2028 |
|
Consumer Products |
|
12.39% |
|
SOFR+700 |
|
7,481 |
|
7,337 |
|
7,369 |
Lucky Bucks, LLC (4) |
|
7/20/2027 |
|
Hotel, Gaming and Leisure |
|
0.00% |
|
|
|
4,489 |
|
4,207 |
|
1,182 |
Lucky Bucks. LLC - OpCo DIP Loans |
|
9/30/2025 |
|
Hotel, Gaming and Leisure |
|
15.33% |
|
SOFR+1000 |
|
160 |
|
158 |
|
160 |
MAG DS Corp |
|
4/1/2027 |
|
Aerospace and Defense |
|
10.99% |
|
SOFR+550 |
|
2,097 |
|
2,007 |
|
1,986 |
Magenta Buyer, LLC |
|
7/31/2028 |
|
Software |
|
10.63% |
|
SOFR+500 |
|
3,006 |
|
2,845 |
|
2,228 |
Marketplace Events, LLC - Super Priority First Lien Term Loan |
|
9/30/2025 |
|
Media: Diversified and Production |
|
10.94% |
|
SOFR+525 |
|
647 |
|
647 |
|
647 |
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
|
|
|
|
589 |
|
- |
|
- |
Marketplace Events, LLC |
|
9/30/2026 |
|
Media: Diversified and Production |
|
10.94% |
|
SOFR+525 |
|
4,837 |
|
3,782 |
|
4,837 |
Mars Acquisition Holdings Corp. |
|
5/14/2026 |
|
Media |
|
11.04% |
|
SOFR+565 |
|
11,588 |
|
11,476 |
|
11,472 |
MBS Holdings, Inc. |
|
4/16/2027 |
|
Internet Software and Services |
|
11.17% |
|
SOFR+585 |
|
7,859 |
|
7,758 |
|
7,749 |
MDI Buyer, Inc. |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
11.32% |
|
SOFR+600 |
|
6,380 |
|
6,271 |
|
6,244 |
Meadowlark Acquirer, LLC |
|
12/10/2027 |
|
Professional Services |
|
11.04% |
|
SOFR+565 |
|
2,372 |
|
2,336 |
|
2,312 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7
PennantPark Senior Secured Loan Fund I LLC |
Consolidated Schedule of Investments |
September 30, 2023 ($ in thousands) |
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par / |
|
Cost |
|
Fair Value (2) |
Mission Critical Electronics, Inc. |
|
3/28/2024 |
|
Capital Equipment |
|
11.29% |
|
SOFR+515 |
|
5,769 |
|
$5,763 |
|
$5,740 |
Municipal Emergency Services, Inc. |
|
9/28/2027 |
|
Distributors |
|
11.04% |
|
SOFR+565 |
|
3,430 |
|
3,380 |
|
3,355 |
NBH Group LLC |
|
8/19/2026 |
|
Healthcare, Education & Childcare |
|
10.93% |
|
SOFR+525 |
|
10,711 |
|
10,572 |
|
10,497 |
Neptune Flood Incorporated |
|
5/9/2029 |
|
Insurance |
|
11.97% |
|
SOFR+650 |
|
5,042 |
|
4,970 |
|
5,042 |
New Milani Group LLC |
|
6/6/2024 |
|
Consumer Goods: Non-Durable |
|
10.92% |
|
SOFR+550 |
|
14,213 |
|
14,194 |
|
14,213 |
One Stop Mailing, LLC |
|
5/7/2027 |
|
Air Freight and Logistics |
|
11.68% |
|
SOFR+636 |
|
15,849 |
|
15,588 |
|
15,849 |
ORL Acquisitions, Inc. |
|
9/3/2027 |
|
Consumer Finance |
|
12.84% |
|
SOFR+725 |
|
2,223 |
|
2,202 |
|
2,023 |
Output Services Group, Inc. (4) |
|
6/27/2026 |
|
Business Services |
|
0.00% |
|
— |
|
7,759 |
|
7,689 |
|
1,513 |
Owl Acquisition, LLC |
|
2/4/2028 |
|
Professional Services |
|
10.80% |
|
SOFR+575 |
|
3,893 |
|
3,832 |
|
3,834 |
Ox Two, LLC |
|
5/18/2026 |
|
Construction and Building |
|
12.90% |
|
SOFR+751 |
|
4,345 |
|
4,306 |
|
4,269 |
Peaquod Merger Sub, Inc. |
|
12/2/2026 |
|
Diversified Financial Services |
|
11.79% |
|
SOFR+640 |
|
11,474 |
|
11,267 |
|
11,244 |
PH Beauty Holdings III, Inc. |
|
9/29/2025 |
|
Wholesale |
|
10.68% |
|
SOFR+500 |
|
9,493 |
|
9,282 |
|
7,974 |
PL Acquisitionco, LLC |
|
11/9/2027 |
|
Textiles, Apparel and Luxury Goods |
|
12.42% |
|
SOFR+710 |
|
7,565 |
|
7,467 |
|
6,809 |
|
|
|
|
|
|
(PIK 4.00%) |
|
|
|
|
|
|
|
|
PlayPower, Inc. |
|
5/8/2026 |
|
Consumer Goods: Durable |
|
10.57% |
|
SOFR+565 |
|
2,551 |
|
2,491 |
|
2,436 |
Pragmatic Institute, LLC |
|
7/6/2028 |
|
Education |
|
11.17% |
|
SOFR+575 |
|
11,138 |
|
10,999 |
|
10,636 |
Quantic Electronics, LLC |
|
11/19/2026 |
|
Aerospace and Defense |
|
11.74% |
|
SOFR+635 |
|
2,803 |
|
2,776 |
|
2,761 |
Rancho Health MSO, Inc. |
|
12/18/2025 |
|
Healthcare Providers and Services |
|
11.22% |
|
SOFR+585 |
|
1,029 |
|
1,029 |
|
1,029 |
Reception Purchaser, LLC |
|
2/28/2028 |
|
Air Freight and Logistics |
|
11.54% |
|
SOFR+600 |
|
4,938 |
|
4,876 |
|
4,740 |
Recteq, LLC |
|
1/29/2026 |
|
Leisure Products |
|
12.54% |
|
SOFR+700 |
|
4,875 |
|
4,825 |
|
4,729 |
Research Now Group, LLC and Dynata, LLC |
|
12/20/2024 |
|
Diversified Consumer Services |
|
11.13% |
|
SOFR+576 |
|
12,432 |
|
12,322 |
|
10,878 |
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) |
|
6/15/2029 |
|
High Tech Industries |
|
11.52% |
|
SOFR+625 |
|
3,749 |
|
3,676 |
|
3,692 |
Sales Benchmark Index LLC |
|
1/3/2025 |
|
Professional Services |
|
11.59% |
|
SOFR+620 |
|
9,522 |
|
9,474 |
|
9,475 |
Sargent & Greenleaf Inc. |
|
12/20/2024 |
|
Wholesale |
|
12.92% |
|
SOFR+760 |
|
5,167 |
|
5,148 |
|
5,116 |
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
Schlesinger Global, Inc. |
|
7/14/2025 |
|
Business Services |
|
12.52% |
|
SOFR+715 |
|
11,791 |
|
11,777 |
|
11,407 |
|
|
|
|
|
|
(PIK 0.50%) |
|
|
|
|
|
|
|
|
Seaway Buyer, LLC |
|
6/13/2029 |
|
Chemicals, Plastics and Rubber |
|
11.54% |
|
SOFR+615 |
|
4,950 |
|
4,884 |
|
4,802 |
Sigma Defense Systems, LLC |
|
12/18/2025 |
|
Aerospace and Defense |
|
14.04% |
|
SOFR+865 |
|
13,787 |
|
13,579 |
|
13,580 |
Skopima Consilio Parent, LLC |
|
5/17/2028 |
|
Business Services |
|
9.93% |
|
SOFR+450 |
|
1,300 |
|
1,274 |
|
1,272 |
Smile Brands Inc. |
|
10/14/2025 |
|
Healthcare and Pharmaceuticals |
|
9.70% |
|
SOFR+450 |
|
11,796 |
|
11,739 |
|
10,598 |
Solutionreach, Inc. |
|
7/17/2025 |
|
Healthcare and Pharmaceuticals |
|
12.37% |
|
SOFR+700 |
|
4,582 |
|
4,577 |
|
4,563 |
Spendmend Holdings LLC |
|
3/1/2028 |
|
Healthcare Technology |
|
11.04% |
|
SOFR+565 |
|
4,112 |
|
4,047 |
|
4,022 |
STV Group Incorporated |
|
12/11/2026 |
|
Construction and Building |
|
10.67% |
|
SOFR+535 |
|
9,075 |
|
9,025 |
|
8,894 |
Summit Behavioral Healthcare, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
10.43% |
|
SOFR+475 |
|
1,786 |
|
1,696 |
|
1,779 |
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
8/16/2027 |
|
Aerospace and Defense |
|
11.49% |
|
SOFR+600 |
|
14,738 |
|
14,540 |
|
14,575 |
Team Services Group, LLC |
|
11/24/2028 |
|
Healthcare and Pharmaceuticals |
|
10.75% |
|
SOFR+500 |
|
346 |
|
333 |
|
339 |
Teneo Holdings LLC |
|
7/18/2025 |
|
Business Services |
|
10.67% |
|
SOFR+535 |
|
2,262 |
|
2,261 |
|
2,259 |
The Aegis Technologies Group, LLC |
|
10/31/2025 |
|
Aerospace and Defense |
|
12.04% |
|
SOFR+665 |
|
5,602 |
|
5,560 |
|
5,518 |
The Bluebird Group LLC |
|
7/27/2026 |
|
Professional Services |
|
12.79% |
|
SOFR+700 |
|
5,403 |
|
5,336 |
|
5,382 |
The Vertex Companies, LLC |
|
8/31/2027 |
|
Construction and Engineering |
|
11.72% |
|
SOFR+635 |
|
7,716 |
|
7,591 |
|
7,656 |
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
11/24/2025 |
|
Consumer Goods: Non-Durable |
|
10.95% |
|
SOFR+565 |
|
8,654 |
|
8,556 |
|
8,654 |
TWS Acquisition Corporation |
|
6/16/2025 |
|
Diversified Consumer Services |
|
11.80% |
|
SOFR+625 |
|
4,316 |
|
4,310 |
|
4,316 |
Tyto Athene, LLC |
|
4/1/2028 |
|
IT Services |
|
10.90% |
|
SOFR+550 |
|
14,670 |
|
14,565 |
|
13,379 |
Urology Management Holdings, Inc. |
|
6/15/2026 |
|
Healthcare and Pharmaceuticals |
|
11.79% |
|
SOFR+665 |
|
6,892 |
|
6,775 |
|
6,749 |
Walker Edison Furniture Company LLC |
|
3/31/2027 |
|
Wholesale |
|
12.18% |
|
SOFR+685 |
|
3,521 |
|
3,521 |
|
3,521 |
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility |
|
3/31/2027 |
|
Wholesale |
|
11.68% |
|
SOFR+635 |
|
1,667 |
|
1,667 |
|
1,667 |
Walker Edison Furniture Company LLC - DDTL - Unfunded (3) |
|
3/31/2027 |
|
Wholesale |
|
|
|
|
|
333 |
|
- |
|
- |
Wildcat Buyerco, Inc. |
|
2/27/2026 |
|
Electronic Equipment, Instruments, and Components |
|
10.54% |
|
SOFR+515 |
|
10,565 |
|
10,491 |
|
10,460 |
Zips Car Wash, LLC |
|
3/1/2024 |
|
Automobiles |
|
12.67% |
|
SOFR+735 |
|
16,732 |
|
16,660 |
|
16,188 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
801,215 |
|
783,598 |
Equity Securities - 3.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New MPE Holdings, LLC |
|
— |
|
Media: Diversified and Production |
|
— |
|
— |
|
- |
|
- |
|
495 |
Walker Edison Furniture - Common Equity |
|
— |
|
Wholesale |
|
|
|
|
|
36 |
|
3,393 |
|
1,766 |
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
3,393 |
|
2,261 |
Total Investments - 1,351.4% |
|
|
|
|
|
|
|
804,608 |
|
785,859 |
||||
Cash and Cash Equivalents - 133.2% |
|
|
|
|
|
|
|
|
|
|
||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
77,446 |
|
77,446 |
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
77,446 |
|
77,446 |
Total Investments and Cash Equivalents —1,485.4% |
|
|
|
|
|
|
|
|
|
|
|
$882,054 |
|
863,305 |
Liabilities in Excess of Other Assets — (1,385.4)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(805,155) |
Members' Equity—100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
58,150 |
(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable Secured Overnight Financing Rate or "SOFR", or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Consolidated Schedule of Investments disclose the actual interest rate in effect as of the reporting period. All securities are subject to a SOFR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any. |
(2) Valued based on PSSL’s accounting policy. |
(3) Represents the purchase of a security with a delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded. (4) Security currently on interest non-accrual status. |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8
PennantPark Senior Secured Loan Fund I LLC
Consolidated Schedule of Investments
September 30, 2022
($ in thousand)
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par |
|
Cost |
|
Fair Value (2) |
First Lien Secured Debt - 1,330.4% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ad.net Acquisition, LLC |
|
5/6/2026 |
|
Media |
|
9.67% |
|
3M L+600 |
|
8,888 |
|
$8,788 |
|
$8,821 |
Alpine Acquisition Corp II |
|
11/30/2026 |
|
Containers and Packaging |
|
8.22% |
|
SOFR+600 |
|
9,975 |
|
9,790 |
|
9,576 |
Altamira Technologies, LLC |
|
7/24/2025 |
|
Business Services |
|
10.81% |
|
3M L+800 |
|
5,225 |
|
5,113 |
|
5,042 |
American Insulated Glass, LLC |
|
12/21/2023 |
|
Building Products |
|
7.79% |
|
3M L+550 |
|
4,883 |
|
4,851 |
|
4,883 |
Anteriad, LLC (f/k/a MeritDirect, LLC) |
|
5/23/2024 |
|
Media: Advertising, Printing & Publishing |
|
9.67% |
|
3M L+550 |
|
5,284 |
|
5,208 |
|
5,284 |
Any Hour Services |
|
7/21/2027 |
|
Professional Services |
|
8.33% |
|
3M L+525 |
|
3,510 |
|
3,441 |
|
3,440 |
Apex Service Partners, LLC |
|
7/31/2025 |
|
Diversified Consumer Services |
|
6.72% |
|
1M L+525 |
|
1,010 |
|
1,010 |
|
1,005 |
Apex Service Partners, LLC Term Loan B |
|
7/31/2025 |
|
Diversified Consumer Services |
|
9.67% |
|
3M L+625 |
|
2,202 |
|
2,202 |
|
2,191 |
Apex Service Partners, LLC Term Loan C |
|
7/31/2025 |
|
Diversified Consumer Services |
|
7.86% |
|
3M L+525 |
|
11,115 |
|
11,050 |
|
11,059 |
Applied Technical Services, LLC |
|
12/29/2026 |
|
Commercial Services & Supplies |
|
8.76% |
|
3M L+575 |
|
8,421 |
|
8,317 |
|
8,211 |
Arcfield Acquisition Corp. |
|
3/7/2028 |
|
Aerospace and Defense |
|
8.99% |
|
SOFR + 575 |
|
4,677 |
|
4,588 |
|
4,583 |
Beta Plus Technologies, Inc. |
|
7/1/2029 |
|
Business Services |
|
7.76% |
|
SOFR + 525 |
|
5,000 |
|
4,903 |
|
4,900 |
Blackhawk Industrial Distribution, Inc. |
|
9/17/2024 |
|
Distributors |
|
8.62% |
|
SOFR + 500 |
|
15,293 |
|
15,102 |
|
14,956 |
Broder Bros., Co. |
|
12/2/2022 |
|
Consumer Products |
|
7.39% |
|
3M L+600 |
|
2,417 |
|
2,417 |
|
2,417 |
By Light Professional IT Services, LLC |
|
5/16/2024 |
|
High Tech Industries |
|
9.20% |
|
1M L+662 |
|
14,822 |
|
14,771 |
|
14,674 |
Cadence Aerospace, LLC |
|
11/14/2023 |
|
Aerospace and Defense |
|
11.31% |
|
3M L+325 |
|
12,412 |
|
12,385 |
|
12,288 |
|
|
|
|
|
|
(PIK 11.31%) |
|
|
|
|
|
|
|
|
Cartessa Aesthetics, LLC |
|
5/13/2028 |
|
Distributors |
|
9.55% |
|
SOFR + 600 |
|
6,484 |
|
6,359 |
|
6,386 |
CF512, Inc. |
|
8/20/2026 |
|
Media |
|
9.08% |
|
3M L+600 |
|
4,950 |
|
4,866 |
|
4,876 |
CHA Holdings, Inc. |
|
4/10/2025 |
|
Construction and Engineering |
|
8.17% |
|
3M L+450 |
|
5,557 |
|
5,487 |
|
5,557 |
Challenger Performance Optimization, Inc. |
|
8/31/2023 |
|
Business Services |
|
9.27% |
|
1M L+575 |
|
9,271 |
|
9,247 |
|
8,993 |
|
|
|
|
|
|
(PIK 1.00%) |
|
|
|
|
|
|
|
|
Connatix Buyer, Inc. |
|
7/13/2027 |
|
Media |
|
8.42% |
|
3M L+550 |
|
3,907 |
|
3,842 |
|
3,810 |
Crane 1 Services, Inc. |
|
8/16/2027 |
|
Commercial Services & Supplies |
|
9.39% |
|
3M L+575 |
|
2,110 |
|
2,084 |
|
2,089 |
Douglas Products and Packaging Company LLC |
|
10/19/2022 |
|
Chemicals, Plastics and Rubber |
|
8.87% |
|
3M L+575 |
|
8,655 |
|
8,653 |
|
8,655 |
Douglas Sewer Intermediate, LLC |
|
10/19/2022 |
|
Chemicals, Plastics and Rubber |
|
8.87% |
|
3M L+575 |
|
7,248 |
|
7,246 |
|
7,248 |
Dr. Squatch, LLC |
|
8/31/2027 |
|
Personal Products |
|
9.42% |
|
3M L+575 |
|
14,862 |
|
14,610 |
|
14,639 |
DRI Holding Inc. |
|
12/21/2028 |
|
Media |
|
8.37% |
|
1M L+525 |
|
1,832 |
|
1,680 |
|
1,643 |
DRS Holdings III, Inc. |
|
11/3/2025 |
|
Consumer Goods: Durable |
|
8.87% |
|
1M L+575 |
|
15,179 |
|
15,103 |
|
14,693 |
Duraco Specialty Tapes LLC |
|
6/30/2024 |
|
Containers and Packaging |
|
8.62% |
|
1M L+550 |
|
10,278 |
|
10,151 |
|
10,031 |
ECL Entertainment, LLC |
|
5/1/2028 |
|
Hotels, Restaurants and Leisure |
|
10.62% |
|
3M L+750 |
|
2,621 |
|
2,598 |
|
2,581 |
ECM Industries, LLC |
|
12/23/2025 |
|
Electronic Equipment, Instruments, and Components |
|
7.82% |
|
3M L+475 |
|
4,974 |
|
4,974 |
|
4,738 |
Exigo Intermediate II, LLC |
|
3/15/2027 |
|
Software |
|
8.87% |
|
1M L+575 |
|
12,935 |
|
12,759 |
|
12,644 |
Fairbanks Morse Defense |
|
6/17/2028 |
|
Aerospace and Defense |
|
8.39% |
|
3M L+475 |
|
10,300 |
|
10,238 |
|
9,528 |
Gantech Acquisition Corp. |
|
5/14/2026 |
|
IT Services |
|
9.37% |
|
1M L+625 |
|
14,638 |
|
14,427 |
|
14,199 |
Global Holdings InterCo LLC |
|
3/16/2026 |
|
Diversified Financial Services |
|
8.74% |
|
3M L+600 |
|
3,904 |
|
3,888 |
|
3,728 |
Graffiti Buyer, Inc. |
|
8/10/2027 |
|
Trading Companies & Distributors |
|
9.17% |
|
3M L+550 |
|
2,369 |
|
2,320 |
|
2,274 |
Hancock Roofing and Construction L.L.C. |
|
12/31/2026 |
|
Insurance |
|
8.67% |
|
1M L+500 |
|
2,392 |
|
2,347 |
|
2,356 |
Holdco Sands Intermediate, LLC |
|
11/23/2028 |
|
Aerospace and Defense |
|
10.17% |
|
3M L+600 |
|
4,963 |
|
4,874 |
|
4,863 |
HW Holdco, LLC |
|
12/10/2024 |
|
Media |
|
6.00% |
|
6M L+575 |
|
3,052 |
|
3,006 |
|
3,014 |
Icon Partners III, LP |
|
5/11/2028 |
|
Automobiles |
|
7.55% |
|
3M L+450 |
|
2,327 |
|
1,997 |
|
1,701 |
IDC Infusion Services, Inc. |
|
12/30/2026 |
|
Healthcare Equipment and Supplies |
|
10.20% |
|
SOFR+700 |
|
9,950 |
|
9,833 |
|
9,502 |
Imagine Acquisitionco, LLC |
|
11/15/2027 |
|
Software |
|
8.42% |
|
1M L+550 |
|
5,364 |
|
5,261 |
|
5,230 |
Inception Fertility Ventures, LLC |
|
12/7/2023 |
|
Healthcare Providers and Services |
|
8.55% |
|
SOFR+700 |
|
16,620 |
|
16,309 |
|
16,454 |
Integrative Nutrition, LLC |
|
9/29/2023 |
|
Diversified Consumer Services |
|
8.42% |
|
3M L+475 |
|
11,187 |
|
11,168 |
|
10,963 |
Integrity Marketing Acquisition, LLC |
|
8/27/2025 |
|
Insurance |
|
7.58% |
|
1M L+550 |
|
5,966 |
|
5,885 |
|
5,906 |
ITI Holdings, Inc. |
|
3/3/2028 |
|
IT Services |
|
8.67% |
|
SOFR + 550 |
|
3,980 |
|
3,917 |
|
3,900 |
K2 Pure Solutions NoCal, L.P. |
|
12/20/2023 |
|
Chemicals, Plastics and Rubber |
|
11.12% |
|
1M L+800 |
|
19,250 |
|
19,103 |
|
19,250 |
Kinetic Purchaser, LLC |
|
11/10/2027 |
|
Personal Products |
|
9.67% |
|
3M L+600 |
|
16,830 |
|
16,451 |
|
16,494 |
Lash OpCo, LLC |
|
2/18/2027 |
|
Personal Products |
|
11.17% |
|
3M L+700 |
|
14,355 |
|
14,074 |
|
14,068 |
LAV Gear Holdings, Inc. |
|
10/31/2024 |
|
Capital Equipment |
|
9.70% |
|
3M L+550 |
|
10,578 |
|
10,539 |
|
10,335 |
|
|
|
|
|
|
(PIK 2.00%) |
|
|
|
|
|
|
|
|
Lightspeed Buyer Inc. |
|
2/3/2026 |
|
Healthcare Providers and Services |
|
9.04% |
|
3M L+575 |
|
10,598 |
|
10,428 |
|
10,254 |
Lucky Bucks, LLC |
|
7/20/2027 |
|
Hotel, Gaming and Leisure |
|
8.31% |
|
3M L+550 |
|
4,331 |
|
4,258 |
|
3,183 |
Magenta Buyer, LLC |
|
7/31/2028 |
|
Software |
|
7.87% |
|
1M L+475 |
|
2,695 |
|
2,539 |
|
2,425 |
Marketplace Events, LLC - Super Priority First Lien Term Loan |
|
9/30/2025 |
|
Media: Diversified and Production |
|
8.19% |
|
1M L+525 |
|
647 |
|
647 |
|
647 |
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3) |
|
9/30/2025 |
|
Media: Diversified and Production |
|
|
|
|
|
589 |
|
- |
|
- |
Marketplace Events, LLC |
|
9/30/2026 |
|
Media: Diversified and Production |
|
8.19% |
|
1M L+525 |
|
4,837 |
|
3,527 |
|
4,837 |
Mars Acquisition Holdings Corp. |
|
5/14/2026 |
|
Media |
|
8.62% |
|
1M L+550 |
|
9,900 |
|
9,782 |
|
9,851 |
MBS Holdings, Inc. |
|
4/16/2027 |
|
Internet Software and Services |
|
8.56% |
|
3M L+575 |
|
7,406 |
|
7,296 |
|
7,332 |
MDI Buyer, Inc. |
|
7/25/2028 |
|
Chemicals, Plastics and Rubber |
|
8.98% |
|
3M L+500 |
|
5,000 |
|
4,902 |
|
4,900 |
Meadowlark Acquirer, LLC |
|
12/10/2027 |
|
Professional Services |
|
9.17% |
|
3M L+650 |
|
2,396 |
|
2,353 |
|
2,372 |
Mission Critical Electronics, Inc. |
|
3/28/2024 |
|
Capital Equipment |
|
8.70% |
|
SOFR+500 |
|
5,829 |
|
5,817 |
|
5,759 |
Municipal Emergency Services, Inc. |
|
9/28/2027 |
|
Distributors |
|
8.67% |
|
3M L+500 |
|
3,465 |
|
3,405 |
|
3,264 |
NBH Group LLC |
|
8/19/2026 |
|
Healthcare, Education & Childcare |
|
7.80% |
|
1M L+550 |
|
10,820 |
|
10,641 |
|
10,820 |
New Milani Group LLC |
|
6/6/2024 |
|
Consumer Goods: Non-Durable |
|
7.75% |
|
3M L+500 |
|
14,363 |
|
14,319 |
|
14,111 |
OIS Management Services, LLC |
|
7/9/2026 |
|
Healthcare Equipment and Supplies |
|
8.40% |
|
SOFR+475 |
|
5,060 |
|
4,991 |
|
5,060 |
One Stop Mailing, LLC |
|
5/7/2027 |
|
Air Freight and Logistics |
|
9.37% |
|
1M L+625 |
|
14,598 |
|
14,353 |
|
14,160 |
Output Services Group, Inc. |
|
3/27/2024 |
|
Business Services |
|
9.80% |
|
3M L+425 |
|
7,682 |
|
7,676 |
|
5,838 |
Owl Acquisition, LLC |
|
2/4/2028 |
|
Professional Services |
|
8.41% |
|
3M L+575 |
|
3,990 |
|
3,918 |
|
3,890 |
Ox Two, LLC |
|
5/18/2026 |
|
Construction and Building |
|
9.81% |
|
3M L+600 |
|
4,925 |
|
4,866 |
|
4,827 |
PH Beauty Holdings III, Inc. |
|
9/29/2025 |
|
Wholesale |
|
8.07% |
|
1M L+500 |
|
9,593 |
|
9,234 |
|
7,674 |
PL Acquisitionco, LLC |
|
11/9/2027 |
|
Textiles, Apparel and Luxury Goods |
|
9.62% |
|
1M L+650 |
|
8,238 |
|
8,111 |
|
8,032 |
Plant Health Intermediate, Inc. |
|
10/19/2022 |
|
Chemicals, Plastics and Rubber |
|
8.87% |
|
3M L+575 |
|
1,562 |
|
1,561 |
|
1,562 |
PlayPower, Inc. |
|
5/8/2026 |
|
Consumer Goods: Durable |
|
9.17% |
|
3M L+550 |
|
2,580 |
|
2,500 |
|
2,309 |
Pragmatic Institute, LLC |
|
7/6/2028 |
|
Education |
|
9.30% |
|
SOFR+575 |
|
11,250 |
|
11,056 |
|
11,138 |
Quantic Electronics, LLC |
|
11/19/2026 |
|
Aerospace and Defense |
|
8.41% |
|
1M L+625 |
|
4,845 |
|
4,755 |
|
4,729 |
Quantic Electronics, LLC - Unfunded Term Loan (3) |
|
11/19/2026 |
|
Aerospace and Defense |
|
|
|
|
|
1,888 |
|
- |
|
- |
Reception Purchaser, LLC |
|
2/28/2028 |
|
Air Freight and Logistics |
|
9.13% |
|
SOFR+600 |
|
4,975 |
|
4,904 |
|
4,751 |
Recteq, LLC |
|
1/29/2026 |
|
Leisure Products |
|
9.92% |
|
3M L+600 |
|
4,925 |
|
4,856 |
|
4,753 |
Research Now Group, LLC and Dynata, LLC |
|
12/20/2024 |
|
Diversified Consumer Services |
|
8.84% |
|
3M L+550 |
|
12,564 |
|
12,354 |
|
11,291 |
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9
PennantPark Senior Secured Loan Fund I LLC
Consolidated Schedule of Investments
September 30, 2022
($ in thousands)
Issuer Name |
|
Maturity |
|
Industry |
|
Current |
|
Basis Point |
|
Par / |
|
Cost |
|
Fair Value (2) |
Sales Benchmark Index LLC |
|
1/3/2025 |
|
Professional Services |
|
9.67% |
|
3M L+600 |
|
5,013 |
|
$4,960 |
|
$4,963 |
Sargent & Greenleaf Inc. |
|
12/20/2024 |
|
Wholesale |
|
8.62% |
|
3M L+550 |
|
5,240 |
|
5,202 |
|
5,187 |
Schlesinger Global, Inc. |
|
7/14/2025 |
|
Business Services |
|
10.27% |
|
SOFR+500 |
|
11,847 |
|
11,829 |
|
11,551 |
|
|
|
|
|
|
(PIK 0.50%) |
|
|
|
|
|
|
|
|
Sigma Defense Systems, LLC |
|
12/18/2025 |
|
Aerospace and Defense |
|
12.17% |
|
1M L+850 |
|
14,716 |
|
14,411 |
|
14,421 |
Smile Brands Inc. |
|
10/14/2025 |
|
Healthcare and Pharmaceuticals |
|
7.05% |
|
3M L+450 |
|
11,917 |
|
11,807 |
|
11,470 |
Solutionreach, Inc. |
|
1/17/2024 |
|
Healthcare and Pharmaceuticals |
|
8.87% |
|
1M L+575 |
|
5,647 |
|
5,625 |
|
5,511 |
Spendmend Holdings LLC |
|
3/1/2028 |
|
Healthcare Technology |
|
8.63% |
|
SOFR+575 |
|
2,956 |
|
2,916 |
|
2,873 |
STV Group Incorporated |
|
12/11/2026 |
|
Construction and Building |
|
8.37% |
|
3M L+525 |
|
9,075 |
|
9,011 |
|
8,985 |
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC) |
|
8/16/2027 |
|
Aerospace and Defense |
|
8.73% |
|
SOFR+600 |
|
14,888 |
|
14,623 |
|
14,649 |
Teneo Holdings LLC |
|
7/18/2025 |
|
Business Services |
|
8.38% |
|
3M L+625 |
|
2,786 |
|
2,757 |
|
2,623 |
The Aegis Technologies Group, LLC |
|
10/31/2025 |
|
Aerospace and Defense |
|
9.55% |
|
3M L+500 |
|
5,659 |
|
5,600 |
|
5,603 |
The Bluebird Group LLC |
|
7/27/2026 |
|
Professional Services |
|
10.67% |
|
1M L+700 |
|
1,707 |
|
1,679 |
|
1,724 |
The Infosoft Group, LLC |
|
9/16/2024 |
|
Media: Broadcasting and Subscription |
|
8.47% |
|
3M L+525 |
|
12,957 |
|
12,952 |
|
12,859 |
The Vertex Companies, LLC |
|
8/30/2027 |
|
Construction and Engineering |
|
8.62% |
|
1M L+550 |
|
5,578 |
|
5,479 |
|
5,550 |
TPC Canada Parent, Inc. and TPC US Parent, LLC |
|
11/24/2025 |
|
Consumer Goods: Non-Durable |
|
8.30% |
|
3M L+475 |
|
8,744 |
|
8,604 |
|
8,482 |
TVC Enterprises, LLC |
|
3/26/2026 |
|
Diversified Consumer Services |
|
8.87% |
|
3M L+550 |
|
14,952 |
|
14,871 |
|
14,578 |
TWS Acquisition Corporation |
|
6/16/2025 |
|
Diversified Consumer Services |
|
8.76% |
|
3M L+625 |
|
5,468 |
|
5,450 |
|
5,441 |
Tyto Athene, LLC (New Issue) |
|
4/1/2028 |
|
IT Services |
|
7.76% |
|
3M L+550 |
|
15,550 |
|
15,421 |
|
14,446 |
UBEO, LLC |
|
4/3/2024 |
|
Capital Equipment |
|
8.17% |
|
3M L+450 |
|
17,390 |
|
17,305 |
|
17,129 |
Unique Indoor Comfort, LLC |
|
5/24/2027 |
|
Home and Office Furnishings, Housewares |
|
8.95% |
|
SOFR+525 |
|
4,975 |
|
4,880 |
|
4,866 |
Walker Edison Furniture Company LLC |
|
3/31/2027 |
|
Wholesale |
|
12.42% |
|
3M L+575 |
|
12,684 |
|
12,438 |
|
8,473 |
|
|
|
|
|
|
(PIK 3.0%) |
|
|
|
|
|
|
|
|
Wildcat Buyerco, Inc. |
|
2/27/2026 |
|
Electronic Equipment, Instruments, and Components |
|
9.45% |
|
SOFR+550 |
|
8,546 |
|
8,506 |
|
8,261 |
Zips Car Wash, LLC |
|
3/1/2024 |
|
Automobiles |
|
10.35% |
|
3M L+725 |
|
16,957 |
|
16,711 |
|
16,536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total First Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
767,316 |
|
751,628 |
Second Lien Secured Debt - 5.2% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventus Power, Inc. |
|
9/29/2024 |
|
Consumer Goods: Durable |
|
12.17% |
|
3M L+850 |
|
3,000 |
|
2,963 |
|
2,955 |
Total Second Lien Secured Debt |
|
|
|
|
|
|
|
|
|
|
|
2,963 |
|
2,955 |
Equity Securities - 0.3% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New MPE Holdings, LLC |
|
— |
|
Media: Diversified and Production |
|
— |
|
— |
|
— |
|
— |
|
139 |
Total Equity Securities |
|
|
|
|
|
|
|
|
|
|
|
— |
|
139 |
Total Investments - 1,335.9% |
|
|
|
|
|
|
|
770,280 |
|
754,722 |
||||
Cash and Cash Equivalents - 53.4% |
|
|
|
|
|
|
|
|
|
|
||||
BlackRock Federal FD Institutional 30 |
|
|
|
|
|
|
|
|
|
|
|
30,152 |
|
30,152 |
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
30,152 |
|
30,152 |
Total Investments and Cash Equivalents —1,389.26% |
|
|
|
|
|
|
|
|
|
|
|
$800,432 |
|
$784,874 |
Liabilities in Excess of Other Assets — (1,289.26)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
(728,378) |
Members' Equity—100.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
$56,496 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Represents floating rate instruments that accrue interest at a predetermined spread relative to an index, typically the applicable LIBOR, or “L”, Secured Overnight Financing Rate or "SOFR", or Prime rate or “P”. The spread may change based on the type of rate used. The terms in the Consolidated Schedule of Investments disclose the actual interest rate in effect as of the reporting period. LIBOR loans are typically indexed to a 30-day, 60-day, 90-day or 180-day SOFR rate (1M S, 2M S, 3M S, or 6M S, respectively), at the borrower’s option. All securities are subject to a SOFR or Prime rate floor where a spread is provided, unless noted. The spread provided includes PIK interest and other fee rates, if any. |
(2) Valued based on PSSL’s accounting policy. |
(3) Represents the purchase of a security with a delayed settlement or a revolving line of credit that is currently an unfunded investment. This security does not earn a basis point spread above an index while it is unfunded. |
|
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
PennantPark Senior Secured Loan Fund I LLC ("PSSL"), is organized as a Delaware limited liability company and commenced operations in May 2017. PSSL is a joint venture between PennantPark Floating Rate Capital Ltd. ("PFLT") and Trinity Universal Insurance Company, a subsidiary of Kemper Corporation (NYSE: KMPR), ("Kemper"). In this report, except where the context suggests otherwise, the terms “Company,” “we,” “our,” or “us” refer to PSSL and its consolidated subsidiary.
The Company's investment objectives are to generate current income and capital appreciation while seeking to preserve capital. We seek to achieve our investment objective by investing primarily in loans bearing a variable-rate of interest, or floating rate loans, and other investments made to U.S. middle-market companies whose debt is rated below investment grade. Floating rate loans pay interest at variable rates, which are determined periodically, on the basis of a floating base lending rate such as London Interbank Offered Rate ("LIBOR"), and Secured Overnight Financing Rate ("SOFR"), with or without a floor, plus a fixed spread.
PFLT and Kemper (individually a "Member" and collectively the "Members") provide capital to PSSL in the form of notes and equity interests. As of September 30, 2023 and 2022, PFLT and Kemper owned 87.5% and 12.5%, respectively, of each of the outstanding notes and equity interests. The administrative agent of the Company is PennantPark Investment Administration, LLC, (the "Administrative Agent"). The Bank of New York Mellon Corporation, or the Sub-Administrator, provides certain services to the Administrative Agent with respect to certain accounting matters and has the responsibility for the official books and records.
PFLT and Kemper each appointed two members to PSSL’s four-person board of directors and investment committee. All material decisions with respect to PSSL, including those involving its investment portfolio, require unanimous approval of a quorum of the board of directors or investment committee. Quorum is defined as (i) the presence of two members of the board of directors or investment committee; provided that at least one individual is present that was elected, designated or appointed by each of the Members; (ii) the presence of three members of the board of directors or investment committee, provided that the individual that was elected, designated or appointed by the Member with only one individual present shall be entitled to cast two votes on each matter; and (iii) the presence of four members of the board of directors or investment committee shall constitute a quorum, provided that two individuals are present that were elected, designated or appointed by each of the Members.
In January 2021, Pennant Park Senior Secured Loan Facility II, LLC ("PSSL II"), a wholly-owned subsidiary of PSSL, was formed as a financing subsidiary for purposes of entering into a senior secured revolving credit facility with Ally Bank (see Note 10).
In January 2021, PSSL completed a $300.7 million debt securitization in the form of a collateralized loan obligation, or the “2032 Asset-Backed Debt”. The 2032 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO II, Ltd. ("CLO II"), a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2032 Asset-Backed Debt is scheduled to mature in January 2032.
In April 2023, PSSL completed a $297.8 million debt securitization in the form of a collateralized loan obligation, or the “2035 Asset-Backed Debt”. The 2035 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO VI, LLC ("CLO VI"), a wholly-owned and consolidated subsidiary of PSSL, consisting primarily of middle market loans and participation interests in middle market loans. The 2035 Asset-Backed Debt is scheduled to mature in April 2035.
2. SIGNIFICANT ACCOUNTING POLICIES
PSSL is considered an investment company under U.S. generally accepted accounting principles ("GAAP") and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946. References to the Accounting Standards Codification, as amended ("ASC"), serves as a source of accounting literature. Subsequent events are evaluated and recognized or disclosed as appropriate for events occurring through the date the consolidated financial statements are available to be issued. The preparation of our consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the reported amount of our assets and liabilities at the date of the consolidated financial statements and the reported amounts of income and expenses during the reported periods. In the opinion of the Company, all adjustments, which are of a normal recurring nature, considered necessary for the fair presentation of financial statements have been included. Actual results could differ from these estimates due to changes in the economic and regulatory environment, financial markets and any other parameters used in determining such estimates and assumptions. We have eliminated all intercompany balances and transactions.
11
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
(a) Restatement of Previously Issued Financial Statement
During the preparation of the financial statements as of and for the year ended September 30, 2023, Management identified
an error in the classification and presentation of cash pertaining to the Company’s affiliate, PFLT, in the September 30, 2022 financial statements. The Company recorded cash activity and due from affiliate pertaining to their investments as an increase in the cash account instead of presenting the related cash and cash equivalents as an asset and another asset for due from affiliate. The impact of the error correction is reflected in a $3.6 million decrease to cash and offsetting increase to due from affiliates as of September 30, 2022 and a decrease in due from affiliates within operating activities on the consolidated statement of cash flows totaling $3.6 million for the year ended September 30, 2022. There was no impact from the error correction to total members' equity as reported on the consolidated statement of assets, liabilities and members' equity as of September 30, 2022. In addition, there was no impact from the error correction on net investment income or net increase (decrease) in members' equity resulting from operations in total as reported on the consolidated statement of operations for the year ended September 30, 2022. The corrections were reported in the year ended September 30, 2023.
Our significant accounting policies consistently applied are as follows:
(b) Investment Valuations
We expect that there may not be readily available market values for many of our investments, which are or will be in our portfolio, and we value such investments at fair value as determined in good faith by or under the direction of our board of directors using a documented valuation policy, described herein, and a consistently applied valuation process. With respect to investments for which there is no readily available market value, the factors that the board of directors may consider in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, we consider the pricing indicated by the external event in determining our valuation. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and the difference may be material. See Note 4.
Our portfolio generally consists of illiquid securities, including debt investments. With respect to investments for which market quotations are not readily available, or for which market quotations are deemed not reflective of the fair value, our board of directors undertakes a multi-step valuation process each quarter, as described below:
Our board of directors generally uses market quotations to assess the value of our investments for which market quotations are readily available. We obtain these market values from independent pricing services or at bid prices obtained from at least two brokers
12
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
or dealers, if available, or otherwise from a principal market maker or a primary market dealer. PennantPark Investment Advisers, LLC assesses the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
(c) Security Transactions, Revenue Recognition, and Realized/Unrealized Gains or Losses
Security transactions are recorded on a trade date basis. We record interest income on an accrual basis to the extent that we expect to collect such amounts. For loans and debt investments with contractual payment-in-kind, or PIK interest, which represents interest accrued and added to the loan balance that generally becomes due at maturity, we will generally not accrue PIK interest when the portfolio company valuation indicates that such PIK interest is not collectable. We do not accrue as a receivable, interest on loans and debt investments if we have reason to doubt our ability to collect such interest. Loan origination fees, original issue discount ("OID"), market discount or premium and deferred financing costs on liabilities, which we do not fair value, are capitalized and then accreted or amortized using the effective interest method as interest income or, in the case of deferred financing costs, as interest expense. Dividend income, if any, is recognized on an accrual basis on the ex-dividend date to the extent that we expect to collect such amounts. From time to time, the Company receives certain fees from portfolio companies, which are non-recurring in nature. Such fees include loan prepayment penalties, structuring fees and amendment fees, and are recorded as other investment income when earned.
Loans are placed on non-accrual status when principal or interest payments are past due 30 days or more and/or if there is reasonable doubt that principal or interest will be collected. Accrued interest receivable is generally reversed when a loan is placed on non-accrual status. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon the Company’ judgment. Non-accrual loans are restored to accrual status when past due principal and interest is paid and, in the Company’ judgment, are likely to remain current. As of September 30, 2023, we had two portfolio companies on non-accrual, representing 1.5% and 0.3% of our overall portfolio on a cost and fair value basis. As of September 30, 2022, none of our portfolio companies were on non-accrual.
We measure realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, using the specific identification method, without regard to unrealized appreciation or depreciation previously recognized, but considering prepayment penalties. Net change in unrealized appreciation or depreciation reflects the change in the fair values of our portfolio investments during the reporting period, including any reversal of previously recorded unrealized appreciation or depreciation, when gains or losses are realized.
(d) Income Taxes
PSSL is classified as a partnership for U.S. federal income tax purposes and is not subject to U.S. federal income tax. Accordingly, no provisions for U.S. income taxes have been made. The Members are responsible for reporting their share of the PSSL’s income or loss on their U.S. income tax returns.
In accordance with FASB ASC Topic 740, the Company is required to determine whether a tax position of PSSL is more likely than not, based on the technical merits of the position, to be sustained upon examination including resolution of any related appeals or litigation processes. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. De-recognition of a tax benefit previously recognized could result in PSSL recording a tax liability that would reduce members’ capital.
As of and for the years ended September 30, 2023 and 2022,management has determined that there were no material uncertain income tax positions.
(e) Foreign Currency Translation
Our books and records are maintained in U.S. dollars. Any foreign currency amounts are translated into U.S. dollars on the following basis:
13
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Although Members’ capital and fair values are presented based on the applicable foreign exchange rates described above, we do not isolate that portion of the results of operations due to changes in foreign exchange rates on investments, other assets and debt from the fluctuations arising from changes in fair values of investments held. Such fluctuations are included with the net realized and unrealized gain or loss from investments.
Foreign security and currency translations may involve certain considerations and risks not typically associated with investing in U.S. companies and U.S. government securities. These risks include, but are not limited to, currency fluctuations and revaluations and future adverse political, social and economic developments, which could cause investments in foreign markets to be less liquid and prices to be more volatile than those of comparable U.S. companies or U.S. government securities.
(f) Consolidation
As explained by ASC paragraph 946-810-45, PSSL will generally not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to us.
(g) Recent Accounting Pronouncements
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes in
the Disclosure Requirements for Fair Value Measurement, which changes the fair value measurement disclosure requirements on fair value measurements in Topic 820. The ASU removed the requirements to disclosure the policy for the timing of transfers between levels, the valuation processes for Level 3 fair value measurements, the Level 3 reconciliation from opening balances to closing balances, and the change in unrealized gains and losses of Level 3 fair value measurements held on the balance sheet date. While most changes are applied on a retrospective basis, the ASU still requires the change in unrealized gain and losses of Level 3 fair value measurements held as of the prior year to be disclosed. As a result of these removals certain modifications were made, including disclosure of the amount of and reason for transfers into and out of Level 3 of the fair value hierarchy and the amount of purchases and issues of Level 3 assets and liabilities. PSSL adopted this ASU for the year ended September 30, 2023.
In March 2020, the FASB issued Accounting Standards Update, or ASU, No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” or ASU 2020-04. The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through December 31, 2022. The Company utilized the optional expedients and exceptions provided by ASU 2020-04 during the years ended September 30, 2023 and September 30, 2022, the effect of which was not material to the consolidated financial statements and the notes thereto.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326)” or ASU 2022-02, which is intended to address issues identified during the post-implementation review of ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. The amendment, among other things, eliminates the accounting guidance for troubled debt restructurings by creditors in Subtopic 310-40, “Receivables - Troubled Debt Restructurings by Creditors”, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The new guidance is effective for interim and annual periods beginning after December 15, 2022. The Company adopted ASU 2022-02 on its consolidated financial statement and disclosures.
In June 2022, the FASB issued Accounting Standards Update No. 2022-03, "Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions," or ASU 2022-03, which changed the fair value measurement disclosure requirements of ASC Topic 820, Fair Value Measurements and Disclosures, or ASC 820. The amendments clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also clarify that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction. The new guidance is effective for fiscal years beginning after December 15, 2023, including interim periods therein. Early application is permitted. The Company is currently evaluating the impact the
14
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
adoption of this new accounting standard will have on its consolidated financial statements, but the impact of the adoption is not expected to be material.
3. AGREEMENTS AND RELATED PARTY TRANSACTIONS
On June 10, 2022, PFLT was issued a capital call from the Company totaling $28.4 million consisting of Member notes of $19.9 million and equity interest of $8.5 million. PFLT fulfilled the June 10, 2022 capital call by contributing $28.0 million of securities and $0.4 million in cash to the Company.
For the years ended September 30, 2023 and 2022, PSSL purchased $158.2 million and $275.8 million, in investments from PFLT, respectively.
As of September 30, 2023 and 2022, PSSL had a receivable from PFLT of $0.4 million and $3.6 million, respectively,
presented as a Due from Affiliate on the consolidated statements of assets, liabilities and members' equity. These amounts are related to cash owed to PSSL from PFLT in connection with trades between funds.
For the years ended September 30, 2023 and 2022, PSSL incurred $2.1 and $1.8 million of Administration fees to the Administrative Agent, respectively. The Administrative Agent provides administration services to PSSL at an annual rate of 0.25% of average gross assets under management payable quarterly in arrears and calculated based on average gross assets measured at cost at the end of the two recently completed calendar quarters.
For the years ended September 30, 2023 and 2022, PSSL incurred $30.3 million and $17.5 million of interest expense related to the notes outstanding with the Members, respectively.
4. FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value, as defined under ASC 820, is the price that we would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment or liability. ASC 820 emphasizes that valuation techniques maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing an asset or liability based on market data obtained from sources independent of us. Unobservable inputs reflect the assumptions market participants would use in pricing an asset or liability based on the best information available to us on the reporting period date.
ASC 820 classifies the inputs used to measure these fair values into the following hierarchies:
Level 1: Inputs that are quoted prices (unadjusted) in active markets for identical assets or liabilities, accessible by us at the measurement date.
Level 2: Inputs that are quoted prices for similar assets or liabilities in active markets, or that are quoted prices for identical or similar assets or liabilities in markets that are not active and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term, if applicable, of the financial instrument.
Level 3: Inputs that are unobservable for an asset or liability because they are based on our own assumptions about how market participants would price the asset or liability.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Generally, most of our investments are classified as Level 3. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the price used in an actual transaction may be different than our valuation and those differences may be material.
15
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
The inputs into the determination of fair value may require significant management judgment or estimation. Even if observable market data is available, such information may be the result of consensus pricing information, disorderly transactions or broker quotes which include a disclaimer that the broker would not be held to such a price in an actual transaction. The non-binding nature of consensus pricing and/or quotes accompanied by disclaimer would result in classification as Level 3 information, assuming no additional corroborating evidence were available. Corroborating evidence that would result in classifying these non-binding broker/dealer bids as a Level 2 asset includes observable market-based transactions for the same or similar assets or other relevant observable market-based inputs that may be used in pricing an asset.
Our investments are generally structured as debt in the form of first lien secured debt, but may also include second lien secured debt, subordinated debt and equity investments. The transaction price, excluding transaction costs, is typically the best estimate of fair value at inception. Ongoing reviews by the Members and independent valuation firms are based on an assessment of each underlying investment, incorporating valuations that consider the evaluation of financing and sale transactions with third parties, expected cash flows and market-based information including comparable transactions, performance multiples and yields, among other factors. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy.
A review of fair value hierarchy classifications is conducted on a quarterly basis. Changes in our ability to observe valuation inputs may result in a reclassification for certain financial assets or liabilities.
In addition to using the above inputs in valuing cash equivalents and investments, we employ the valuation policy approved by our board of directors that is consistent with ASC 820. Consistent with our valuation policy, we evaluate the source of inputs, including any markets in which our investments are trading, in determining fair value. See Note 2.
As outlined in the table below, some of our Level 3 investments using a market comparable valuation technique are valued using the average of the bids from brokers or dealers. The bids include a disclaimer, may not have corroborating evidence, may be the result of a disorderly transaction and may be the result of consensus pricing. The Members assess the source and reliability of bids from brokers or dealers. If the board of directors has a bona fide reason to believe any such market quote does not reflect the fair value of an investment, it may independently value such investments by using the valuation procedure that it uses with respect to assets for which market quotations are not readily available.
Some of our investments can also be valued using a market comparable or an enterprise market value technique. With respect to investments for which there is no readily available market value, the factors that the board of directors may consider in pricing our investments at fair value include, as relevant, the nature and realizable value of any collateral, the portfolio company’s ability to make payments, its earnings and discounted cash flow, the markets in which the portfolio company does business, comparison to publicly traded securities and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent equity sale occurs, the pricing indicated by the external event, excluding transaction costs, is used to corroborate the valuation. When using earnings multiples to value a portfolio company, the multiple used requires the use of judgment and estimates in determining how a market participant would price such an asset. These non-public investments using unobservable inputs are included in Level 3 of the fair value hierarchy. Generally, the sensitivity of unobservable inputs or combination of inputs such as industry comparable companies, market outlook, consistency, discount rates and reliability of earnings and prospects for growth, or lack thereof, affects the multiple used in pricing an investment. As a result, any change in any one of those factors may have a significant impact on the valuation of an investment. Generally, an increase in a market yield will result in a decrease in the valuation of a debt investment, while a decrease in a market yield will have the opposite effect. Generally, an increase in an EBITDA multiple will result in an increase in the valuation of an investment, while a decrease in an EBITDA will have the opposite effect.
Our Level 3 valuation techniques, unobservable inputs and ranges were categorized as follows for ASC 820 purposes:
16
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
|
|
|
|
|
|
|
|
|
|
|
|
Asset Category |
|
Fair value at September 30, 2023 |
|
|
Valuation Technique |
|
Unobservable Input |
|
Range of Input |
||
First Lien |
|
$ |
|
91,489 |
|
|
Market Comparable |
|
Broker/Dealer bids or quotes |
|
N/A |
First Lien |
|
|
|
691,949 |
|
|
Market Comparable |
|
Market Yield |
|
10.0% – 18.8% (12.3%) |
First Lien |
|
|
|
160 |
|
|
Market Comparable |
|
EBITDA Multiple |
|
2.8x |
Equity |
|
|
|
2,261 |
|
|
Enterprise Market Value |
|
EBITDA Multiple |
|
5.3x – 10.9x (6.5x) |
Total Level 3 investments |
|
$ |
|
785,859 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Category |
|
Fair value at September 30, 2022 |
|
|
Valuation Technique |
|
Unobservable Input |
|
Range of Input |
||
First lien |
|
$ |
|
127,355 |
|
|
Market Comparable |
|
Broker/Dealer bids or quotes |
|
N/A |
First lien |
|
|
|
615,800 |
|
|
Market Comparable |
|
Market Yield |
|
6.0% – 12.2% (9.1%) |
First lien |
|
|
|
8,473 |
|
|
Enterprise Market Value |
|
EBITDA Multiple |
|
14.0x |
Second Lien |
|
|
|
2,955 |
|
|
Market Comparable |
|
Market Yield |
|
12.2% - 12.2% (12.2%) |
Equity |
|
|
|
139 |
|
|
Enterprise Market Value |
|
EBITDA Multiple |
|
8.0x |
Total Level 3 investments |
|
$ |
|
754,722 |
|
|
|
|
|
|
|
(1) The weighted averages disclosed in the table above were weighted by their relative fair value.
Our investments and cash and cash equivalents were categorized as follows in the fair value hierarchy for ASC 820 purposes:
|
|
Fair Value at September 30, 2023 |
|
||||||||||||||||||
Description |
|
Level 1 |
|
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
First lien |
|
$ |
|
— |
|
|
|
$ |
|
— |
|
|
$ |
|
783,598 |
|
|
$ |
|
783,598 |
|
Equity |
|
|
|
— |
|
|
|
|
|
— |
|
|
|
|
2,261 |
|
|
|
|
2,261 |
|
Total investments |
|
|
— |
|
|
|
|
— |
|
|
|
|
785,859 |
|
|
|
|
785,859 |
|
||
Cash and cash equivalents |
|
|
|
77,446 |
|
|
|
|
|
— |
|
|
|
|
— |
|
|
|
|
77,446 |
|
Total investments, cash and cash equivalents |
|
$ |
|
77,446 |
|
|
|
$ |
— |
|
|
$ |
|
785,859 |
|
|
$ |
|
863,305 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
Fair Value at September 30, 2022 |
|
||||||||||||||||||
Description |
|
Level 1 |
|
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||||||
First lien |
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
|
751,628 |
|
|
$ |
|
751,628 |
|
||
Second Lien |
|
|
— |
|
|
|
|
— |
|
|
|
|
2,955 |
|
|
|
|
2,955 |
|
||
Equity |
|
|
— |
|
|
|
|
— |
|
|
|
|
139 |
|
|
|
|
139 |
|
||
Total investments |
|
|
— |
|
|
|
|
— |
|
|
|
|
754,722 |
|
|
|
|
754,722 |
|
||
Cash and cash equivalents |
|
|
|
30,152 |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
30,152 |
|
||
Total investments, cash and cash equivalents |
|
$ |
|
30,152 |
|
|
|
$ |
— |
|
|
$ |
|
754,722 |
|
|
$ |
|
784,874 |
|
|
Net Change in unrealized depreciation reported within the net change in unrealized (depreciation) appreciation on investments in our Consolidated Statements of Operations attributable to our level 3 assets still held as of September 30, 2022 was ($8.3) million related to debt investments, ($0.5) million related to equity investments and ($8.8) million related to total investments.
For the year ended September 30, 2023, the amount of Level 3 purchases, including PIK interest, net discount accretion and non-cash exchanges for the year were $195.8 million. There were no Level 3 transfers.
For the year ended September 30, 2022, the amount of Level 3 purchases, including PIK interest, net discount accretion and non-cash exchanges for the year were $311.0 million. There were no Level 3 transfers.
17
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
5. CASH AND CASH EQUIVALENTS
Cash equivalents represent cash invested in overnight money market funds. These temporary investments with original maturities of 90 days or less are deemed cash equivalents. Cash deposited at financial institutions is insured by the Federal Deposit Insurance Corporation (“FDIC”), up to specified limits. At times, such balances may exceed FDIC insured amounts. As of September 30, 2023, the entire amount of $77.4 million included in the cash and cash equivalents balance on the Consolidated Statement of Assets and Liabilities is comprised of money market funds, which are not subject to FDIC insurance. As of September 30, 2022, cash and cash equivalents consisted of money market funds in the amounts of $30.2 million at fair value. PSSL believes it is not exposed to any significant risk of loss on its cash and cash equivalents.
6. MEMBERS’ EQUITY
PFLT and Kemper provide capital to PSSL in the form of equity interests. As of September 30, 2023 and 2022, PFLT and Kemper owned 87.5% and 12.5%, respectively, of equity interests in PSSL.
As of September 30, 2023 and 2022, PFLT had commitments to fund equity interests to PSSL of $101.9 million and $90.0 million, respectively, of which $11.8 million and $8.5 million, respectively, were unfunded.
As of September 30, 2023 and 2022, Kemper had commitments to fund equity interests to PSSL of $14.6 million and $12.9 million, respectively, of which $1.7 million and $1.2 million, respectively were unfunded.
7. NOTES PAYABLE TO MEMBERS
PFLT and Kemper provide capital to PSSL in the form of first lien secured debt (“Member Notes”). The Member Notes were previously subordinated debt that were modified during the year ended September 30, 2018 to eliminate the subordination provision. The Member Notes bear an interest rate of 3-month LIBOR plus 8.0% through June 30, 2023 and 3-month SOFR plus 8.0% after June 30, 2023 and mature on May 6, 2024. As of September 30, 2023 and 2022, PFLT and Kemper owned 87.5% and 12.5% of the Member Notes, respectively.
As of September 30, 2023 and 2022, PFLT had commitments to fund Member Notes to PSSL of $237.7 million and $210.1 million, respectively, of which $27.6 million and $19.9 million, respectively, were unfunded.
As of September 30, 2023 and 2022, Kemper had commitments to fund Member Notes to PSSL of $34.0 million and $30.0 million, respectively, of which $3.9 million and $2.8 million, respectively, were unfunded.
8. RISKS AND UNCERTAINTIES
Investment risk
PSSL seeks investment opportunities that offer the possibility of attaining income generation, capital preservation and capital appreciation including investments in private companies. Certain events particular to each industry in which PSSL’s investments conduct their operations, as well as general economic and political conditions, may have a significant negative impact on the investee’s operations and profitability. Such events are beyond PSSL’s controls, and the likelihood that they may occur cannot be predicted. Furthermore, investments of PSSL are made in private companies and there are generally no public markets for these securities at the current time. The ability of PSSL to liquidate these investments and realize value is subject to significant limitations and uncertainties.
Leverage Risk
PSSL may borrow funds in order to increase the amount of capital available for investment. The use of leverage can improve the return on invested equity, however, such use may also magnify the potential for loss on invested equity capital. If the value of PSSL’s assets decreases, leveraging would cause Members’ equity to decline more sharply than it otherwise would have had PSSL not used leverage. Similarly, any decrease in PSSL’s income would cause Members’ equity to decline more sharply than it would have had PSSL not borrowed. Borrowings will usually be from credit facilities and/or debt securitization which will typically be
18
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
secured by PSSL’s securities and other assets. Under certain circumstances, such debt may demand an increase in the collateral that secures PSSL’s obligations and if PSSL was unable to provide additional collateral, the debt could liquidate assets held in the account to satisfy PSSL’s obligations. Liquidation in this manner could have adverse consequences. Additionally, the amount of PSSL’s borrowings and the interest rates on those borrowings, which will fluctuate, could have a significant effect on PSSL’s profitability.
Credit Risk
PSSL primarily invests in first lien secured debt to middle-market companies. A majority of the investments held by PSSL are subject to restrictions on their resale or are otherwise illiquid. PSSL assumes the credit risk of the borrower. In the event that the borrower becomes insolvent or enters bankruptcy, PSSL may incur certain costs and delays in realizing payment, or may suffer a loss of principal and/or interest.
9. FINANCIAL HIGHLIGHTS
The Members are responsible for all investment making and business decisions, therefore, there is no requirement to show financial highlights per ASC 946, which have been omitted accordingly.
10. LEVERAGE
Credit Facility
On January 26, 2021, PSSL II entered into a $125.0 million senior secured revolving credit facility with Ally Bank (the "Ally Credit Facility"). Between June 3, 2021 and May 2, 2022, the Ally Credit Facility was amended to increase the total commitment to $325 million. On August 16, 2023, the total commitment was decreased to $260 million. Interest on the Ally Credit Facility ranged from LIBOR plus 2.5% to SOFR plus 2.6%. The Ally credit facility matures on January 26, 2026 and is secured by substantially all of the assets held by PSSL II. As of September 30, 2023 there were $48.6 million in outstanding borrowings under the Ally Credit Facility and we were in compliance with all required covenants in the facility.
Asset - Backed Debt
In January 2021, CLO II completed a $300.7 million debt securitization in the form of a collateralized loan obligation (the "Debt Securitization" or the "2032 Asset-Backed Debt”). The 2032 Asset-Backed Debt is secured by a diversified portfolio consisting primarily of middle market loans. The Debt Securitization was executed through a private placement of: (i) $171.0 million Class A-1 Senior Secured Floating Rate Loans maturing 2032, which bear interest at the three-month SOFR plus 1.9%, (ii) $6.0 million Class A-2 Senior Secured Floating Rate Notes due 2032, which bear interest at three month SOFR plus 2.25%, (iii) $15.5 million Class B-1 Senior Secured Floating Rate Notes due 2032, which bear interest at the three-month SOFR plus 2.6%, (iv) $8.5 million Class B-2 Senior Secured Fixed Rate Notes due 2032, which bear interest of 3.14%, (v) $27.0 million Class C Secured Deferrable Floating Rate Notes due 2032, which bear interest at the three-month SOFR plus 4.25%, (vi) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2032, which bear interest at the three-month SOFR plus 6.5%, and (vii) $18.0 million Class E Secured Deferrable Floating Rate Notes due 2032, which bear interest at the three-month SOFR plus 8.5%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and U.S. Bank National Association, as collateral agent and as loan agent. As of September 30, 2023 there was $246.0 million of 2032 Asset-Backed Debt and there was $2.0 million of un-amortized financing costs. As of September 30, 2023 the weighted average interest rate was 8.0%.
On the closing date of the Debt Securitization, in consideration of our transfer to CLO II of the initial closing date loan portfolio, PSSL received 100% of the Preferred Shares of CLO II, 100% of the Class E Notes issued by CLO II, and a portion of the net cash proceeds received from the sale of the 2032 Asset-Backed Debt. The Preferred Shares do not bear interest and had a stated value of approximately $36.7 million at the closing of the Debt Securitization.
The 2032 Asset-Backed Debt is included in the Consolidated Statement of Assets, Liabilities and Members' Equity as debt of the Company and the Class E Notes and the Preferred Shares have been eliminated in consolidation.
In April 2023, CLO VI completed a $297.8 million debt securitization in the form of a collateralized loan obligation (the "Debt Securitization" or the "2035 Asset-Backed Debt”). The 2035 Asset-Backed Debt is secured by a diversified portfolio consisting primarily of middle market loans. The Debt Securitization was executed through a private placement of: (i) $171.0 million Class A-1 Senior Secured Floating Rate Loans maturing 2035, which bear interest at the three-month SOFR plus 2.68%, (ii) $28.0 million
19
PENNANTPARK SENIOR SECURED LOAN FUND I LLC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2023
Class B-1 Senior Secured Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 3.75%, (iii) $5.0 million Class B-2 Senior Secured Fixed Rate Notes due 2035, which bear interest of 7.634%, (v) $24.0 million Class C Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 5.25%, and (vi) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 7.0%, under a credit agreement by and among the Securitization Issuers, as borrowers, various financial institutions, as lenders, and Wilmington Trust, as collateral agent and as loan agent. As of September 30, 2023 there was $246.0 million of 2035 Asset-Backed Debt and there was $2.5 million of un-amortized financing costs. As of September 30, 2023 the weighted average interest rate was 8.5%.
On the closing date of the Debt Securitization, in consideration of our transfer to CLO VI of the initial closing date loan portfolio, PSSL received 100% of the Preferred Shares of CLO VI from the sale of the 2035 Asset-Backed Debt. The Preferred Shares do not bear interest and had a stated value of approximately $51.8 million at the closing of the Debt Securitization.
The 2035 Asset-Backed Debt is included in the Consolidated Statement of Assets, Liabilities and Members' Equity as debt of the Company and the Preferred Shares have been eliminated in consolidation.
PennantPark Investment Adviser, LLC serves as collateral manager to the Securitization Issuers pursuant to a Collateral Management Agreement. For so long as PennantPark Investment Advisor, LLC serves as collateral manager, it will elect to irrevocably waive any collateral management fee to which it may be entitled under the Collateral Management Agreements.
11. COMMITMENTS AND CONTINGENCY
As of September 30, 2023 and September 30, 2022, the Company had $1.1 million and $2.5 million, respectively, of unfunded commitments to fund existing investments.
The Company has provided general indemnifications to the Members, affiliates of the Members, and any person acting on behalf of the Members or that affiliate when they act, in good faith, in the best interest of the Company. The Company is unable to develop an estimate of the maximum potential amount of future payments that could potentially result from any hypothetical future claim but expects the risk of having to make any payments under these general business indemnifications to be remote.
12. SUBSEQUENT EVENTS
Subsequent events are evaluated and disclosed as appropriate for events occurring through the date the consolidated financial statements were available to be issued, December 7, 2023. There were no events that required disclosure.
20