Content analysis
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H.S. senior Avg
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New words:
Alera, Apex, Beach, combination, Curia, Dechra, Dental, DOXA, Environmental, GreenSky, Heritage, Highgate, Kellermeyer, lost, Medical, Mezzanine, Miami, Shaw, stability, STV, thirteen
Removed:
annum, apply, assure, ASU, AxiomSL, Big, BNP, Boxwood, Careismatic, Cayman, Cedar, Chestnut, Citibank, custodian, Deferral, discontinued, discounting, Dow, Dunlap, eighteen, expanded, Fargo, Goldman, Green, iii, impacted, iv, JCF, Jersey, Karman, Lakefield, Magnolia, National, optional, pandemic, recently, scope, Space, structure, sunset, transition, Veterinary
Financial report summary
?Risks
- Our ability to achieve our investment objectives depends on the Advisor’s ability to manage and support our investment process and if our agreement with the Advisor were to be terminated, or if the Advisor loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.
- The Advisor has a limited track record of acting as an investment adviser to a BDC, and any failure by the Advisor to manage and support our investment process may hinder the achievement of our investment objectives.
- Because our business model depends to a significant extent upon relationships with private equity sponsors, investment banks and commercial banks, the inability of the Advisor to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
- We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
- Our board of directors may change our operating policies and strategies without prior notice or stockholder approval.
- Changes in laws or regulations governing our operations or the operations of our business partners may adversely affect our business or cause us to alter our business strategy.
- The SBCA Act allows us to incur additional leverage.
- We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
- As a public company, we are subject to regulations not applicable to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to comply with such regulations will involve significant expenditures, and non-compliance with such regulations may adversely affect us.
- We may experience fluctuations in our quarterly results.
- If we, our affiliates and our and their respective third-party service providers are unable to maintain the availability of electronic data systems and safeguard the security of data, our ability to conduct business may be compromised, which could impair our liquidity, disrupt our business, damage our reputation or otherwise adversely affect our business.
- We and our Advisor could be the target of litigation.
- 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.
- The Advisor and its affiliates, including our officers and some of our directors, face conflicts of interest as a result of compensation arrangements between us and the Advisor, which could result in actions that are not in the best interests of our stockholders.
- We may be obligated to pay the Advisor incentive compensation on income that we have not received.
- There may be conflicts of interest related to obligations the Advisor’s senior management and investment teams have to our affiliates and to other clients.
- The time and resources that the Advisor and individuals employed by the Advisor devote to us may be diverted and we may face additional competition due to the fact that the Advisor and individuals employed by the Advisor are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.
- The Advisor’s liability is limited under each of the investment advisory agreement and the administration agreement, and we are required to indemnify it against certain liabilities, which may lead it to act in a riskier manner on our behalf than it would when acting for its own account.
- Failure to maintain our status as a BDC would reduce our operating flexibility.
- We are uncertain of our sources for funding our future capital needs and if we cannot obtain debt or equity financing on acceptable terms, or at all, our ability to acquire investments and to expand our operations will be adversely affected.
- The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
- Regulations governing our operation as a BDC and a RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
- Our ability to enter into transactions with our affiliates is restricted.
- Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
- Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.
- International investments create additional risks.
- Our investments in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities, subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.
- We may acquire various structured financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce the cash available to service debt or for distribution to stockholders.
- Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
- Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
- We generally will not control our portfolio companies.
- Declines in market values or fair market values of our investments could result in significant net unrealized depreciation of our portfolio, which in turn would reduce our net asset value.
- A significant portion of our investment portfolio does not have a readily available market price and is and will be recorded at fair value in accordance with policies and procedures approved by our board of directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
- We are exposed to risks associated with changes in interest rates.
- A covenant breach by our portfolio companies may harm our operating results.
- Our portfolio companies may be highly leveraged.
- We may not realize gains from our equity investments.
- An investment strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.
- A lack of liquidity in certain of our investments may adversely affect our business.
- We may not have the funds or ability to make additional investments in our portfolio companies.
- Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
- Our investments may include original issue discount and PIK instruments.
- We may from time to time enter into total return swaps, credit default swaps or other derivative transactions which expose us to certain risks, including credit risk, market risk, liquidity risk and other risks similar to those associated with the use of leverage.
- We may invest through joint ventures, partnerships or other special purpose vehicles and our investments through these vehicles may entail greater risks, and investments in which we have a non-controlling interest may involve risks specific to third-party management of those investments.
- We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common stock and may increase the risk of investing in our common stock.
- The agreements governing our debt financing arrangements contain, and agreements governing future debt financing arrangements may contain, various covenants which, if not complied with, could have a material adverse effect on our ability to meet our investment obligations and to pay distributions to our stockholders.
- There is a risk that investors in our common stock may not receive distributions.
- Our distribution proceeds may exceed our earnings. Therefore, portions of the distributions that we make may represent a return of capital to stockholders, which will lower their tax basis in their shares of common stock.
- Our shares of common stock may trade at a discount to net asset value, and such discount may be significant.
- We may pay distributions from offering proceeds, borrowings or the sale of assets to the extent our cash flows from operations, net investment income or earnings are not sufficient to fund declared distributions.
- A stockholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.
- Stockholders may experience dilution in their ownership percentage if they do not participate in our distribution reinvestment plan.
- Certain provisions of our charter and bylaws as well as provisions of the Maryland General Corporation Law could deter takeover attempts and have an adverse impact on the value of our common stock.
- The net asset value of our common stock may fluctuate significantly.
- The market price of our common stock may fluctuate significantly.
- Future sales of our common stock in the public market or the issuance of securities senior to our common stock could adversely affect the trading price of our common stock and our ability to raise funds in new stock offerings.
- If we issue preferred stock, debt securities or convertible debt securities, the net asset value and market value of our common stock may become more volatile.
- Holders of any preferred stock that we may issue will have the right to elect members of the board of directors and have class voting rights on certain matters.
- We have obtained the approval of our stockholders to issue shares of our common stock at prices below the then-current net asset value per share of our common stock, and any such issuance could materially dilute our stockholders’ interest in our common stock and reduce our net asset value per share.
- We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy the RIC annual distribution requirements.
- Some of our investments may be subject to corporate-level income tax.
- We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
- Our portfolio investments may present special tax issues.
- If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you will be taxed as though you received a distribution of some of our expenses.
- Legislative or regulatory tax changes could adversely affect investors.
- Future disruptions or instability in capital markets could negatively impact the valuation of our investments and our ability to raise capital.
- Future economic recessions or downturns could impair our portfolio companies and harm our operating results.
- Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of operations.
- We are currently operating in a period of capital markets disruption and economic uncertainty.
- If a period of capital market disruption and instability continues for an extended period of time, there is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital.
- Global economic, political and market conditions, including downgrades of the U.S. credit rating, may adversely affect our business, results of operations and financial condition.
- The Russian invasion of Ukraine may have a material adverse impact on us and our portfolio companies.
- Changes to United States tariff and import/export regulations may have a negative effect on 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.
Management Discussion
- (1)Such revenues represent $388 and $399 of cash income earned as well as $46 and $57 in non-cash portions relating to accretion of discount and PIK interest for the three months ended March 31, 2024 and 2023, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
- The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. Fee income is transaction based, and typically consists of amendment and consent fees, prepayment fees, structuring fees and other non-recurring fees. As such, fee income is generally dependent on new direct origination investments and the occurrence of events at existing portfolio companies resulting in such fees.
- The decrease in interest and PIK income during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 is primarily attributable to the repayment of higher yielding positions and lost interest income on certain assets that were placed on non-accrual status during the year ended December 31, 2023.