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H.S. junior Avg
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New words:
absent, assignment, ASU, burden, DebtCo, deposit, encumbrance, enhance, expansion, expired, FASB, fourth, guarantor, Guaranty, improve, interim, Intermediate, IntraFi, lien, LLCP, mailing, national, notice, option, outweigh, proposed, quotation, recommencement, retrospectively, segment, separate, single, standalone, stopped, subordinated, suspension, syndication, unfufilled, unsecured, USA, USAW, Valley, week
Removed:
acquiring, automotive, began, Blue, body, cleaning, closing, commencement, communication, complement, conform, culture, Development, disaster, discretionary, discussed, earn, Elite, equipment, ESOP, factor, FCF, franchisor, gutter, innovative, Manufacturing, Milton, pandemic, plant, power, reach, reconcile, residential, residual, Ridge, shop, specialty, Steck, suite, thereof, towing, training, washing, window, Workplace
Financial report summary
?Risks
- The offering prices may change on a monthly basis and investors may not know the offering price when they submit their subscription agreements.
- Investors will not have the opportunity to evaluate the assets we acquire before we make them, which makes an investment in us more speculative.
- The Follow-On Public Offering is a “best efforts” offering and if we are unable to raise substantial funds, we will be limited in the number and type of acquisitions we may make, and the value of an investment in us will fluctuate with the performance of the assets we acquire.
- The shares sold in the Follow-On Public Offering will not be listed on an exchange or quoted through a national quotation system for the foreseeable future, if ever. Therefore, investors in the Follow-On Public Offering will have limited liquidity and may not receive a full return of their invested capital if investors sell their shares.
- Under our share repurchase program, our ability to make new acquisitions of businesses or increase the current distribution rate may become limited if, during any consecutive two-year period, we do not have at least one quarter in which we fully satisfy 100% of properly submitted repurchase requests, which may adversely affect our flexibility and our ability to achieve our investment objectives.
- The ongoing offering price may not accurately reflect the value of our assets.
- Valuations and appraisals of our assets are estimates of fair value and may not necessarily correspond to realizable value.
- Our net asset value per share may change materially if the valuations of our assets materially change from prior valuations or the actual operating results for a particular month differ from what we originally budgeted for that month.
- The amount of any distributions we may pay is uncertain. We may not be able to pay investors distributions and our distributions may not grow over time.
- Because the Managing Dealer is an affiliate of the Manager, investors will not have the benefit of an independent review of the Follow-On Public Offering or us customarily performed in underwritten offerings.
- We may be unable to use a significant portion of the net proceeds of the Follow-On Public Offering on acceptable terms in the timeframe contemplated by the prospectus relating to the Follow-On Public Offering.
- Investors’ interest in us will be diluted if we issue additional shares, which could reduce the overall value of the investment.
- Investors will experience substantial dilution in the net tangible book value of their shares equal to the offering costs and sales load associated with their shares and will encounter substantial on-going fees and expenses.
- Our business could be adversely affected if we fail to maintain our qualification as a venture capital operating company, or VCOC, under the Plan Asset Regulation.
- We may be unable to successfully implement our business and acquisition strategies or generate sufficient cash flow to make distributions to our shareholders.
- Our ability to implement and execute our business strategy depends on the Manager’s and the Sub-Manager’s ability to manage and support our business operations. If the Manager or the Sub-Manager were to lose any members of their respective senior management teams, our ability to implement and execute our business strategy could be significantly harmed.
- Our board of directors may change our business and acquisition policies and strategies without prior notice or shareholder approval, the effects of which may be adverse to investors.
- If we internalize our management functions, investors’ interest in us could be diluted, and we could incur other significant costs and face other significant risks associated with being self-managed.
- Anti-takeover provisions in our LLC Agreement could inhibit a change in control.
- We may have conflicts of interest with the noncontrolling shareholders of our businesses.
- An investor’s investment return may be reduced if we are required to register as an investment company under the Investment Company Act.
- If, in the future, we cease to control and operate our businesses, we may be deemed to be an investment company under the Investment Company Act.
- Our success will be dependent on the performance of the Manager and the Sub-Manager and their respective affiliates, but investors should not rely on the past performance of the Manager, the Sub-Manager and their respective affiliates as an indication of future success. Prior to the Initial Public Offering, affiliates of CNL had only sponsored real estate and credit investment programs.
- The Manager, the Sub-Manager and their respective affiliates, including our officers and some of our directors will face conflicts of interest including conflicts that may result from compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders.
- We pay substantial fees and expenses to the Manager, the Sub-Manager, the Managing Dealer or their respective affiliates. These payments increase the risk that investors will not earn a profit on their investment.
- The time and resources that individuals associated with the Manager and the Sub-Manager devote to us may be diverted.
- We do not have a policy that expressly prohibits our directors, officers, or affiliates from engaging for their own account in business activities of the types conducted by us.
- The Manager and the Sub-Manager will experience conflicts of interest in connection with the management of our business affairs, our businesses and their respective other accounts and clients.
- The Sub-Manager may experience conflicts of interests in its management of other clients that may have a similar business strategy as us.
- The Manager and its respective affiliates may have an incentive to delay a liquidity event, which may result in actions that are not in the best interest of our shareholders.
- Our access to confidential information may restrict our ability to take action with respect to our businesses, which, in turn, may negatively affect our results of operations.
- We may be obligated to pay the Manager and the Sub-Manager incentive fees even if there is a decline in the value of our assets for that calendar year and even if our earned interest income is not payable in cash.
- The Manager’s and the Sub-Manager’s liability is limited under the Management Agreement, the Sub-Management Agreement, the Administrative Services Agreement and the Sub-Administration Agreement, as applicable, and we are required to indemnify the Manager and the Sub-Manager against certain liabilities, which may lead them to act in a riskier manner on our behalf than it would when acting for their own account.
- Each of the Manager and the Sub-Manager can resign on 120 days notice and, pursuant to the Sub-Management Agreement, the Manager and the Sub-Manager have agreed to resign if the other is terminated for anything other than cause and we may not be able to find suitable replacement(s) within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
- A business strategy focused primarily on privately held companies presents certain challenges, including the lack of available information about these companies.
- We face risks with respect to the evaluation and management of future acquisitions.
- If we cannot obtain debt financing or equity capital on acceptable terms, our ability to finance future acquisitions of businesses and expand our operations will be adversely affected.
- We may face increasing competition for acquisition opportunities, which could delay deployment of our capital, reduce returns and result in losses.
- We rely on receipts from our businesses to make distributions to our shareholders.
- We anticipate acquiring controlling interests in a limited number of businesses and these businesses may be subject to unplanned business interruptions.
- The outbreak of highly infectious or contagious diseases could materially and adversely impact our business, our operating businesses, our financial condition, results of operations and cash flows.
- In certain circumstances, certain business analyses and decisions by the Manager and the Sub-Manager may be required to be undertaken on an expedited basis.
- Our success is dependent on general economic, political and market conditions.
- We will be exposed to risks associated with changes to overall pricing and valuation multiples of durable and high-quality private companies.
- Financial results of certain of our businesses may be affected by the operating results of and actions taken by their franchisees.
- For certain of our businesses, a limited number of customers may account for a large portion of their net sales, so that if one or more of the major customers were to experience difficulties in fulfilling their obligations to such businesses, cease doing business with such businesses, significantly reduce the amount of their purchases from such businesses or return substantial amounts of such businesses’ products, it could have a material adverse effect on our business, financial condition and results of operations.
- Some of our businesses are or may be dependent upon the financial and operating conditions of their customers and clients. If the demand for their customers’ and clients’ products and services declines, demand for their products and services will be similarly affected and could have a material adverse effect on their financial condition, business and results of operations.
- Some of our businesses are and may be subject to a variety of federal, state and foreign laws and regulations concerning employment, health, safety and products liability. Failure to comply with governmental laws and regulations could subject them to, among other things, potential financial liability, penalties and legal expenses which could have a material adverse effect on our financial condition, business and results of operations.
- Some of our businesses are and may be subject to federal, state and foreign environmental laws and regulations that expose them to potential financial liability. Complying with applicable environmental laws requires significant resources, and if our businesses fail to comply, they could be subject to substantial liability.
- Some of our businesses are subject to certain risks associated with business they conduct in foreign jurisdictions.
- Some of the businesses we acquire may rely on their intellectual property and licenses to use others’ intellectual property, for competitive advantage. If they are unable to protect their intellectual property, are unable to obtain or retain licenses to use others’ intellectual property, or if they infringe upon or are alleged to have infringed upon others’ intellectual property, it could have a material adverse effect on their financial condition, business and results of operations.
- Some of the businesses we acquire may be subject to certain risks associated with the movement of businesses offshore.
- Defaults by our businesses will harm our operating results.
- Our businesses may incur debt that ranks equally with, or senior to, our debt in such businesses.
- We may not have the funds or ability to make additional capital contributions or loans to our businesses.
- The debt positions we will typically acquire in connection with our acquisition of controlling equity interests in businesses may be risky, and we could lose all or part of our assets.
- We have acquired, and may acquire in the future, debt and minority interests in businesses and, if we do so, we may not be in a position to control such businesses, and their respective management team may make decisions that could decrease the value of our assets.
- The credit ratings of certain of our assets may not be indicative of the actual credit risk of such rated instruments.
- Subordinated liens on collateral securing debt that we may acquire in businesses 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.
- There may be circumstances where the loans we make to businesses could be subordinated to claims of other creditors or we could be subject to lender liability claims.
- Certain of our assets may be adversely affected by laws relating to fraudulent conveyance or voidable preferences.
- 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 our debt or for distribution to our shareholders.
- The downgrade of the U.S. credit rating could negatively impact our business, financial condition and results of operations.
- To the extent that we borrow money, the potential for gain or loss on amounts invested in us will be magnified and may increase the risk of investing in us. Borrowed money may also adversely affect the return on our assets, reduce cash available to service our debt or for distribution to our shareholders, and result in losses.
- The replacement of LIBOR with Secured Overnight Financing (“SOFR”) or another alternative reference rate may adversely affect interest expense related to our borrowings.
- Future litigation or administrative proceedings could have a material adverse effect on our business, financial condition and results of operations.
- We could be negatively impacted by cybersecurity attacks.
- We, and our businesses, are subject to a variety of federal, state and international laws and other obligations regarding data protection.
- We may acquire interests in joint ventures, which creates additional risk because, among other things, we cannot exercise sole decision making power and our partners may have different economic interests than we have.
- A significant portion of our assets are recorded at fair value as determined in good faith by our board of directors, with assistance from the Manager and the Sub-Manager and, as a result, there will be uncertainty as to the value of our assets.
- We may experience fluctuations in our quarterly results.
- We may experience fluctuations in our operating expenses.
- We will be exposed to risks associated with changes in interest rates.
- Shareholders may realize taxable income without cash distributions, and may have to use funds from other sources to fund tax liabilities.
- If we were to become taxable as a corporation for U.S. federal income tax purposes, we would be required to pay income tax at corporate rates on our net income and would reduce the amount of cash available for distributions to our shareholders. Such distributions, if any, by us to shareholders would constitute dividend income taxable to such shareholders, to the extent of our earnings and profits.
- The IRS could adjust or reallocate items of income, gain, deduction, loss and credit with respect to the shares if the IRS does not accept the assumptions or conventions utilized by us.
- Changes in tax laws and regulations may have a materially adverse effect on our business, financial condition and result of operations and have a negative impact on our shareholders.
- Interest deductions on loans made to our subsidiaries and other portfolio companies may be limited, which could result in adverse tax consequences.
Management Discussion
- Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
- Certain statements in this quarterly report on Form 10-Q for the quarterly period ended March 31, 2024 (this “Quarterly Report”) constitute “forward-looking statements.” Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of our business and its performance, the economy and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should” and “could,” and words and terms of similar substance, although not all forward-looking statements include these words. The forward-looking statements contained in this Quarterly Report involve risks and uncertainties, including statements as to:
- •fiscal policies or inaction at the U.S. federal government level, which may lead to federal government shutdowns or negative impacts on the U.S economy;