res
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)r
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 2023
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 814-00891
PENNANTPARK FLOATING RATE CAPITAL LTD.
(Exact name of registrant as specified in its charter)
MARYLAND
27-3794690
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1691 Michigan Avenue
Miami Beach, Florida
33139
(Address of principal executive offices)
(Zip Code)
(786) 297-9500
(Registrant’s Telephone Number, Including Area Code)
None
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share
PFLT
The New York Stock Exchange
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. Yes ☒ No ☐
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). Yes ☒ No ☐
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.
Large accelerated filer
Accelerated filer
☑
Non-accelerated filer
Smaller reporting company
Emerging growth company
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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The number of shares of the registrant’s common stock, $0.001 par value per share, outstanding as of February 7, 2024 was 61,627,881.
FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 2023
TABLE OF CONTENTS
PART I. CONSOLIDATED FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Statements of Assets and Liabilities as of December 31, 2023 (unaudited) and September 30, 2023
4
Consolidated Statements of Operations for the three months ended December 31, 2023 and 2022 (unaudited)
5
Consolidated Statements of Changes in Net Assets for the three months ended December 31, 2023 and 2022 (unaudited)
6
Consolidated Statements of Cash Flows for the three months ended December 31, 2023 and 2022 (unaudited)
7
Consolidated Schedules of Investments as of December 31, 2023 (unaudited) and September 30, 2023
8
Notes to Consolidated Financial Statements (unaudited)
20
Report of Independent Registered Public Accounting Firm (PCAOB ID 49)
39
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
41
Item 3. Quantitative and Qualitative Disclosures About Market Risk
55
Item 4. Controls and Procedures
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
57
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
58
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
59
SIGNATURES
60
2
PART I—CONSOLIDATED FINANCIAL INFORMATION
We are filing this Quarterly Report on Form 10-Q, or the Report, in compliance with Rule 13a-13 as promulgated by the Securities and Exchange Commission, or the SEC, under the Securities Exchange Act of 1934, as amended, or the Exchange Act. In this Report, except where the context suggests otherwise, the terms “Company,” “we,” “our” or “us” refers to PennantPark Floating Rate Capital Ltd. and its wholly-owned consolidated subsidiaries; “Funding I” refers to PennantPark Floating Rate Funding I, LLC; “Taxable Subsidiary” refers to PFLT Investment Holdings, 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 Advisers” or “Investment Adviser” refer to PennantPark Investment Advisers, LLC; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; “2023 Notes” refers to our 4.3% Series A notes due 2023; “2026 Notes” refers to our 4.25% Notes due 2026; “1940 Act” refers to the Investment Company Act of 1940, as amended; “SBCAA” refers to the Small Business Credit Availability Act; “Code” refers to the Internal Revenue Code of 1986, as amended; “RIC” refers to a regulated investment company under the Code; “BDC” refers to a business development company under the 1940 Act; “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; “Securitization Issuer” refers to PennantPark CLO I, Ltd.; “Securitization Issuers” refers to the Securitization Issuer and PennantPark CLO I, LLC; “Debt Securitization” refers to the $301.4 million term debt securitization completed by the Securitization Issuers; “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; and “Depositor” refers to PennantPark CLO I Depositor, 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.
3
PENNANTPARK FLOATING RATE CAPITAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES
(in thousands, except share and per share data)
December 31, 2023
September 30, 2023
(unaudited)
Assets
Investments at fair value
Non-controlled, non-affiliated investments (amortized cost— $965,446 and $768,240, respectively)
$
974,595
772,178
Controlled, affiliated investments (amortized cost— $325,032 and $324,639, respectively)
296,332
294,996
Total investments (amortized cost— $1,290,478 and $1,092,878, respectively)
1,270,927
1,067,174
Cash and cash equivalents (cost— $75,809 and $100,555, respectively)
75,826
100,555
Interest receivable
11,636
10,423
Distributions receivable
508
565
Due from affiliate
142
—
Prepaid expenses and other assets
894
Total assets
1,359,059
1,179,611
Liabilities
Credit Facility payable, at fair value (cost— $260,855 and $9,400, respectively)
260,917
9,400
2031 Asset-Backed Debt, net (par—$228,000)
226,917
226,759
2026 Notes payable, net (par—$185,000)
183,248
183,054
Interest payable on debt
6,520
8,615
Distributions payable
6,020
Payable for investments purchased
5,578
4,905
Incentive fee payable
4,863
4,628
Base management fee payable
2,951
2,759
Deferred tax liability
1,794
Accounts payable and accrued expenses
1,746
1,287
Due to affiliates
492
566
2023 Notes payable, at fair value (par—$0 and $76,219, respectively)
76,219
Total liabilities
701,046
526,006
Commitments and contingencies (See Note 11)
Net assets
Common stock, 58,734,702 and 58,734,702 shares issued and outstanding, respectively Par value $0.001 per share and 100,000,000 shares authorized
Paid-in capital in excess of par value
765,187
Accumulated deficit
(107,233
)
(111,641
Total net assets
658,013
653,605
Total liabilities and net assets
Net asset value per share
11.20
11.13
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three Months Ended December 31,
2023
2022
Investment income:
From non-controlled, non-affiliated investments:
Interest
23,768
20,735
Dividend
577
Other income
1,763
From controlled, affiliated investments:
8,434
6,909
3,500
2,975
Total investment income
37,973
31,338
Expenses:
Interest and expenses on debt
8,942
9,858
Performance-based incentive fee
3,433
Base management fee
2,931
General and administrative expenses
988
706
Administrative services expenses
626
144
Expenses before provision for taxes
18,370
17,072
Provision for taxes on net investment income
154
534
Total expenses
18,524
17,606
Net investment income
19,449
13,732
Realized and unrealized gain (loss) on investments and debt:
Net realized gain (loss) on:
Non-controlled, non-affiliated investments
(3,089
63
Non-controlled and controlled, affiliated investments
Net realized gain (loss) on investments
Net change in unrealized appreciation (depreciation) on:
5,228
(12,693
Controlled and non-controlled, affiliated investments
943
(4,064
Provision for taxes on unrealized appreciation (depreciation) on investments
(725
Debt (appreciation) depreciation
(62
2,067
Net change in unrealized appreciation (depreciation) on investments and debt
6,109
(15,415
Net realized and unrealized gain (loss) from investments and debt
3,020
(15,352
Net increase (decrease) in net assets resulting from operations
22,469
(1,620
Net increase (decrease) in net assets resulting from operations per common share (See Note 7)
0.38
(0.04
Net investment income per common share
0.33
0.30
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
(in thousands, except share issue data)
Net increase (decrease) in net assets from operations:
Net change in unrealized appreciation (depreciation) on investments
6,171
(16,757
Net change in provision for taxes on unrealized appreciation (depreciation) on investments
Net change in unrealized (appreciation) depreciation on debt
Distributions to stockholders:
Distribution of net investment income
(18,061
(12,932
Total distributions to stockholders
Capital transactions
Public offering
995
Offering costs
(5
Net increase in net assets resulting from capital transactions
990
Net increase (decrease) in net assets
4,408
(13,562
Net assets:
Beginning of period
527,092
End of period
513,530
Capital share activity:
Shares issued from public offering
86,177
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three months ended December 31,
Cash flows from operating activities:
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
(6,171
16,757
62
(2,067
Net realized (gain) loss on investments
3,089
(63
Net accretion of discount and amortization of premium
(1,026
(944
Purchases of investments
(302,598
(65,587
Payment-in-kind interest
(867
(56
Proceeds from dispositions of investments
103,803
62,998
Amortization of deferred financing costs
352
(Increase) decrease in:
(1,213
(1,193
Distribution receivable
(577
Receivable for investments sold
(8,912
874
(197
(142
Increase (decrease) in:
673
9,990
(2,095
(2,088
192
(96
235
269
725
(74
(1,486
Account payable and accrued expenses
459
72
Net cash provided by (used in) operating activities
(181,921
6,277
Cash flows from financing activities:
Proceeds from public offering
(15
Distributions paid to stockholders
(12,924
Repayment of 2023 notes payable
(76,219
(20,787
Borrowings under Credit Facility
251,455
30,000
Repayments under Credit Facility
Net cash provided by (used in) financing activities
157,175
(2,731
Net increase (decrease) in cash and cash equivalents
(24,746
3,546
Effect of exchange rate changes on cash
17
23
Cash and cash equivalents, beginning of period
51,488
Cash and cash equivalents, end of period
55,057
Supplemental disclosures:
Interest paid
10,685
11,594
Taxes paid
160
Non-cash exchanges and conversions
5,067
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 2023
(in thousands, except share data)
Issuer Name
Maturity
Industry
Current Coupon
Basis Point Spread Above Index (1)
Par / Shares
Cost
Fair Value (2)
Investments in Non-Controlled, Non-Affiliated Portfolio Companies—148.1% (3), (4)
First Lien Secured Debt—129.2%
A1 Garage Merger Sub, LLC
12/22/2028
Commercial Services & Supplies
11.96
%
3M SOFR+660
1,516
1,497
1,509
A1 Garage Merger Sub, LLC LLC (Revolver) (7), (9)
748
(4
A1 Garage Merger Sub, LLC - Unfunded Term Loan
528
ACP Avenu Buyer, LLC
10/02/2029
IT Services
11.64
3M SOFR+625
10,313
10,124
10,055
ACP Avenu Buyer, LLC (Revolver) (7), (9)
3,807
(95
ACP Avenu Buyer, LLC - Unfunded Term Loan
9,517
(107
ACP Falcon Buyer, LLC (Revolver) (7), (9)
08/01/2029
Professional Services
3,096
(34
Ad.net Acquisition, LLC
05/07/2026
Media
11.61
3M SOFR+626
4,875
4,837
4,851
Ad.net Acquisition, LLC (Revolver) (7)
622
619
Ad.net Acquisition, LLC (Revolver) (7), (9)
(3
Aeronix, Inc.
12/18/2028
Aerospace and Defense
10.88
3M SOFR+550
49,000
48,271
48,265
Aeronix, Inc. (Revolver) (9)
6,099
AFC Dell Holding Corp.
04/09/2027
Distributors
11.71
3M SOFR+640
3,865
3,813
3,812
AFC Dell Holding Corp. - Unfunded Term Loan
22,497
Amsive Holding Corporation (f/k/a Vision Purchaser Corporation)
06/10/2025
11.75
13,922
13,836
13,713
Anteriad, LLC (f/k/a MeritDirect, LLC)
05/23/2024
11.00
3M SOFR+565
13,591
13,572
13,455
Anteriad, LLC (f/k/a MeritDirect, LLC) - Incremental Term Loan
12.00
3M SOFR+665
2,183
2,169
2,172
Anteriad, LLC (f/k/a MeritDirect, LLC) (Revolver) (7), (9)
2,869
(29
Any Hour Services
07/21/2027
Energy Equipment and Services
11.23
3M SOFR+585
6,378
6,310
6,314
Any Hour Services (Revolver) (7), (9)
1,147
(11
Applied Technical Services, LLC
12/29/2026
11.28
3M SOFR+615
9,449
9,345
9,260
Applied Technical Services, LLC (Revolver) (7)
13.25
3M SOFR+475
732
717
Applied Technical Services, LLC (Revolver) (7), (9)
541
Arcfield Acquisition Corp.
08/03/2029
1M SOFR+625
5,996
5,908
5,936
Arcfield Acquisition Corp. (Revolver) (9)
08/04/2028
1,379
(14
Beta Plus Technologies, Inc.
07/01/2029
Internet Software and Services
11.10
1M SOFR+575
4,938
4,853
4,740
BioDerm, Inc. (Revolver) (7)
01/31/2028
Healthcare Equipment and Supplies
11.84
1M SOFR+650
268
265
BioDerm, Inc. (Revolver) (9)
804
(8
Blackhawk Industrial Distribution, Inc.
09/17/2026
11.49
5,302
5,256
5,236
Blackhawk Industrial Distribution, Inc. - Unfunded Term Loan
2,337
(6
Blackhawk Industrial Distribution, Inc. (Revolver) (7)
13.75
3M SOFR+525
823
813
Blackhawk Industrial Distribution, Inc. (9)
1,920
(24
BlueHalo Financing Holdings, LLC
10/31/2025
12.01
5,408
5,366
5,299
Broder Bros., Co.
12/04/2025
Textiles, Apparel and Luxury Goods
3,302
By Light Professional IT Services, LLC
05/16/2025
High Tech Industries
12.40
3M SOFR+688
25,148
24,995
24,645
By Light Professional IT Services, LLC (Revolver) (7)(9)
3,507
(70
Carisk Buyer, Inc.
12/01/2029
Healthcare Technology
3M SOFR+575
5,500
5,418
Carisk Buyer, Inc. - Unfunded Term Loan
4,813
Carisk Buyer, Inc. (Revolver) (7)(9)
1,750
(26
Cartessa Aesthetics, LLC
06/14/2028
13,043
12,882
Cartessa Aesthetics, LLC (Revolver) (7)
511
Cartessa Aesthetics, LLC (Revolver) (7)(9)
927
-
CF512, Inc.
08/20/2026
11.55
3M SOFR+619
5,964
5,921
5,845
CF512, Inc. (Revolver) (7), (9)
955
(19
CHA Holdings, Inc.
04/10/2025
Environmental Industries
9.97
3M SOFR+461
1,560
1,558
Challenger Performance Optimization, Inc.
08/31/2024
Business Services
13.19
3M SOFR+775
236
228
Compex Legal Services, Inc.
02/09/2026
10.96
3M SOFR+555
8,902
8,871
Compex Legal Services, Inc. (Revolver) (7)
02/07/2025
10.92
422
Compex Legal Services, Inc. (Revolver) (7), (9)
984
Connatix Buyer, Inc.
07/13/2027
11.14
3M SOFR+576
3,805
3,755
3,634
Connatix Buyer, Inc. (7), (9)
1,234
Crane 1 Services, Inc.
08/16/2027
10.36
3M SOFR+501
880
868
876
Crane 1 Services, Inc. (Revolver) (7)
135
134
202
(1
Dr. Squatch, LLC
08/31/2027
Personal Products
4,372
4,321
Dr. Squatch, LLC (Revolver) (7), (9)
3,353
DRS Holdings III, Inc.
11/03/2025
Chemicals, Plastics and Rubber
15,993
15,884
15,817
DRS Holdings III, Inc. (Revolver) (7), (9)
1,426
(16
Duraco Specialty Tapes LLC
06/30/2024
Containers and Packaging
3M SOFR+650
3,436
3,411
3,381
ECL Entertainment, LLC
08/31/2030
Hotels, Restaurants and Leisure
10.11
1M SOFR+475
4,988
4,900
4,991
EDS Buyer, LLC - Unfunded Term Loan
01/10/2029
Electronic Equipment, Instruments, and Components
6,750
EDS Buyer, LLC. (Revolver) (7), (9)
2,025
(20
Efficient Collaborative Retail Marketing Company, LLC
06/15/2024
Media: Diversified and Production
15.97
3M SOFR+1050
8,150
8,164
5,705
ETE Intermediate II, LLC (Revolver) (9)
05/25/2029
Diversified Consumer Services
1,656
Exigo Intermediate II, LLC (Revolver) (9)
03/15/2027
Software
689
(10
Five Star Buyer, Inc.
02/23/2028
12.46
3M SOFR+710
4,536
4,459
4,468
Five Star Buyer, Inc. - DDTL B Unfunded
837
(13
Five Star Buyer, Inc. (Revolver) (9)
741
Gauge ETE Blocker, LLC - Promissory Note
05/19/2029
12.56
215
Global Holdings InterCo LLC
03/16/2026
Diversified Financial Services
11.46
3M SOFR+610
3,271
3,245
3,107
Graffiti Buyer, Inc.
08/10/2027
Trading Companies & Distributors
10.98
3M SOFR+560
1,066
1,056
1,055
Graffiti Buyer, Inc. (Revolver) (7)
10.97
298
295
Graffiti Buyer, Inc. (Revolver) (7), (9)
567
CONSOLIDATED SCHEDULE OF INVESTMENTS—(Continued)
Hancock Roofing and Construction L.L.C.
12/31/2026
Insurance
10.95
4,172
4,116
4,005
Hancock Roofing and Construction L.L.C. (Revolver) (7)
335
322
Hancock Roofing and Construction L.L.C. (Revolver) (7), (9)
415
(17
Holdco Sands Intermediate, LLC
11/23/2028
3M SOFR+635
13,624
13,400
13,531
Holdco Sands Intermediate, LLC (Revolver) (9)
11/23/2027
1,791
(18
HW Holdco, LLC
12/10/2024
11.82
1M SOFR+640
9,000
8,978
8,865
HW Holdco, LLC (Revolver)
11.79
116
114
HW Holdco, LLC (Revolver) (7), (9)
1,335
IG Investments Holdings, LLC (7)
09/22/2028
11.48
4,417
4,351
4,350
IG Investments Holdings, LLC (Revolver) (7), (9)
09/22/2027
477
(7
Imagine Acquisitionco, LLC (9)
11/15/2027
1,657
Imagine Acquisitionco, LLC (Revolver) (9)
1,193
Inception Fertility Ventures, LLC
12/31/2024
Healthcare Providers and Services
12.64
3M SOFR+725
15,766
15,652
Infinity Home Services Holdco, Inc.
12/28/2028
12.21
3M SOFR+685
2,084
Infinity Home Services Holdco, Inc. (CAD)
12.25
3M SOFR+675
CAD 1,450
1,043
1,080
Infinity Home Services Holdco, Inc. - Unfunded Term Loan
02/15/2024
1,135
Infinity Home Services Holdco, Inc. - 1st Amendment Unfunded Term Loan
11/17/2025
6,122
(31
Infinity Home Services Holdco, Inc. (Revolver) (9)
1,292
Infolinks Media Buyco, LLC
11/01/2026
11.21
2,940
2,906
Integrative Nutrition, LLC
01/31/2025
Consumer Services
12.50
3M SOFR+715
15,557
15,499
14,468
Integrity Marketing Acquisition, LLC
08/27/2026
11.53
16,182
16,073
16,020
Integrity Marketing Acquisition, LLC - Unfunded Term Loan
08/31/2025
7,440
(37
Integrity Marketing Acquisition, LLC (Revolver) (7), (9)
ITI Holdings, Inc. (Revolver)
03/03/2028
12.07
500
485
ITI Holdings, Inc. (Revolver) (9)
165
Inventus Power, Inc.
06/30/2025
12.97
3M SOFR+761
4,975
4,893
Inventus Power, Inc. (Revolver) (7), (9)
1,729
(35
K2 Pure Solutions NoCal, L.P. (Revolver) (7), (9)
01/31/2024
1,429
Kinetic Purchaser, LLC
11/10/2027
11.50
17,210
16,970
17,124
Kinetic Purchaser, LLC - (Revolver) (9)
11/10/2026
3,435
Lash OpCo, LLC
02/18/2027
12.48
1M SOFR+700
10,378
10,250
10,326
Lash OpCo, LLC (Revolver) (7)
08/16/2026
12.53
2,086
2,076
Lash OpCo, LLC (Revolver) (7), (9)
986
LAV Gear Holdings, Inc.
Capital Equipment
11.81
13,104
13,099
12,816
(PIK 5.50%)
LAV Gear Holdings, Inc. (Revolver) (7)
11.78
1,721
1,683
Ledge Lounger, Inc.
11/09/2026
Leisure Products
3,700
3,675
3,663
Ledge Lounger, Inc. (Revolver)
592
586
Ledge Lounger, Inc. (Revolver) (9)
197
(2
Lightspeed Buyer Inc.
02/03/2026
10.71
1M SOFR+535
22,484
22,249
22,372
Lightspeed Buyer Inc. (Revolver) (7) (9)
2,499
(12
LJ Avalon Holdings, LLC
02/01/2030
Construction & Engineering
11.86
1,101
1,088
1,079
LJ Avalon Holdings, LLC - Unfunded Term Loan
07/31/2024
(9
LJ Avalon Holdings, LLC (Revolver) (9)
01/31/2030
1,130
(23
Loving Tan Intermediate II, Inc.
05/31/2028
12.35
3M SOFR+700
19,215
18,861
19,022
Loving Tan Intermediate II, Inc. (Revolver)
1,861
1,842
Loving Tan Intermediate II, Inc. (Revolver)(7)(9)
1,523
Lucky Bucks, LLC - First-out Term Loan
10/02/2028
13.03
3M SOFR+765
261
Lucky Bucks, LLC - Last-out Term Loan
522
MAG DS Corp.
04/01/2027
1M SOFR+550
3,664
3,561
3,499
Mars Acquisition Holdings Corp.
05/14/2026
8,706
8,603
Mars Acquisition Holdings Corp. (Revolver)(7)(9)
2,435
MBS Holdings, Inc. (Revolver)
04/16/2027
694
684
MBS Holdings, Inc. (Revolver)(7)(9)
463
MDI Buyer, Inc.
07/25/2028
Commodity Chemicals
11.63
2,036
1,999
1,986
MDI Buyer, inc. (Revolver) (7)
11.39
3M SOFR+600
273
266
MDI Buyer, inc. (Revolver) (9)
Meadowlark Acquirer, LLC
12/10/2027
1,973
1,950
1,914
Meadowlark Acquirer, LLC - Term Loan II
9,483
(190
Meadowlark Acquirer, LLC (Revolver) (9)
1,693
(51
Medina Health, LLC
10/20/2028
11.60
17,954
17,647
17,595
Medina Health, LLC (Revolver) (7)
778
762
Medina Health, LLC (Revolver) (9)
4,409
(88
Mission Critical Electronics, Inc.
03/28/2024
3M SOFR +590
3,562
3,556
Mission Critical Electronics, Inc. (9)
707
Mission Critical Electronics, Inc. (Revolver) (7), (9)
1,325
Municipal Emergency Services, Inc.
10/01/2027
10.51
3M SOFR+515
1,178
1,143
1,177
Municipal Emergency Services, Inc. - Unfunded Term Loan A
12/16/2024
387
Municipal Emergency Services, Inc. - Unfunded Term Loan B
1,264
Municipal Emergency Services, Inc. (Revolver) (7), (9)
947
9
Neptune Flood Incorporated (Revolver) (9)
05/09/2029
NBH Group LLC (Revolver) (7), (9)
08/19/2026
1,677
(101
NORA Acquisition, LLC
08/31/2029
11.70
19,950
19,566
19,651
NORA Acquisition, LLC (Revolver) (7), (9)
5,479
(82
Omnia Exterior Solutions, LLC
12/29/2029
10.85
6,500
6,403
Omnia Exterior Solutions, LLC - Unfunded Term Loan 1
5,200
Omnia Exterior Solutions, LLC - Unfunded Term Loan 2
12/29/2025
9,100
Omnia Exterior Solutions, LLC (Revolver) (7), (9)
2,600
One Stop Mailing, LLC
05/07/2027
Air Freight and Logistics
11.72
3M SOFR+636
8,493
8,381
ORL Acquisition, Inc. (7)
09/03/2027
Consumer Finance
12.75
3M SOFR+740
4,888
4,820
4,154
ORL Acquisition, Inc. (Revolver) (7), (9)
861
(129
OSP Embedded Purchaser, LLC
12/15/2029
12,900
12,675
12,674
OSP Embedded Purchaser, LLC (Revolver) (9)
2,932
Output Services Group, Inc. - First-out Term Loan
11/30/2028
13.82
3M SOFR+843
521
Output Services Group, Inc. - Last-out Term Loan
05/30/2028
3M SOFR+668
1,058
Owl Acquisition, LLC
02/04/2028
10.75
3,893
3,802
3,834
Ox Two, LLC
05/18/2026
Construction and Building
12.86
1M SOFR+751
22,736
22,531
22,452
Ox Two, LLC (Revolver) (9)
3,387
(42
Pacific Purchaser, LLC
09/30/2028
11.43
5,000
4,902
4,925
Pacific Purchaser, LLC - Unfunded Term Loan
3,598
Pacific Purchaser, LLC - (Revolver) (9)
1,799
(27
Pequod Merger Sub, Inc. - Unfunded Term Loan
12/02/2026
2,847
(57
Pequod Merger Sub, Inc (Revolver) (9)
757
PL Acquisitionco, LLC
11/09/2027
5,661
5,591
5,010
PL Acquisitionco, LLC - (Revolver) (9)
2,290
(263
PlayPower, Inc.
05/08/2026
11.06
1M SOFR+565
3,392
3,377
3,290
Pragmatic Institute, LLC - Unfunded Term Loan
07/06/2028
(126
Pragmatic Institute, LLC (Revolver)
11.12
1,526
1,427
Quantic Electronics, LLC
11/19/2026
1M SOFR+635
6,630
6,567
6,497
Quantic Electronics, LLC (Revolver) (7)
670
657
Questex, LLC
09/09/2024
9.77
3M SOFR+440
6,731
6,713
Questex, LLC (Revolver) (7), (9)
1,197
Rancho Health MSO, Inc. (Revolver) (7)
12/18/2025
210
Rancho Health MSO, Inc. (Revolver) (7), (9)
315
Recteq, LLC
01/29/2026
1,459
1,445
1,408
Recteq, LLC (Revolver) (7), (9)
1,296
(45
Research Now Group, Inc. and Dynata, LLC
12/20/2024
16,917
16,848
14,972
Riverpoint Medical, LLC
06/20/2025
10.50
7,919
7,887
7,856
Riverpoint Medical, LLC (Revolver) (7)
10.46
3M SOFR+510
227
225
Riverpoint Medical, LLC (Revolver) (7), (9)
682
Riverside Assessments, LLC
03/10/2025
11.25
3M SOFR+590
15,159
15,055
15,008
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) - Unfunded Term Loan
06/15/2029
1,146
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.) (Revolver) (7), (9)
860
Sales Benchmark Index LLC
01/03/2025
3M SOFR+620
2,527
2,515
2,514
Sales Benchmark Index LLC (Revolver) (7), (9)
1,293
Sargent & Greenleaf Inc.
12.96
1M SOFR+760
3,410
3,399
3,393
Sargent & Greenleaf Inc. (Revolver)
12.69
597
594
Sargent & Greenleaf Inc. (Revolver) (9)
484
Schlesinger Global, Inc.
07/14/2025
12.08
3M SOFR + 715
14,490
14,436
14,019
Schlesinger Global, Inc. (Revolver)
1M SOFR+715
1,499
1,450
Schlesinger Global, Inc. (Revolver) (7), (9)
372
Seaway Buyer, LLC
06/13/2029
1,916
1,891
1,849
Sigma Defense Systems, LLC
12/18/2027
20,023
19,747
19,823
Sigma Defense Systems, LLC (Revolver) (7)
1,572
1,557
Sigma Defense Systems, LLC (Revolver) (7), (9)
1,048
Signature Systems Holding Company
05/03/2024
1M SOFR+665
8,147
8,138
Signature Systems Holding Company (Revolver) (9)
1,747
Skopima Consilio Parent, LLC
05/17/2028
1M SOFR+450
600
588
595
Smile Brands Inc.
10/14/2025
Healthcare and Pharmaceuticals
9.98
2,431
2,128
Smile Brands Inc. (Revolver)
9.95
514
Smile Brands Inc. (Revolver) (7), (9)
928
(116
Smile Brands Inc. LC (Revolver) (7), (9)
100
Solutionreach, Inc.
07/17/2025
4,657
4,631
4,643
Solutionreach, Inc. (Revolver) (7), (9)
833
Spendmend Holdings LLC
03/01/2028
3M SOFR + 565
2,056
2,033
2,034
Spendmend Holdings LLC - Unfunded Term Loan
03/01/2024
1,707
Spendmend Holdings LLC (Revolver)
11.02
357
353
Spendmend Holdings LLC (Revolver) (9)
535
STV Group Incorporated
12/11/2026
4,752
4,726
4,704
Summit Behavioral Healthcare, LLC
11/24/2028
10.40
1M SOFR+501
1,995
1,980
1,990
System Planning and Analysis, Inc. (f/k/a Management Consulting & Research, LLC)
11.33
18,326
18,077
18,216
10
System Planning and Analysis, Inc. (Revolver) (9) (f/k/a Management Consulting & Research, LLC)
5,188
S101 Holdings, Inc.
7,742
7,626
7,625
S101 Holdings, Inc. - Unfunded Term Loan
4,152
S101 Holdings, Inc. - Unfunded Term Loan 2
12/15/2024
9,688
Teneo Holdings LLC
07/18/2025
5,718
5,675
5,704
The Bluebird Group LLC
07/28/2026
2,581
2,542
2,552
The Bluebird Group LLC (Revolver) (7), (9)
862
The Plimpton & Hills Corporation
11/07/2029
11.37
17,026
16,773
16,771
The Plimpton & Hills Corporation - Unfunded Term Loan
11/07/2025
10,812
(54
The Vertex Companies, LLC (7)
08/30/2027
1M SOFR+610
1,974
1,945
1,968
The Vertex Companies, LLC (Revolver)
305
304
The Vertex Companies, LLC (Revolver) (7), (9)
606
TPC Canada Parent, Inc. and TPC US Parent, LLC (5), (10)
11/24/2025
Food Products
11.04
4,800
4,783
TransGo, LLC
12/29/2028
Auto Components
11.35
40,000
39,401
39,400
TransGo, LLC (Revolver) (7), (9)
0.00
5,317
TWS Acquisition Corporation
06/16/2025
3,740
3,714
TWS Acquisition Corporation (Revolver) (7), (9)
2,628
Tyto Athene, LLC
04/01/2028
11,928
11,808
11,022
Tyto Athene, LLC (Revolver) (7), (9)
04/01/2026
312
311
286
Tyto Athene, LLC (Revolver) (7)
728
(55
Walker Edison Furniture, LLC - Term Loan
03/01/2029
Wholesale
4,028
3,947
Walker Edison Furniture Company, LLC - Unfunded Term Loan
1,042
Walker Edison Furniture Company, LLC - Funded Junior Revolver
1,667
Watchtower Intermediate, LLC
11.38
19,250
18,942
18,865
Watchtower Intermediate, LLC - Unfunded Term Loan
12/01/2025
4,200
Watchtower Intermediate, LLC - Funded Revolver
1,260
1,235
Watchtower Intermediate, LLC (Revolver) (9)
5,040
Wildcat Buyerco, Inc.
02/26/2027
11.11
12,689
12,559
12,499
Wildcat Buyerco, Inc. - Unfunded Term Loan
3,281
Wildcat Buyerco, Inc. (Revolver) (9)
Zips Car Wash, LLC
Automobiles
12.71
3M SOFR+735
13,249
13,232
12,951
Total First Lien Secured Debt
862,365
850,023
Second Lien Secured Debt—0.0%
Mailsouth Inc. (7)
04/23/2025
Media: Advertising, Printing and Publishing
(6)
1,205
965
QuantiTech LLC
02/04/2027
15.47
3M SOFR+1,010
150
148
Total Second Lien Secured Debt
1,113
Preferred Equity— 2.0% (6)
Ad.net Holdings, Inc. (7)
6,720
672
Anteriad Holdings, LP (f/k/a MeritDirect Holdings, LP) (7), (8)
2,018
2,059
Cartessa Aesthetics, LLC (Preferred) (8)
1,437,500
1,438
2,133
Gauge Lash Coinvest LLC (Preferred)
108,546
1,843
Gauge Schlesinger Coinvest LLC (Preferred Equity)
64
36
Imagine Topco, LP
8.00
1,236,027
1,236
1,279
Magnolia Topco LP - Class A Preferred Equity(8)
47
49
Magnolia Topco LP - Class B Preferred Equity(8)
31
Mars Intermediate Holdings II, Inc. (7)
835
1,145
NXOF Holdings, Inc. (Tyto Athene, LLC) (7)
733
749
ORL Holdco, Inc. (7)
1,327
133
PL Acquisitionco, LLC (Preferred Equity)
61
69
Signature CR Intermediate Holdco, Inc. (7)
1,323
2,222
TPC Holding Company, LP (5), (7), (10)
409
614
TWD Parent Holdings, LLC (The Vertex Companies, LLC) (7)
37
35
46
UniTek Global Services, Inc. -
Telecommunications
20.00
343,861
344
221
Super Senior Preferred Equity (7)
UniTek Global Services, Inc. - Senior Preferred Equity (7)
19.00
448,851
449
UniTek Global Services, Inc. (7)
13.50
1,047,317
Total Preferred Equity
11,073
13,230
Common Equity/Warrants— 16.9% (6)
A1 Garage Equity, LLC
647,943
648
718
7,467
75
Affinion Group Holdings, Inc. (Warrants)
04/10/2024
Consumer Goods: Durable
8,893
245
AFC Acquisitions, Inc.(8)
1,262,252
1,262
Aftermarket Drivetrain Products Holdings, LLC
2,632
AG Investco LP (7), (8)
805,164
805
1,125
AG Investco LP (7), (8), (9)
194,836
Altamira Intermediate Company II, Inc. (7)
1,437
1,448
Athletico Holdings, LLC (8)
4,678
4,838
11
BioDerm Holdings, LP
1,313
1,449
Burgess Point Holdings, LP
96
By Light Investco LP (7), (8)
22,789
849
10,924
Carisk Parent, L.P.
169,231
169
Connatix Parent, LLC (7)
38,278
421
Consello Pacific Aggregator, LLC(8)
1,025,476
1,025
1,046
Crane 1 Acquisition Parent Holdings, L.P. (7)
130
120
199
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8)
760,273
747
1,189
Delta InvestCo LP (Sigma Defense Systems, LLC) (7), (8),(9)
244,597
eCommission Holding Corporation (7), (10)
Banking, Finance, Insurance & Real Estate
251
536
EDS Topco, LP
1,125,000
1,165
Exigo, LLC
541,667
542
624
FedHC InvestCo LP (7),(8)
21,665
727
2,372
FedHC InvestCo LP (7),(8),(9)
7,566
Five Star Parent Holdings, LLC
655,714
656
675
Gauge ETE Blocker, LLC
374,444
374
371
Gauge Lash Coinvest LLC (7)
1,485,953
7,203
Gauge Loving Tan, LP
2,481,781
2,482
2,111
Gauge Schlesinger Coinvest LLC (7)
465
476
263
GCOM InvestCo LP (7)
19,184
3,342
4,276
GMP Hills, L.P.
4,430,843
4,431
Go Dawgs Capital III, LP
Building Products
324,675
325
779
(American Insulated Glass, LLC) (7), (8)
Hancock Claims Consultants Investors, LLC (7), (8)
450,000
448
207
HPA SPQ Aggregator LP
750,399
750
HV Watterson Holdings, LLC
100,000
102
Icon Partners V C, L.P.
1,870,915
1,870
1,767
Icon Partners V C, L.P. (7), (9)
629,085
IIN Group Holdings, LLC
1,000
(Integrative Nutrition, LLC) (7), (8)
Imagine Topco, LP (Common)
IHS Parent Holdngs, L.P.
1,218,045
1,218
1,759
Ironclad Holdco, LLC (Applied Technical Services, LLC) (7), (8)
5,811
573
ITC Infusion Co-invest, LP (8)
116,032
1,175
1,377
ITC Rumba, LLC (Cano Health, LLC) (7),(8)
46,763
117
33
Kentucky Racing Holdco, LLC(8)
87,345
940
1,734,775
1,735
2,175
KL Stockton Co-Invest LP (Any Hour Services) (7),(8)
382,353
385
Lightspeed Investment Holdco LLC (7)
585,587
1,545
LJ Avalon, LP
1,638,043
1,638
1,671
Lucky Bucks, LLC
73,870
2,062
Magnolia Topco LP - Class A Common Equity(8)
46,974
Magnolia Topco LP - Class B Common Equity(8)
30,926
233
MDI Aggregator, LP
10,761
1,077
956
Meadowlark Title, LLC (8)
819,231
MSpark, LLC
3,988
Municipal Emergency Services, Inc. (7)
1,973,370
2,005
2,565
NEPRT Parent Holdings, LLC (Recteq, LLC) (7), (8)
1,494
76
New Medina Health, LLC(8)
2,672,646
2,673
NORA Parent Holdings, LLC (8)
2,544
2,554
North Haven Saints Equity Holdings, LP (8)
223,602
224
14,960
15
OceanSound Discovery Equity, LP (Holdco Sands Intermediate, LLC) (7), (8)
173,638
1,588
4,584
OHCP V BC COI, L.P.
1,152,777
1,153
968
OHCP V BC COI, L.P. (9)
97,224
1,474
OSP Embedded Aggregator, LP
1,727,679
1,728
Output Services Group, Inc.
80,170
642
PennantPark-TSO Senior Loan Fund, LP (7)
Financial Services
11,167,847
11,168
9,629
LEP Pequod Holdings, LP
350
865
946
Pink Lily Holdco, LLC (PL Acquisitions, LLC) (8)
34
Pragmatic Institute, LLC
610,583
611
Quad (U.S.) Co-Invest, L.P.
266,864
267
313
QuantiTech InvestCo LP (7), (8)
712
68
451
QuantiTech InvestCo LP (7), (8), (9)
QuantiTech InvestCo II LP (7), (8),
40
24
26
RFMG Parent, LP (Rancho Health MSO, Inc.) (7)
1,050,000
1,050
1,097
SBI Holdings Investments LLC (Sales Benchmark Index LLC) (7)
64,634
646
520
Seaway Topco, LP
296
70
1,837
SP L2 Holdings, LLC (Ledge Lounger, Inc.)
360,103
360
234
SSC Dominion Holdings, LLC
818
Class B (US Dominion, Inc.) (7)
12
StellPen Holdings, LLC (CF512, Inc.) (7)
161,538
161
SV Aero Holdings, LLC (8)
605
TAC LifePort Holdings, LLC (7),(8)
533,833
525
976
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC)(8)
220,187
206
388
Tower Arch Infolinks Media, LP (Infolinks Media Buyco, LLC)(8) (9)
145,420
21,527
21
363
1
UniTek Global Services, Inc.(C)
213,739
UniTek Global Services, Inc. (W)
23,889
UniVista Insurance (7), (8)
400
613
Urology Partners Co., L.P.
694,444
583
Walker Edison Holdco LLC
36,458
Watchtower Holdings, LLC (8)
1,241,935
1,242
1,261
WCP IvyRehab QP CF Feeder, LP(8)
3,715,012
3,754
4,071
WCP IvyRehab QP CF Feeder, LP (8), (9)
284,988
Wildcat Parent, LP (Wildcat Buyerco, Inc.) (7)
2,240
95
Total Common Equity/Warrants
90,895
111,192
Total Investments in Non-Controlled, Non-Affiliated Portfolio Companies
965,446
Investments in Controlled, Affiliated Portfolio Companies—45.0% (3), (4)
First Lien Secured Debt—36.5%
Marketplace Events, LLC - Super Priority First Lien Term Loan (7)
09/30/2025
10.94
3,582
Marketplace Events, LLC - Super Priority First Lien (7), (9)
3,261
Marketplace Events, LLC
09/30/2026
26,771
21,324
PennantPark Senior Secured Loan Fund I LLC (7), (9), (10)
05/06/2024
13.42
3M SOFR+800
210,088
234,994
240,441
Equity Interests—8.5%
New MPE Holdings, LLC (Marketplace Events, LLC) (7),(8)
349
3,762
90,038
52,129
Total Equity Interests
55,891
Total Investments in Controlled, Affiliated Portfolio Companies
325,032
Total Investments—193.1%
1,290,478
Cash and Cash Equivalents—11.5%
Money Market - BlackRock Federal FD Institutional 30
75,809
Total Cash and Cash Equivalents
Total Investments and Cash Equivalents—204.7%
1,366,287
1,346,753
Liabilities in Excess of Other Assets—(104.7)%
(688,740
Net Assets—100.0%
—————
13
Investments in Non-Controlled, Non-Affiliated Portfolio Companies—118.1% (3), (4)
First Lien Secured Debt—101.9%
11.99
1,520
1,512
11.65
4,846
13,958
13,859
13,749
13,786
13,755
13,545
12.04
2,212
2,186
2,184
(50
11.22
6,395
6,326
6,267
Apex Service Partners, LLC
07/31/2025
10.52
6,160
6,132
6,145
Apex Service Partners, LLC Term Loan B
294
Apex Service Partners, LLC Term Loan C
10.68
12,826
12,732
12,793
Apex Service Partners, LLC (Revolver) (7)
10.86
1,150
Apex Service Partners, LLC (Revolver) (7), (9)
692
11.54
8,891
8,784
8,714
Applied Technical Services, LLC (Unfunded Term Loan)
582
509
499
764
11.62
6,526
6,429
6,461
4,950
4,862
4,604
107
964
631
628
2,624
274
270
2,469
3,324
12.43
25,674
25,499
25,224
(61
Cadence Aerospace, LLC (7)
11/14/2023
980
(PIK 9.50%)
13,076
12,907
11.59
5,980
5,930
5,860
10.15
3M SOFR+476
1,564
1,562
12.18
3M L+675
237
230
10.99
8,925
141
1,265
11.16
1M SOFR+576
3,814
3,761
3,681
(43
10.90
3M SOFR+551
882
871
878
11.24
4,383
4,328
16,266
16,142
16,070
11.93
3,445
3,407
10.14
4,985
eCommission Financial Services, Inc. (10)
10/05/2023
10.43
1M SOFR+510
4,599
eCommission Financial Services, Inc. (Revolver) (7), (9), (10)
(30
13.15
3M SOFR+776
7,645
7,651
5,352
(28
1M SOFR+710
4,569
4,488
4,500
14
3,279
3,252
3,115
736
729
Graffiti Buyer, Inc. (7), (9)
12/8/2023
332
596
10.93
4,112
4,068
1M SOFR+560
327
11.32
6M SOFR+585
4,913
4,835
8,973
11.45
4,428
4,356
4,362
14,803
14,656
12.24
2,089
12/28/2023
11.17
1M SOFR+585
3,178
3,143
Infolinks Media Buyco, LLC- Unfunded Term Loan
11/01/2023
Integrated Data Services (Revolver) (9)
(72
12.54
15,521
15,457
14,590
11.57
15,666
15,553
15,509
8,000
(40
12.05
490
12.93
1M SOFR+761
4,894
12/20/2023
17,253
16,999
16,995
(52
11.88
1M SOFR+675
10,404
10,264
10,300
12.15
2,065
10/31/2024
11.83
1M SOFR+643
7,544
7,537
7,454
1,700
3,709
3,677
789
10.67
22,543
22,282
22,317
(25
394
392
2,424
12.39
19,263
18,894
18,974
1,833
Lucky Bucks, LLC (6)
07/20/2027
4,489
4,210
1,182
Lucky Bucks, LLC - DIP
10/20/2023
15.30
3M SOFR+1000
158
3,674
3,564
3,481
8,728
8,616
8,640
185
182
972
11.09
2,041
2,003
1,997
10.91
361
412
1,978
1,954
1,929
Meadowlark Acquirer, LLC - Term Loan I (9)
1,103
Meadowlark Acquirer, LLC - Term Loan II (9)
10.65
SOFR +515
3,571
3,560
3,553
1,181
1,144
1,155
06/16/2023
Municipal Emergency Services, Inc. (Revolver) (7)
379
370
568
Neptune Flood Incorporated - Revolver Unfunded
11.74
41,489
40,662
40,659
(110
11.68
1M SOFR+636
8,516
8,397
12.84
6M SOFR+725
4,828
(77
Output Services Group, Inc. (6)
06/27/2026
4,923
4,469
960
10.80
6M SOFR+550
3,797
12.90
3M SOFR+751
22,513
22,338
(59
12.42
5,612
5,538
5,050
(229
3,401
3,386
3,248
(80
1,458
6,647
6,578
6,547
660
9.81
3M SOFR+425
6,706
1,463
1,419
(39
16,962
16,875
14,842
10.54
7,939
7,903
7,828
10.42
112
795
11.29
15,199
15,075
15,047
2,596
2,583
3,439
3,425
3,405
12.92
280
277
801
14,428
12.52
1,495
1,446
375
1,921
1,895
1,863
14.04
3M SOFR+865
10,277
10,123
1,835
1,807
786
1M L+665
9,708
9.93
587
3M SOFR+450
2,437
2,190
1,508
1,355
108
01/17/2024
12.37
4,650
4,638
11.03
SOFR + 565
2,061
2,037
2,016
4,724
6M SOFR+615
18,373
18,109
18,171
5,733
5,683
5,725
The Aegis Technologies Group, LLC
5,421
5,374
5,340
12.79
2,368
2,331
2,359
11.67
1,979
1,949
1,961
303
4,793
4,316
4,280
11,803
10,879
1,040
(94
16
03/31/2027
1M SOFR+685
3,521
333
02/27/2026
7,646
7,579
7,570
12.67
1M SOFR+735
13,206
12,818
683,940
665,725
1,161
15.50
149
Preferred Equity— 1.8% (6)
1,633
2,007
1,319
1,246
Magnolia Topco LP - Class A Preferred Equity (8)
Magnolia Topco LP - Class B Preferred Equity (8)
28
1,112
489
66
2,158
TPC Holding Company, LP (5), (7), (8), (10)
598
45
11,028
11,571
Common Equity/Warrants— 14.5% (6)
A1 Garage Equity, LLC(8)
691
1,074
1,456
4,516
1,514
109
11,610
222
1,358
1,062
612
3,062
800
6,810
2,088
Gauge TVC Coinvest, LLC (TVC Enterprises, LLC) (7)
391,144
3,165
711
338
751
111
1,863,863
1,864
636,137
(66
1,642
844
1,160
1,268
Kentucky Racing Holdco, LLC (8)
883
2,508
382
775
1,736
Magnolia Topco LP - Class A Common Equity (8)
5,144
Magnolia Topco LP - Class B Common Equity (8)
28,231
468
2,230
101
NORA Parent Holdings, LLC
223
1,614
3,768
743,750
744
650
506,250
(64
1,006
238
446
1,052
515
1,784
247
1,098
178
524
850
219,056
146,550
212
UniVista Insurance (7),(8)
362
555
653
1,766
4,319
794
72,159
94,733
768,240
Investments in Controlled, Affiliated Portfolio Companies—45.1% (3), (4)
First Lien Secured Debt—36.8%
20,931
26,770
13.33
234,601
240,440
Equity Interests—8.3%
50,881
54,556
324,639
Total Investments—163.3%
1,092,878
Cash and Cash Equivalents—15.3%
Total Investments and Cash Equivalents—178.6%
1,193,433
1,167,729
Liabilities in Excess of Other Assets—(78.6)%
(514,124
18
19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
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 80% of the value of our managed assets will be invested in floating rate loans and other investments bearing a variable rate of interest, which may include, from time to time, variable rate derivative instruments. We generally expect that first lien secured debt will represent at least 65% of our overall portfolio. We 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.
We have entered into an investment management agreement, or (the "Investment Management Agreement"), with PennantPark Investment Advisers LLC (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 PennantPark Investment Administration LLC (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 a credit facility. 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 us so long as the Investment Adviser remains the collateral manager. This arrangement does not increase our consolidated management fee.
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.
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.
In May 2017, we and a subsidiary of Kemper Corporation (NYSE: KMPR), Trinity Universal Insurance Company, or 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 $138.6 million of our 2023 Notes. The principal on the 2023 Notes were 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% on December 15, 2023. On December 15, 2023, the remaining 2023 Notes were repaid in full. The 2023 Notes were general, unsecured obligations and ranked equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2023 Notes were listed on the TASE. In connection with this offering, we have dual listed our common stock on the TASE.
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 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. See Note 10.
In March 2021 and 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. Interest on the 2026 Notes is paid semi-annually on April 1 and October 1 of each year, at a rate of 4.25% per year, commencing October 1, 2021. The 2026 Notes mature on April 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes are effectively subordinated to our existing and future secured indebtedness 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 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.
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 $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 December 31, 2023, 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.
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.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
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.
Restatement of Previously Issued Financial Statements
As noted in the Annual Report on Form 10-K for the year ended September 30, 2023, 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 affiliates – PSSL and PTSF in the September 30, 2022 financial statements. The Company recorded cash activity and due to affiliates pertaining to their investments as a reduction of the cash account instead of presenting the related cash and cash equivalents as an asset and a due to affiliates as a liability. This misclassification also existed at December 31, 2022, and the impact of the error correction is reflected on the consolidated statement of cash flows for the three months ended December 31, 2022 as an increase to cash and cash equivalents, beginning of period totaling $3.6 million, an increase to cash and cash equivalents, end of period totaling $2.1 million, and decrease in due to affiliates of $1.5 million.
There was no impact from the error correction to total net assets and net asset value per share as reported on the consolidated statement of assets and liabilities as of December 31, 2022. The corrections related to the prior year comparative cash flow statement amounts were reported in the quarter ended December 31, 2022.
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:
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 may or may not be non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, 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.
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 December 31, 2023, we had one portfolio company on non-accrual, representing 0.1% and zero percent of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2023, we had three portfolio companies on non-accrual, representing 0.9% and 0.2% of our overall portfolio on a cost and fair value basis, respectively.
(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 material U.S. 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 excise tax, or we may incur taxes through our taxable subsidiaries, including the Taxable Subsidiary. For both the three months ended December 31, 2023 and 2022, we recorded a provision for taxes on net investment income of $0.2 million and $0.5 million, respectively, pertaining to federal excise tax.
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 (PFLT Investment Holdings, LLC, a second tier wholly-owned subsidiary of the Company), 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 three months ended December 31, 2023, the Company recognized a provision for taxes of zero on unrealized appreciation (depreciation) on investments by the Taxable Subsidiary. For the three months ended December 31, 2022 the Company recognized a provision for taxes of $0.7 million on unrealized appreciation (depreciation) on investments by the Taxable Subsidiary. The provision for taxes on unrealized appreciation (depreciation) 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 December 31, 2023 and September 30, 2023, $1.8 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 December 31, 2023 and September 30, 2023, zero and $0.3 million, respectively, was accrued as a provision for taxes on the Consolidated Statements of Operations relating to realized gain on investments held by the Taxable Subsidiary. During the three months ended December 31, 2023 and 2022, the Company paid zero and zero, respectively, in taxes on realized gains on the sale of investments held by the Taxable Subsidiary.
We operate in a manner to maintain our election to be subject to tax as a RIC and to eliminate corporate-level U.S. federal income tax (other than the 4% excise tax) by distributing sufficient investment company taxable income and capital gain net income (if any). As a result, we will have an effective tax rate equal to 0% before the excise tax and income taxes incurred by the Taxable Subsidiary. As such, a reconciliation of the differences between our reported income tax expense and its tax expense at the federal statutory rate of 21% is not meaningful.
Because 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.
On March 27, 2023 we entered into equity distribution agreements with JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. (together, the "Equity Distribution Agreements"), as sales agents (each a "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 at-the-market offering ("ATM Program"). On August 11, 2023 we amended the Equity Distribution Agreements
22
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. The Amended and Restated 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 three months ended December 31, 2023, we did not issue any shares of common stock through the ATM Program.
(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 of 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, or ASU, 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 utilized the optional expedients and exceptions provided by ASU 2020-04 during the three months ended December 31, 2023, the effect of which was not material to the consolidated financial statements and the notes thereto.
In March 2022, the FASB issued ASU No. 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 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.
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 February 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 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 three months ended December 31, 2023 and 2022, the Investment Adviser earned a base management fee of $3.0 million and $2.9 million respectively, from us.
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 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 three months ended December 31, 2023 and 2022, the Investment Adviser earned $4.9 million and $3.4 million, respectively, in incentive fees on net investment income from us.
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 three months ended December 31, 2023 and 2022, the Investment Adviser did not accrue an incentive fee on capital gains, as calculated under the Investment Management Agreement (as described above).
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 20% of such amount, less the aggregate amount of actual capital gains related to incentive fees paid 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, but not payable, under GAAP on our unrealized and realized capital gains for the three months ended December 31, 2023 and 2022, was zero, respectively.
(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 February 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 Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs. The amount billed by the Administrator may include credits related to its administrative agreement with PSSL. 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 three months ended December 31, 2023 and 2022, we recorded administrative expenses of approximately $0.6 million and $0.1 million, respectively, including expenses the Administrator incurred for services described above.
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
There were no transactions subject to Rule 17a-7 under the 1940 Act during each of the three months ended December 31, 2023 and 2022.
For the three months ended December 31, 2023 and 2022, we sold $62.7 million and $18.8 million in investments to PSSL at fair value, respectively, and recognized zero and zero of net realized gains (losses), respectively.
For the three months ended December 31, 2023 and 2022, we sold no investments to PTSF.
As of December 31, 2023 and September 30, 2023, PFLT had a payable to PSSL and PTSF of $0.5 million and $0.6 million, respectively, presented as a Due to Affiliates on the consolidated statement of assets and liabilities. These amounts are related to cash owed to PSSL and PTSF from PFLT in connection with trades between the funds.
As of December 31, 2023 and September 30, 2023, PFLT had a receivable from the Administrator of $0.1 million and zero, respectively, presented as Due from Affiliate on the consolidated statements of assets and liabilities. This amount relates to agency fees collected on behalf of the Company.
4. INVESTMENTS
For the three months ended December 31, 2023 and 2022, purchases of investments, including PIK interest totaled $303.5 million and $65.6 million, respectively. For the three months ended December 31, 2023 and 2022, sales and repayments of investments totaled $103.8 million and $63.0 million, respectively.
Investments and cash and cash equivalents consisted of the following:
($ in thousands)
Investment Classification
Fair Value
First lien
887,271
880,376
708,452
696,078
First lien in PSSL
Second lien
Equity
101,968
128,184
83,188
109,978
Equity interests in PSSL
Total investments
Cash and cash equivalents
Total investments and cash and cash equivalents
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
December 31, 2023 (1)
September 30, 2023 (1)
All Other
Total
PennantPark Senior Secured Loan Fund I LLC
25
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 December 31, 2023 and September 30, 2023, PSSL had total assets of $879.4 million and $869.4 million, respectively, and its investment portfolio consisted of investments in 106 and 105 portfolio companies, respectively. As of December 31, 2023, at fair value, the largest investment in a single portfolio company in PSSL was $21.1 million and the five largest investments totaled $91.7 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 December 31, 2023, and September 30, 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 $210.1 million (additional $27.6 million unfunded) and $210.1 million (additional $27.6 million unfunded), respectively, and equity interests of $90.0 million (additional $11.8 million unfunded) and $90.0 million (additional $11.8 million unfunded), respectively.
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.
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 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:
836,857
785,859
Weighted average cost yield on income producing investments
12.1
Number of portfolio companies in PSSL
106
105
Largest portfolio company investment
21,114
18,463
Total of five largest portfolio company investments
91,715
83,365
Below is a listing of PSSL’s individual investments as of December 31, 2023 (Par and $ in thousands):
Basis PointSpread AboveIndex (1)
Par
First Lien Secured Debt - 1,398.7%
SOFR+660
2,881
2,918
10/1/2029
SOFR+626
10,000
9,827
9,750
ACP Falcon Buyer, Inc.
8/1/2029
11.85
SOFR+650
18,904
18,539
18,696
5/7/2026
8,775
8,708
8,731
Alpine Acquisition Corp II
11/30/2026
11.44
SOFR+600
12,820
12,519
12,307
5/23/2024
Media: Advertising, Printing & Publishing
SOFR+565
4,930
4,912
4,881
SOFR+665
4,778
4,788
7/21/2027
SOFR+585
7,491
7,338
7,416
SOFR+615
9,748
9,652
9,553
8/3/2029
SOFR+625
11,200
11,048
11,088
7/1/2029
SOFR+575
4,854
BioDerm, Inc.
1/31/2028
8,955
8,854
9/17/2026
15,092
14,892
14,904
5,588
5,552
5,476
12/4/2025
Consumer Products
2,334
Burgess Point Purchaser Corporation
9/26/2029
Automotive
SOFR+525
418
419
5/16/2025
SOFR+688
13,538
13,500
13,267
6/14/2028
9,612
9,490
8/20/2026
SOFR+619
6,803
6,667
4/10/2025
Construction and Engineering
SOFR+461
5,484
5,448
8/31/2024
SOFR+775
9,232
9,208
8,909
(PIK 1.00%)
Confluent Health, LLC
10/28/2028
9.47
SOFR+400
6,761
6,529
6,626
7/13/2027
SOFR+576
3,756
8/16/2027
SOFR+501
2,063
2,073
8/31/2027
14,675
14,484
DRI Holding Inc.
12/21/2028
2,620
2,419
2,385
11/3/2025
SOFR+640
14,189
14,144
14,033
6/30/2024
10,876
10,833
10,702
8/31/2030
Hotel, Gaming and Leisure
SOFR+475
5,004
EDS Buyer, LLC
1/10/2029
8,933
8,817
8,843
Exigo Intermediate II, LLC
3/15/2027
SOFR+610
12,643
12,484
12,453
ETE Intermediate II, LLC
5/29/2029
11.89
12,373
12,132
Fairbanks Morse Defense
6/17/2028
10,169
10,119
10,150
3/16/2026
3,726
3,715
3,540
8/10/2027
SOFR+560
2,339
2,314
2,316
2,250
2,219
2,160
SOFR+635
4,830
11.80
3,014
2,993
2,968
Imagine Acquisitionco, LLC
10.74
SOFR+550
9,225
9,064
9,086
SOFR+725
16,411
16,254
12.20
SOFR+685
6,075
5,967
1/31/2025
SOFR+715
11,130
11,113
10,351
(PIK 2.25%)
8/27/2026
5,895
5,847
5,836
6/30/2025
SOFR+761
8,226
8,094
8,061
ITI Holdings, Inc.
3/3/2028
3,940
3,888
3,822
K2 Pure Solutions NoCal, L.P.
1/31/2024
15.46
SOFR+1000
14,602
14,599
16,620
16,324
16,537
2/18/2027
SOFR+700
14,174
13,968
14,103
15,006
14,973
14,676
2/3/2026
SOFR+535
12,024
11,896
11,964
1/31/2030
2,579
2,533
5/31/2028
7,463
7,326
7,388
Lucky Bucks, LLC - First-Out Term Loan
10/2/2028
SOFR+765
Lucky Bucks, LLC - Last-Out Term Loan
10/2/2029
MAG DS Corp
4/1/2027
2,091
Magenta Buyer, LLC
7/31/2028
10.64
SOFR+500
2,998
2,844
2,106
Marketplace Events, LLC - Super Priority First Lien Term Loan
9/30/2025
647
Marketplace Events, LLC - Super Priority First Lien Unfunded Term Loan (3)
589
9/30/2026
3,852
5/14/2026
11.01
11,558
11,460
MBS Holdings, Inc.
4/16/2027
8,395
8,290
8,282
7/25/2028
6,364
6,260
6,212
2,366
2,332
2,295
27
19,344
19,018
18,957
3/28/2024
SOFR+590
5,769
5,764
9/28/2027
SOFR+515
3,421
3,374
3,418
NBH Group LLC
8/19/2026
Healthcare, Education & Childcare
11.19
10,684
10,553
10,043
Neptune Flood Incorporated
5/9/2029
4,932
4,865
New Milani Group LLC
6/6/2024
Consumer Goods: Non-Durable
14,175
14,161
8/31/2029
21,435
21,043
5/7/2027
SOFR+636
15,807
15,559
ORL Acquisitions, Inc.
9/3/2027
SOFR+740
2,217
2,198
1,884
Output Services Group, Inc - First-Out Term Loan
SOFR+843
821
Output Services Group, Inc - Last-Out Term Loan
5/30/2028
SOFR+668
2/4/2028
10.70
3,835
5/18/2026
SOFR+751
4,345
4,310
4,291
9/30/2028
12,028
11,848
Pequod Merger Sub, Inc. - Term Loan (f/k/a Simplicity Group)
12/2/2026
11,474
11,281
11,244
PH Beauty Holdings III, Inc.
9/29/2025
9,468
9,292
8,884
11/9/2027
SOFR+710
7,633
7,539
6,755
(PIK 4.00%)
5/8/2026
2,551
2,497
2,474
7/6/2028
Education
11,109
10,977
10,387
2,796
2,774
2,740
Rancho Health MSO, Inc.
1,026
Reception Purchaser, LLC
2/28/2028
4,868
4,777
1/29/2026
4,819
4,692
Research Now Group, LLC and Dynata, LLC
12,399
12,314
10,973
Rural Sourcing Holdings, Inc. (HPA SPQ Merger Sub, Inc.)
6/15/2029
3,739
3,669
3,683
1/3/2025
SOFR+620
9,268
9,233
9,222
SOFR+760
5,181
5,165
5,155
7/14/2025
11,791
11,780
11,407
(PIK 0.50%)
6/13/2029
4,874
4,765
12,141
11,973
12,020
5/17/2028
SOFR+450
1,300
1,275
1,290
11,766
11,733
10,299
7/17/2025
4,582
4,554
4,568
3/1/2028
4,102
4,040
4,057
9,075
9,028
8,985
1,782
1,695
1,777
14,700
14,518
14,612
Team Services Group, LLC
346
342
7/18/2025
2,256
2,255
2,251
7/27/2026
8,569
8,455
8,475
The Vertex Companies, LLC
7,696
7,577
7,684
TPC Canada Parent, Inc. and TPC US Parent, LLC
8,553
8,554
6/16/2025
3,738
4/1/2028
14,670
14,569
13,555
Urology Management Holdings, Inc.
6/15/2026
6,875
6,766
6,732
Walker Edison Furniture Company LLC
3/1/2029
Walker Edison Furniture Company LLC - Junior Revolving Credit Facility
Walker Edison Furniture Company LLC - DDTL - Unfunded (3)
(21
2/27/2027
16,138
15,896
3/1/2024
12.70
SOFR+735
16,732
16,698
16,355
841,081
833,276
Equity Securities - 3.9%
74
New MPE Holdings, LLC
507
Output Services Group, Inc
126
1,012
Walker Edison Furniture - Common Equity
Total Equity Securities
6,467
3,581
Total Investments - 1,404.7%
847,548
Cash and Cash Equivalents - 61.0%
BlackRock Federal FD Institutional 30
36,339
Total Investments and Cash Equivalents —1,465.7%
883,887
873,196
Liabilities in Excess of Other Assets — (1,365.7)%
(813,620
Members' Equity—100.0%
59,576
cash a
Below is a listing of PSSL’s individual investments as of September 30, 2023 (Par and $ in thousands)
First Lien Secured Debt - 1,347.5%
2,886
2,925
8,798
8,723
8,754
12,852
12,535
12,338
5,001
4,971
Anteriad Holdings Inc (fka MeritDirect) March 2023
4,817
4,814
7,510
7,348
7,360
7/31/2025
1,002
2,187
2,181
10.69
11,013
10,972
10,985
9,579
9,475
9,387
Applied Technical Services, LLC - DDTL Unfunded (3)
194
9,218
9,093
9,126
8,874
15,132
14,928
14,905
2,349
13,821
13,778
13,579
Cadence Aerospace, LLC
4,011
4,010
(PIK 2.00%)
9,636
9,509
SOFR+476
5,499
5,455
SOFR+675
9,201
9.32
6,797
6,559
6,445
3,815
SOFR+551
2,079
14,712
14,511
2,627
2,418
2,394
14,429
14,376
14,256
10,904
10,838
10,740
10.07
8,833
8,821
Electro Rent Corporation
1/17/2024
2,200
2,171
12,505
12,422
12,404
12,154
12,193
10,195
10,143
10,114
3,736
3,724
3,549
2,345
2,322
2,194
2,988
10.72
9,248
9,110
12.51
16,453
16,257
6,090
5,979
Integrated Data Services
11.87
18,532
11,105
11,083
10,439
5,906
5,851
3,886
3,861
SOFR+810
15,487
16,662
16,346
16,412
12.13
14,210
13,989
14,068
SOFR+643
15,042
14,997
14,862
12,056
11,911
11,935
11.77
2,585
2,537
2,534
5/26/2028
7,481
7,337
7,369
Lucky Bucks, LLC (4)
7/20/2027
4,207
Lucky Bucks. LLC - OpCo DIP Loans
15.33
2,097
10.63
3,006
2,845
2,228
3,782
11,588
11,476
11,472
7,859
7,758
7,749
6,380
6,271
6,244
2,336
2,312
29
5,763
5,740
3,430
3,380
3,355
10,711
10,572
10,497
14,213
14,194
15,849
15,588
2,223
2,202
2,023
Output Services Group, Inc. (4)
6/27/2026
7,759
7,689
1,513
3,832
4,306
4,269
Peaquod Merger Sub, Inc.
11,267
9,493
9,282
7,974
7,565
6,809
10.57
2,491
2,436
11,138
10,999
10,636
2,803
2,776
2,761
1,029
4,876
4,825
4,729
12,432
12,322
10,878
11.52
3,749
3,676
3,692
9,522
9,474
5,167
5,148
5,116
11,777
4,884
4,802
SOFR+865
13,787
13,580
1,274
1,272
9.70
11,796
11,739
10,598
4,577
4,563
4,047
4,022
9,025
8,894
1,786
1,696
1,779
14,738
14,540
14,575
339
2,262
2,261
2,259
5,602
5,560
5,518
5,403
5,336
5,382
7,716
7,591
7,656
8,654
8,556
14,565
13,379
6,892
6,775
6,749
3/31/2027
2/27/2026
10,565
10,491
10,460
16,660
16,188
801,215
783,598
495
Total Investments - 1,351.4%
804,608
Cash and Cash Equivalents - 133.2%
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
58,150
30
Below are the consolidated statements of assets and liabilities for PSSL ($ in thousands):
Investments at fair value (amortized cost—$847,548 and $804,608, respectively)
Cash and cash equivalents (cost—$36,339 and $77,446, respectively)
5,652
5,179
436
151
879,393
869,410
Credit facility payable
75,600
48,600
2032 Asset-backed debt, net (par—$246,000)
244,125
243,973
2035 Asset-backed debt, net (par—$246,000)
243,596
243,483
Notes payable to members
240,100
Interest payable on Credit facility and asset backed debt
9,105
14,291
13,466
Interest payable on notes to members
6,532
6,488
Accrued expenses
759
859
819,817
811,260
Commitments and contingencies(1)
Members' equity
Total liabilities and members' equity
Below are the consolidated statements of operations for PSSL ($ in thousands):
26,048
19,617
177
110
26,225
19,727
Expenses(1):
Interest and expense on credit facility and asset-backed debt
13,398
8,641
Interest expense on notes to members
8,220
Administration fees
558
262
300
22,438
16,259
3,787
3,468
Realized and unrealized gain (loss) on investments:
(6,420
8,059
(5,800
Net realized and unrealized gain (loss) on investments
1,639
(5,870
Net increase (decrease) in members' equity resulting from operations
5,426
(2,402
(1) No management or incentive fees are payable by PSSL. If any fees were to be charged, they would be separately disclosed in the consolidated statement of 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.
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, 2023 Notes and our 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 and our 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, discounted for lack of marketability 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 December 31, 2023
Valuation Technique
Unobservable Input
Range of Input(Weighted Average) (1)
30,609
Market Comparable
Broker/Dealer bids or quotes
N/A
1,054,150
Market yield
8.4% - 27.1% (12.2%)
Enterprise Market Value
EBITDA multiple
7.8x
14.0%
6.3x
118,522
.5x - 17.5x (11.8x)
DLOM(2)
14.3%
Total Level 3 investments
1,209,169
Long-Term Credit Facility
2.1%
____________________________________________
32
Fair value at September 30, 2023
25,521
875,133
Market Yield
10.0% - 25.0% (12.6%)
5,512
2.8x - 7.5x (7.4x)
14.8%
6.0x
100,489
3.4x - 17.7x (12.1x)
27.9%
1,006,948
Long-Term Credit Facility and 2023 Notes
85,619
2.3%
Our investments, cash and cash equivalents, Credit Facility, 2023 Notes, 2026 Notes and 2031 Asset-Backed Debt were categorized as follows in the fair value hierarchy for ASC 820 purposes ($ in thousands):
Fair Value at December 31, 2023
Description
Level 1
Level 2
Level 3
Measured at NetAsset Value (1)
1,090,464
180,313
118,555
61,758
Credit Facility payable
2026 Notes payable (2)
2031 Asset-Backed Debt(2)
Total debt
671,082
487,834
Fair Value at September 30, 2023
906,166
160,859
100,633
60,226
2023 Notes payable
495,432
312,378
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):
Three Months Ended December 31, 2023
First Lien
Second lien,subordinateddebt and equityinvestments
Totals
Beginning balance
100,782
Net realized gain (loss)
(4,304
1,215
Net change in unrealized appreciation (depreciation)
5,478
(858
4,620
Purchases, PIK interest, net discount accretion and non-cash exchanges
288,248
18,950
307,198
Sales, repayments and non-cash exchanges
(105,124
(1,384
(106,508
Transfers in and/or out of Level 3
Ending balance
118,705
Net change in unrealized appreciation (depreciation) reported within the net change in unrealized appreciaiton (depreciation) on investments in our consolidated statements of operations attributable to our Level 3 assets still held at the reporting date.
(1,085
(790
Three Months Ended December 31, 2022
1,009,642
95,285
1,104,927
50
(7,399
(3,446
(10,845
58,636
4,031
62,667
(62,720
(278
(62,998
998,209
95,605
1,093,814
(4,830
(3,368
(8,198
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):
Beginning balance (cost – $85,619 and $168,830, respectively)
167,563
Net change in unrealized (depreciation) appreciation included in earnings
125
Borrowings
Repayments
Net realized (gain) loss
Ending balance (cost – $260,855 and $259,277, respectively)
197,688
As of December 31, 2023, we had outstanding non-U.S. dollar borrowings on our Credit Facility. Net change in fair value from currency translation on outstanding borrowings is listed below ($ in thousands):
Foreign Currency
AmountBorrowed
Borrowing Cost
Current Value
Reset Date
Change in FairValue
Canadian Dollar
2,000
1,455
1,517
1/1/2024
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 did not incur any expenses relating to amendment costs on the Credit Facility during both the three months ended December 31, 2023 and 2022. 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 our 2026 Notes and the 2031 Asset-Backed Debt.
For the three months ended December 31, 2023 and 2022, the Credit Facility and the 2023 Notes had a net change in unrealized appreciation (depreciation) of less than $0.1 million and $(2.1) million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized appreciation (depreciation) on the Credit Facility and the 2023 Notes totaled $0.1 million and zero, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility in a manner consistent with the valuation process that our board of directors uses to value our investments. Our 2023 Notes traded on the TASE and were fully paid off during the quarter.
6. TRANSACTIONS WITH AFFILIATED COMPANIES
An affiliated portfolio company is a company in which we have ownership of 5% or more of its voting securities. A portfolio company is generally presumed to be a non-controlled affiliate when we own at least 5% but less than 25% of its voting securities and a controlled affiliate generally when we own more than 25% of its voting securities. Transactions related to our funded investments with both controlled and non-controlled affiliates for the three months ended December 31, 2023 were as follows ($ in thousands):
Name of Investment
Gross Additions
Sale of/ Distribution from Affiliates
Net Change inUnrealizedAppreciation(Depreciation)
Interest Income
Dividend/Other Income
Net RealizedGains (Losses)
Controlled Affiliates
$34,028
$392
$—
$(305)
$34,115
$1,241
PennantPark Senior Secured
Loan Fund I LLC *
260,969
1,248
262,217
7,193
Total Controlled Affiliates
$294,997
$943
$296,332
$8,434
$3,500
* We and Kemper are the members of PSSL, a joint venture formed as a Delaware limited liability company that is not consolidated by us for financial reporting purposes. The members of PSSL make investments in PSSL in the form of first lien secured debt and equity interests, and all portfolio and other material decisions regarding PSSL must be submitted to PSSL’s board of directors or investment committee, both of which are comprised of two members appointed by each of us and Kemper. Because management of PSSL is shared equally between us and Kemper, we do not believe we control PSSL for purposes of the 1940 Act or otherwise.
7. CHANGE IN NET ASSETS FROM OPERATIONS PER COMMON SHARE
The following information sets forth the computation of basic and diluted per share net increase (decrease) in net assets resulting from operations
($ in thousands, except per share data):
Numerator for net increase (decrease) in net assets resulting from operations
Denominator for basic and diluted weighted average shares
58,734,702
45,368,844
Basic and diluted net increase in net assets per share resulting from operations
8. CASH AND CASH EQUIVALENTS
Cash equivalents represent cash in money market funds pending investment in longer-term portfolio holdings and for other general purposes. 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 December 31, 2023 and September 30, 2023, cash and cash equivalents consisted of money market funds in the amounts of $75.8 million and $100.6 million at fair value, respectively.
9. FINANCIAL HIGHLIGHTS
Below are the financial highlights ($ in thousands, except per share data):
Per Share Data:
Net asset value, beginning of period
Net investment income (1)
Net change in realized and unrealized gain (loss) (1)
0.05
(0.34
Net increase (decrease) in net assets resulting from operations (1)
Distributions to stockholders (1), (2)
(0.31
(0.29
Accretive effect of common stock issuance
0.01
Net asset value, end of period
11.30
Per share market value, end of period
12.10
Total return *(3)
16.68
17.29%
Shares outstanding at end of period
45,431,815
Ratios** / Supplemental Data:
Ratio of operating expenses to average net assets** (4)
5.86
5.91
Ratio of debt related expenses to average net assets** (5)
5.47
7.53
Ratio of total expenses to average net assets** (5)
13.44
Ratio of net investment income to average net assets** (5)
10.48
Net assets at end of period
Weighted average debt outstanding
528,462
688,165
Weighted average debt per share (1)
9.00
15.17
Asset coverage per unit (6)
1,972
1,734
Portfolio turnover rate*
7.98
4.04
Note: The expense and investment income ratios above do not reflect the Company's proportionate share of income and expenses of PSSL and PTSF
* Not annualized for periods less than one year.
** Re-occuring investment income and expenses included in these ratios are annualized for periods less than one year
10. DEBT
The annualized weighted average cost of debt for the three months ended December 31, 2023 and 2022, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 6.8% and 5.8%, respectively.
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 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 December 31, 2023 and September 30, 2023, our asset coverage ratio, as computed in accordance with the 1940 Act, was 197% and 230%, respectively.
Credit Facility
Funding I’s multi-currency Credit Facility with affiliates of Truist Bank, or the Lenders, was $386.0 million as of December 31, 2023, subject to satisfaction of certain conditions and the 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 236 basis points, a maturity date of August 2026 and a revolving period that ends in August 2024. As of December 31, 2023 and September 30, 2023, Funding I had $260.9 million and $9.4 million of outstanding borrowings under the Credit Facility, respectively. The Credit Facility had a weighted average interest rate of 7.7% and 7.7%, exclusive of the fee on undrawn commitments as of December 31, 2023 and September 30, 2023, respectively. As of December 31, 2023 and September 30, 2023, we had $125.1 million and $376.6 million of unused borrowing capacity under the Credit Facility, respectively, subject to leverage and borrowing base restrictions.
During the revolving period, the Credit Facility bears interest at SOFR (or an alternative risk-free floating interest rate index) plus 236 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 2026. The Credit Facility is secured by all of the assets of Funding I. Both we 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, 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 December 31, 2023, 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 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 $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 have dual listed our common stock on the TASE.
The 2023 Notes paid interest at a rate of 4.3% per year. As a result of the downgrade of the 2023 Notes from “ilA+” to “ilA-” in March 2020, the interest rate of the 2023 Notes was increased to 4.3% from 3.8%. 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.
2026 Notes
In March 2021 and in October 2021, we issued $100.0 million and $85.0 million, respectively, in aggregate principal amount of $185.0 million of our 2026 Notes at a public offering price per note of 99.4% and 101.5%, respectively. Interest on the 2026 Notes is paid semi-annually on April 1 and October 1 of each year, at a rate of 4.25% per year, commencing October 1, 2021. The 2026 Notes mature on April 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are our general, unsecured obligations and rank equal in right of payment with all of our existing and future senior unsecured indebtedness. The 2026 Notes are effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the 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
In September 2019, the Company completed the $301.4 million term debt securitization. Term debt securitizations, also known as CLOs, are a form of secured financing incurred by the Company, which is consolidated by the Company and subject to the Company’s asset coverage requirements. The 2031 Asset-Backed Debt was issued by the Securitization Issuer. 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 Loans 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 interest at 5.4%, and (vii) $18.0 million Class D Secured Deferrable Floating Rate Loans 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 Notes 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 annualized interest on the 2031 Asset-Backed Debt will be paid, to the extent of funds available. The reinvestment period of the Debt Securitization ends on October 15, 2023 and 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. The Preferred Shares of the Securitization Issuer do not bear interest and had a stated value of approximately $55.4 million at the closing of the Debt Securitization.
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 both December 31, 2023 and September 30, 2023, the Company had $228.0 million of 2031 Asset-Backed Debt outstanding with a weighted average interest rate of 7.2% and 7.1%, respectively. As of December 31, 2023 and September 30, 2023, the unamortized fees on the 2031 Asset-Backed Debt were $1.1 million and $1.2 million, respectively.
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.
11. COMMITMENTS AND CONTINGENCIES
From time to time, we 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 December 31, 2023 and September 30, 2023, we had $270.7 million and $155.5 million, respectively, in commitments to fund investments. Additionally, as described in Note 4, the Company had unfunded commitments of $39.4 million and $39.4 million to PSSL as of December 31, 2023 and September 30, 2023, respectively, that may be contributed primarily for the purpose of funding new investments approved by the PSSL board of directors or investment committee.
38
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors of PennantPark Floating Rate Capital Ltd. and its Subsidiaries
Results of Review of Interim Financial StatementsWe have reviewed the accompanying consolidated statement of assets and liabilities of PennantPark Floating Rate Capital Ltd. and its Subsidiaries (the Company), including the consolidated schedule of investments, as of December 31, 2023, the related consolidated statements of operations and changes in net assets for the three-month periods ended December 31, 2023 and 2022 and cash flows for the three-month periods ended December 31, 2023 and 2022, and the related notes to the consolidated financial statements (collectively, the interim financial information or financial statements). Based on our reviews, we are not aware of any material modifications that should be made to the accompanying interim financial information for them to be in conformity with accounting principles generally accepted in the United States of America.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statement of assets and liabilities of the Company, including the consolidated schedule of investments, as of September 30, 2023, and the related consolidated statements of operations, changes in net assets, and cash flows for the year then ended (not presented herein); and in our report dated December 7, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, as of September 30, 2023, is fairly stated, in all material respects, in relation to the consolidated statement of assets and liabilities, including the consolidated schedule of investments, from which it has been derived.
Emphasis of Matter
As discussed in Note 2 of the consolidated financial statements, the consolidated statements of cash flows for the three months ended December 31, 2022 has been restated to reclassify certain amounts presented within.
Basis for Review ResultsThese interim financial statements are the responsibility of the Company’s management. We conducted our reviews in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. 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.
/s/ RSM US LLP
New York, New York
February 7, 2024
Awareness Letter of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of PennantPark Floating Rate Capital Ltd. and its Subsidiaries
We have reviewed, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the unaudited interim financial information of PennantPark Floating Rate Capital Ltd. for the periods ended December 31, 2023 and 2022, as indicated in our report dated February 7, 2024; because we did not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your Quarterly Report on Form 10-Q for the quarter ended December 31, 2023, is incorporated by reference in Registration Statement No.333-268813 on Form N-2.
We are also aware that the aforementioned report, pursuant to Rule 436(c) under the Securities Act of 1933, is not considered a part of the Registration Statement prepared or certified by an accountant or a report prepared or certified by an accountant within the meaning of Sections 7 and 11 of that Act.
Item 2. 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
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 Financial Officer, Chief Compliance 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.
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:
42
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.
There was no impact from the error correction on net investment income or net increase (decrease) in net assets resulting from operations in total or on a per common share basis as reported on the consolidated statements of operations for the three months ended December 31, 2022. The corrections related to the prior year comparative cash flow statement amounts were reported in the quarter ended December 31, 2023.
As a result of the error in the classification and presentation of cash described above, we conducted an analysis to determine whether incentive-based compensation was erroneously awarded, thereby necessitating recovery under the Clawback Policy we adopted effective December 1, 2023. Because we do not pay or otherwise award incentive-based compensation to the Company’s executives, we concluded that the error did not result in erroneously-awarded incentive-based compensation, and therefore no compensation recovery is required.
PORTFOLIO AND INVESTMENT ACTIVITY
PennantPark Floating Rate Capital Ltd.
As of December 31, 2023, our portfolio totaled $1,270.9 million, and consisted of $1,090.5 million of first lien secured debt (including $210.1 million in PSSL), $0.2 million of second lien secured debt and $180.3 million of preferred and common equity (including $52.1 million in PSSL). Our debt portfolio consisted of approximately 100% variable-rate investments. As of December 31, 2023, we had one portfolio company on non-accrual, representing 0.1% and zero percent of our overall portfolio on a cost and fair value basis, respectively. As of December 31, 2023, the portfolio had net unrealized depreciation of $19.6 million. Our overall portfolio consisted of 141 companies with an average investment size of $9.0 million and had a weighted average yield on debt investments of 12.5%, and was invested 86% in first lien secured debt (including 17% in PSSL), less than 1% in second lien secured debt and 14% in preferred and common equity (including 4% in PSSL). As of December 31, 2023, approximately 100% 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 $r906.2 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% of our overall portfolio on a cost and fair value basis, respectively. As of September 30, 2023, 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 three months ended December 31, 2023, we invested $302.6 million in 13 new and 34 existing portfolio companies at a weighted average yield on debt investments of 11.9%. For the three months ended December 31, 2023, sales and repayments of investments totaled $103.8 million, including $62.7 million of sales to PSSL.
For the three months ended December 31, 2022, we invested $65.6 million in four new and 29 existing portfolio companies at a weighted average yield on debt investments of 11.2%. For the three months ended December 31, 2022 sales and repayments of investments totaled $63.0 million, including $18.8 million of sales to PSSL.
As of December 31, 2023, PSSL’s portfolio totaled $836.9 million and consisted of 106 companies with an average investment size of $7.9 million and at a weighted average yield on debt investments of 12.1%. 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 at a weighted average yield on debt investments of 12.1%.
For the three months ended December 31, 2023, PSSL invested $75.7 million (including $62.7 million purchased from the Company) in four new and nine existing portfolio companies at a weighted average yield on debt investments of 12.3%. Sales and repayments of investments for the three months ended December 31, 2023 totaled $27.7 million.
For the three months ended December 31, 2022, PSSL invested $29.5 million (including $18.8 million purchased from the Company) in seven new and eight existing portfolio companies at a weighted average yield on debt investments of 11.1%. For the three months ended December 31, 2022 sales and repayments of investments totaled $28.8 million.
At-the-Market Offering
On March 27, 2023 we entered into equity distribution agreements with JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. (together, the "Equity Distribution Agreements"), as sales agents (each a "Sales Agent" and together, the "Sales Agents") in connection with the sale of shares of our common stock, which we amended on August 11, 2023 with an aggregate offering of up to $250 million under an at-the-market offering ("ATM Program"). On August 11, 2023, we amended and restated the 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. The Amended and Restated Equity Distribution Agreements provide that we may offer and sell shares of our common stock from time to
43
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.
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 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. We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the three months from those disclosed in our 2023 Annual Report on Form 10-K.
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 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.
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.
44
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 boards of directors to periodically assess material valuation risks and take steps to manage those risks. The rule also permits 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 and our 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.
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 did not incur any expenses relating to amendment costs on the Credit Facility and debt issuance costs on the 2023 Notes during the three months ended December 31, 2023 and 2022, 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 and the 2031 Asset-Backed Debt.
For the three months ended December 31, 2023 and 2022, the Credit Facility and the 2023 Notes had a net change in unrealized appreciation (depreciation) of less than $0.1 million and $(2.1) million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized appreciation (depreciation) on the Credit Facility as applicable, and the 2023 Notes totaled $0.1 million and zero, respectively. We use a nationally recognized independent valuation service to measure the fair value of the Credit Facility in a manner consistent with the valuation process that our board of directors uses to value our investments. Our 2023 Notes traded on the TASE and were fully paid off during the quarter.
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 may or may not be non-recurring in nature. Such fees include loan prepayment penalties, structuring fees, amendment fees and agency 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, our 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
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 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 three months ended December 31, 2023 and 2022, we recorded a provision for taxes on net investment income of $0.2 million and $0.5 million, respectively, pertaining to federal excise tax.
We have formed and expect to continue to form certain taxable subsidiaries, including the Taxable Subsidiary, which are taxed 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.
RESULTS OF OPERATIONS
Set forth below are the results of operations for the three months ended December 31, 2023 and 2022.
Investment Income
For the three months ended December 31, 2023, investment income was $38.0 million, which was attributable to $33.2 million from first lien secured debt and $4.8 million from other investments. For the three months ended December 31, 2022, investment income was $31.3 million, which was attributable to $27.6 million from first lien secured debt and $3.7 million from other investments. The increase in investment income compared to the same period in the prior year was primarily due to the increase in the cost yield of our debt portfolio.
For the three months ended December 31, 2023, expenses totaled $18.5 million and were comprised of: $8.9 million of debt related interest and expenses, $3.0 million of base management fees, $4.9 million of performance-based incentive fees, $1.6 million of general and administrative expenses and $0.2 million of taxes. For the three months ended December 31, 2022, expenses totaled $17.6 million and were comprised of: $9.9 million of debt related interest and expenses, $2.9 million of base management fees, $3.4 million of performance-based incentive fees, $0.8 million of general and administrative expenses and $0.5 million of taxes. The increase in expenses compared to the same period in the prior year was primarily due to the increase in performance-based incentive fees as a result of higher pre-incentive fee net investment income.
Net Investment Income
For the three months ended December 31, 2023 and 2022, net investment income totaled $19.4 million or $0.33 per share, and $13.7 million or $0.30 per share, respectively. The increase in net investment income was primarily due to an increase in investment income partially offset by an increase in expenses compared to the same period in the prior year.
Net Realized Gains or Losses
For the three months ended December 31, 2023 and 2022, net realized gains (losses) totaled $(3.1) million and less than $0.1 million, respectively. The change in net realized gains (losses) compared to the same period in the prior year was primarily due to changes in the market conditions of our investments and the values at which they were realized.
Unrealized Appreciation or Depreciation on Investments, the Credit Facility and the 2023 Notes
For the three months ended December 31, 2023 and 2022, we reported net change in unrealized appreciation (depreciation) on investments of $6.2 million and $(16.8) million, respectively. As of December 31, 2023 and September 30, 2023, our net unrealized appreciation (depreciation) on investments totaled $(19.6) million and $(25.7) million, respectively. The net change in unrealized appreciation (depreciation) on our investments compared to the same period in the prior year was primarily due to the operating performance of the portfolio companies within our portfolio and changes in the capital market conditions of our investments.
For the three months ended December 31, 2023 and 2022, our Credit Facility and the 2023 Notes had a net change in unrealized appreciation (depreciation) of less than $0.1 million and $(2.1) million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized appreciation (depreciation) on the Credit Facility and the 2023 Notes totaled less than $0.1 million and zero, respectively. The net change in net unrealized appreciation or (depreciation) compared to the same period in the prior year was primarily due to changes in the capital markets.
Net Increase (Decrease) in Net Assets Resulting from Operations
For the three months ended December 31, 2023 and 2022, net increase (decrease) in net assets resulting from operations totaled $22.5 million or $0.38 per share and $(1.6) million, or $(0.04) per share, respectively. The net increase or (decrease) from operations compared to the same period in the prior year was primarily due to operating performance of our portfolio and changes in capital market conditions of our investments along with change in cost yield of our debt portfolio and costs of financing.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are derived primarily from cash flows from operations, including income earned, proceeds from investment sales and repayments, and proceeds of securities offerings and debt financings. 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 our portfolio and proceeds from public and private offerings of securities to finance our investment objectives and operations. As of December 31, 2023, 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.
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 December 31, 2023 and September 30, 2023, our asset coverage ratio, as computed in accordance with the 1940 Act, was 197% and 230%, respectively.
For the three months ended December 31, 2023 and 2022, the annualized weighted average cost of debt, inclusive of the fee on the undrawn commitment on the Credit Facility, amendment costs and debt issuance costs, was 6.8% and 5.7%, respectively. As of December 31, 2023 and September 30, 2023, we had $125.1 million and $376.6 million of unused borrowing capacity under the Credit Facility, as applicable, respectively, subject to leverage and borrowing base restrictions.
Funding I’s multi-currency Credit Facility with the Lenders was $386.0 million as of December 31, 2023 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 236 basis points, a maturity date of August 2026 and a revolving period that ends in August 2024. As of December 31, 2023 and September 30, 2023, PennantPark Floating Rate Funding I, LLC, our wholly-owned subsidiary, borrowed $260.9 million and $9.4 million under the Credit Facility, respectively, and the weighted average interest rate, exclusive of the fee on undrawn commitments, was of 7.7% and 7.7%, respectively, exclusive of the fee on undrawn commitments.
During the revolving period, the Credit Facility bears interest at SOFR (or an alternative risk-free floating interest rate index) plus 236 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 2026. 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 December 31, 2023, we were in compliance with the covenants relating to our 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 $138.6 million of our 2023 Notes. The 2023 Notes were issued pursuant to a deed of trust between the Company and Mishmeret Trust Company, Ltd., as trustee, of which zero and $76.2 million was outstanding as of December 31, 2023 and September 30, 2023, respectively.
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. Interest on the 2026 Notes is paid semi-annually on April 1 and October 1 of each year, at a rate of 4.25% per year, commencing October 1, 2021. The 2026 Notes mature on April 1, 2026 and may be redeemed in whole or in part at our option subject to a make-whole premium if redeemed more than three months prior to maturity. The 2026 Notes are our general, unsecured obligations and rank equal in right of payment with all of our existing and future senior
unsecured indebtedness. The 2026 Notes are effectively subordinated to all of our existing and future secured indebtedness 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 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.
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 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 both December 31, 2023 and September 30, 2023, the Company had $228.0 million of 2031 Asset-Backed Debt outstanding with a weighted average interest rate of 7.2% 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.
On March 27, 2023 we entered into equity distribution agreements with JMP Securities LLC, Raymond James & Associates, Inc. and Truist Securities, Inc. (together, the "Equity Distribution Agreements"), as sales agents (each a “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 at-the-market offering (“ATM Program”). On August 11, 2023, we amended the 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. The Amended and Restated 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.
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 2024, 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 February 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 Financial Officer, Chief Compliance 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.
As of December 31, 2023 and September 30, 2023, we had cash and cash equivalents of $75.8 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.
For the three months ended December 31, 2023, our operating activities used cash of $181.9 million and our financing activities provided cash of $157.2 million. Our operating activities used cash primarily due to our investment activities and our financing activities provided cash primarily due to borrowings under our Credit Facility partially offset by the repayment of the 2023 Notes.
For the three months ended December 31, 2022, our operating activities provided cash of $6.3 million and our financing activities used cash of $2.7 million. Our operating activities provided cash primarily realized from our investment activities and our financing activities used cash primarily due to borrowings under our Credit Facility and principal repayment of our 2023 Notes.
48
51
Below is a listing of PSSL’s individual investments as of September 30, 2023 ($ in thousands):
52
53
(1)As of December 31, 2023 and September 30, 2023, PSSL had unfunded commitments to fund investments of $1.6 million and $1.1 million, respectively.
Off-Balance Sheet Arrangements
We currently engage in no off-balance sheet arrangements other than our funding requirements for the unfunded investments described above.
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 our 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 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 three months ended December 31, 2023 and 2022, we declared distributions of $0.3075 and $0.285 per share for total distributions of $18.1 million and $12.9 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.
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
54
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
We are subject to financial market risks, including changes in interest rates. As of December 31, 2023, our debt portfolio consisted of approximately 100.0% 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, Net of Interest Expense(in thousands)
Change in Interest Income,Net of InterestExpense Per Share
Down 1%
(6,603
(0.11
Up 1%
6,603
0.11
Up 2%
0.22
Up 3%
19,809
0.34
Up 4%
26,425
0.45
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 our 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.
As of the quarter ended December 31, 2023, 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) under the Exchange Act). As disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023, a material weakness was previously identified in connection with our internal control over financial reporting relating to the review of quarterly cash and investment reconciliations. Additionally, a material weakness was identified in the operation of our internal controls over financial reporting relating to our review of interest income and non-accrual classification of investments. We have taken steps to remediate these material weaknesses, which steps have included (i) enhancing existing controls to ensure 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, (ii) enhancing 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 (iii) enhancing policies and procedures to demonstrate a commitment to improving our overall control environment.
Taking the above efforts into consideration, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures for the quarter ended December 31, 2023 were effective and provided reasonable assurance that information required to be disclosed in our periodic filings with the SEC 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.
Other than disclosed in this Item 4, there have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
56
PART II – OTHER INFORMATION
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 and any future 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.
In addition to the other information set forth in this Report, you should consider carefully the factors discussed below, as well as in Part I “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 filed on December 8, 2023, which could materially affect our business, financial condition and/or operating results. The risks described below, as well as in our Annual Report on Form 10-K are not the only risks facing PennantPark Floating Rate Capital Ltd. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results.
None.
Not applicable.
10b5-1 Disclosure
None of the officers or directors of the Company have adopted or terminated any Rule 10b5-1 trading arrangements applicable to them (if any) or the Company.
Unless specifically indicated otherwise, the following exhibits are incorporated by reference to exhibits previously filed with the SEC:
3.1
Articles of Amendment and Restatement of the Registrant (Incorporated by reference to Exhibit 99(A) to the Registrant's Pre-Effective Amendment No. 3 to the Registration Statement on Form N-2 (File No. 333-170243), filed on March 29, 2011).
3.2
Second Amended and Restated Bylaws of the Registrant (Incorporated by reference to Exhibit 3.2 to the Registrant's Quarterly Report on Form 10-Q (File No. 814-00891), filed on May 11, 2020).
4.1
Form of Share Certificate (Incorporated by reference to Exhibit 99(D) to the Registrant's Pre-Effective Amendment No. 5 to the Registration Statement on Form N-2 (File No. 333-170243), filed on April 5, 2011).
31.1*
Certification of Chief Executive Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
31.2*
Certification of Chief Financial Officer pursuant to Rule 13a-14 of the Securities Exchange Act of 1934, as amended.
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
Privacy Policy of the Registrant (Incorporated by reference to Exhibit 99.1 to the Registrant’s Annual Report on Form 10-K (File No. 814-00891), filed on November 17, 2011).
101.INS*
Inline XBRL Instance Document-the instance document does not appear in the Interactive Data File as its XBRL tags are embedded within the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents
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 formatted as Inline XBRL and contained in Exhibit 101
* Filed herewith.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: February 7, 2024
By:
/s/ Arthur H. Penn
Arthur H. Penn
Chief Executive Officer and Chairman of the Board of Directors
(Principal Executive Officer)
/s/ Richard T. Allorto, Jr.
Richard T. Allorto, Jr.
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)