QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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(State or other jurisdiction of incorporation or organization)
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||
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(IRS Employer Identification No.)
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(Address of principal executive offices)
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(Zip Code)
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Title of Each Class
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Trading Symbol(s)
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Name of each exchange on which registered
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Large accelerated filer
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☐
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Accelerated filer
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☐
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☒
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Smaller reporting company
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Emerging growth company
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TABLE OF CONTENTS
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PAGE
NO.
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||
PART I
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FINANCIAL INFORMATION
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Item 1
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4 |
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4
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||
5
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||
6
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||
7
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||
8
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||
10
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||
Item 2
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21
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Item 3
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31
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Item 4
|
32
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PART II
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OTHER INFORMATION
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Item 1
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32
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Item 1A
|
32
|
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Item 2
|
32
|
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Item 3
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32
|
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Item 4
|
33
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Item 5
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33
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Item 6
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33
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34
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•
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our future operating results and distribution projections;
|
•
|
the ability of Silver Spike Capital, LLC (“SSC”) to attract and retain highly talented professionals;
|
•
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our business prospects and the prospects of our portfolio companies;
|
•
|
the impact of interest and inflation rates on our business prospects and the prospects of our portfolio companies;
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•
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the impact of the investments that we expect to make;
|
•
|
the ability of our portfolio companies to achieve their objectives;
|
•
|
our expected financings and investments and the timing of our investments in our initial portfolio;
|
•
|
changes in regulation impacting the cannabis industry;
|
•
|
the adequacy of our cash resources and working capital;
|
•
|
the current and future effects of the COVID-19 pandemic on us and our portfolio companies; and
|
•
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the timing of cash flows, if any, from the operations of our portfolio companies.
|
•
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our limited operating history;
|
•
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changes or potential disruptions in our operations, the economy, financial markets or political environment;
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•
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risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters or the COVID-19 pandemic;
|
•
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future changes in laws or regulations (including the interpretation of these laws and regulations by regulatory authorities) and conditions in our operating areas, particularly with respect to business
development companies (“BDCs”) or regulated investment companies (“RICs”); and
|
•
|
other considerations that may be disclosed from time to time in our publicly disseminated documents and filings.
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|
March 31, 2023 |
December 31, 2022
|
||||||
|
(unaudited)
|
|||||||
ASSETS
|
||||||||
Investments at fair value:
|
||||||||
Non-control/non-affiliate investments at fair value (amortized cost of $
|
$
|
|
$
|
|
||||
Cash and cash equivalents
|
|
|
||||||
Interest receivable
|
|
|
||||||
Prepaid expenses
|
|
|
||||||
Total assets
|
$
|
|
$
|
|
||||
|
||||||||
LIABILITIES
|
||||||||
|
||||||||
Management fee payable
|
$
|
|
$
|
|
||||
Income-based incentive fee payable
|
||||||||
Capital gains incentive fee payable
|
||||||||
Legal fees payable
|
|
|
||||||
Administrator fees payable
|
|
|
||||||
Valuation fees payables
|
|
|
||||||
Audit fees payable
|
|
|
||||||
Professional fees payable
|
|
|
||||||
Director’s fee payable
|
|
|
||||||
Excise tax payable
|
|
|
||||||
Due to affiliate
|
|
|
||||||
Other payables
|
|
|
||||||
Total liabilities
|
$
|
|
$
|
|
||||
|
||||||||
Commitments and contingencies (Note 6)
|
||||||||
|
||||||||
NET ASSETS
|
||||||||
Common Stock, $
|
$
|
|
$
|
|
||||
Additional paid-in-capital
|
|
|
||||||
Distributable earnings/(Accumulated losses)
|
|
|
||||||
Total net assets
|
$
|
|
$
|
|
||||
NET ASSET VALUE PER SHARE
|
$
|
|
$
|
|
|
For the three
months ended |
For the three
months ended |
||||||
|
March 31, 2023
|
March 31, 2022
|
||||||
INVESTMENT INCOME
|
||||||||
Non-control/non-affiliate investment income
|
||||||||
Interest income
|
$
|
|
$
|
|
||||
Fee income
|
|
|
||||||
Total investment income
|
|
|
||||||
|
||||||||
EXPENSES
|
||||||||
Management fee
|
|
|
||||||
Income-based incentive fee
|
||||||||
Capital gains incentive fee
|
||||||||
Legal expenses
|
|
|
||||||
Audit expense
|
|
|
||||||
Administrator fees
|
|
|
||||||
Valuation fees
|
|
|
||||||
Insurance expense
|
|
|
||||||
Director expenses
|
|
|
||||||
Professional fees
|
|
|
||||||
Custodian fees
|
|
|
||||||
Organizational expenses
|
|
|
||||||
Other expenses
|
|
|
||||||
Total expenses
|
|
|
||||||
|
||||||||
NET INVESTMENT INCOME (LOSS)
|
|
(
|
)
|
|||||
|
||||||||
NET REALIZED GAIN (LOSS) FROM INVESTMENTS
|
|
|
||||||
Net realized gain (loss) from investments
|
|
|
||||||
|
||||||||
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS
|
||||||||
Non-controlled/non-affiliate investments
|
|
|
||||||
Net change in unrealized appreciation/(depreciation) on investments
|
|
|
||||||
|
||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
|
$
|
|
$
|
(
|
)
|
|||
|
||||||||
NET INVESTMENT INCOME (LOSS) PER SHARE — BASIC AND DILUTED
|
$
|
|
$
|
(
|
)
|
|||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS PER SHARE — BASIC AND DILUTED
|
$
|
|
$
|
(
|
)
|
|||
WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED
|
|
|
|
Common Stock
|
|||||||||||||||||||
|
Shares
|
Par Value
|
Additional
paid-in-capital |
Distributable Earnings/
(Accumulated Loss)
|
Total net assets/
(net liabilities)
|
|||||||||||||||
Balance, December 31, 2022
|
|
$
|
|
$
|
|
$
|
|
$
|
|
|||||||||||
Net increase (decrease) in net assets resulting from operations
|
||||||||||||||||||||
Net investment income (loss)
|
-
|
|
|
|
|
|||||||||||||||
Net realized gain (loss) from investments
|
-
|
|
|
|
|
|||||||||||||||
Net change in unrealized appreciation (depreciation) from investments
|
-
|
|
|
|
|
|||||||||||||||
Total net increase (decrease) in net assets resulting from operations
|
-
|
|
|
|
|
|||||||||||||||
Capital transactions
|
||||||||||||||||||||
Issuance of common stock
|
|
|
|
|
|
|||||||||||||||
Total increase (decrease) in net assets | ||||||||||||||||||||
Effect of permanent adjustments |
- | ( |
) | |||||||||||||||||
Balance, March 31, 2023
|
|
$
|
|
$
|
|
$
|
|
$
|
|
Common Stock
|
||||||||||||||||||||
|
Shares
|
Par value
|
Additional
paid-in-capital |
Distributable Earnings/
(Accumulated Loss) |
Total net assets/
(net liabilities) |
|||||||||||||||
Balance, December 31, 2021
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
(
|
)
|
|||||||||
Net increase (decrease) in net assets resulting from operations
|
||||||||||||||||||||
Net investment income (loss)
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Net realized gain (loss) from investments
|
-
|
|
|
|
|
|||||||||||||||
Net change in unrealized appreciation (depreciation) from investments
|
-
|
|
|
|
|
|||||||||||||||
Total net increase (decrease) in net assets resulting from operations
|
-
|
|
|
(
|
)
|
(
|
)
|
|||||||||||||
Capital transactions
|
||||||||||||||||||||
Issuance of common stock, net of offering costs of $
|
|
|
|
|
|
|||||||||||||||
Total increase (decrease) in net assets
|
|
|
|
(
|
)
|
|
||||||||||||||
Effect of permanent adjustments
|
-
|
|
(
|
)
|
|
|
||||||||||||||
Balance, March 31, 2022
|
|
$
|
|
$
|
|
$
|
(
|
)
|
$
|
|
|
For the three months ended
|
|||||||
|
March 31, 2023
|
March 31, 2022
|
||||||
Cash flows from operating activities
|
||||||||
Net increase (decrease) in net assets resulting from operations
|
$
|
|
$
|
(
|
)
|
|||
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities:
|
||||||||
Net change in unrealized (appreciation) depreciation from investments
|
(
|
)
|
|
|||||
Net (accretion of discounts) and amortization of premiums
|
(
|
)
|
|
|||||
Purchase of investments
|
(
|
)
|
|
|||||
PIK interest capitalized
|
( |
) | ||||||
(Increase)/Decrease in operating assets:
|
||||||||
Prepaid expenses
|
(
|
)
|
(
|
)
|
||||
Interest receivable
|
(
|
)
|
(
|
)
|
||||
Deferred offering costs
|
|
|
||||||
Increase/(Decrease) in operating liabilities:
|
||||||||
Management fee payable
|
|
|
||||||
Income-based incentive fee payable
|
||||||||
Capital gains incentive fee payable
|
||||||||
Legal fees payable
|
|
|
||||||
Administrator fees payable
|
|
|
||||||
Valuation fees payables
|
|
|
||||||
Audit fees payable
|
(
|
)
|
|
|||||
Professional fees payable
|
|
|
||||||
Director’s fee payable
|
|
|
||||||
Excise tax payable
|
(
|
)
|
|
|||||
Due to affiliate
|
(
|
)
|
(
|
)
|
||||
Offering cost payable
|
|
(
|
)
|
|||||
Organizational costs payable
|
|
(
|
)
|
|||||
Other payables
|
(
|
)
|
|
|||||
Net cash provided by (used in) operating activities
|
(
|
)
|
(
|
)
|
||||
|
||||||||
Cash flows from financing activities
|
||||||||
Issuance of common stock, net of offering cost
|
|
|
||||||
Net cash provided by (used in) financing activities
|
|
|
||||||
|
||||||||
Net increase (decrease) in cash & cash equivalents
|
(
|
)
|
|
|||||
Cash & cash equivalents, beginning of period
|
|
|
||||||
Cash & cash equivalents, end of period
|
$
|
|
$
|
|
Portfolio Company (1)
|
Type of Investment (2)
|
Investment
Date (3)
|
Maturity
Date
|
Interest Rate (4)
|
Fair Value
Hierarchy (5)
|
Geographic
Region (6) |
Non-
Qualifying
Asset (7)
|
Principal
Amount (8)
|
Amortized
Cost
|
Fair
Value (9)
|
% of Net
Assets
|
|||||||||||||||
Debt Securities - United States
|
||||||||||||||||||||||||||
Wholesale Trade (10)
|
||||||||||||||||||||||||||
|
|
|
|
Fixed interest rate
|
|
|
No
|
$
|
|
$
|
|
$
|
|
|
%
|
|||||||||||
.
|
|
|
|
Fixed interest rate
|
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
Variable interest rate PRIME(11) +
( |
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
Fixed interest rate
|
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
Variable interest rate PRIME(11) +
( |
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
Variable interest rate PRIME(11) +
( |
|
|
No
|
|
|
|
|
|||||||||||||||
|
$
|
|
|
|
|
|||||||||||||||||||||
|
||||||||||||||||||||||||||
Total: Debt Securities -United States (
|
|
|
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||||
Total: Debt Securities (
|
|
|
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Investment in Securities (
|
$
|
|
$
|
|
|
%
|
||||||||||||||||||||
|
||||||||||||||||||||||||||
Cash equivalents
|
||||||||||||||||||||||||||
State Street Institutional U.S. Government Money Market Fund (12)
|
$
|
|
$
|
|
|
%
|
||||||||||||||||||||
Cash equivalents (
|
|
|
|
|||||||||||||||||||||||
|
||||||||||||||||||||||||||
Total Portfolio Investments and Cash equivalents (
|
$
|
|
$
|
|
|
%
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
(7) |
Under the Investment Company Act of 1940, as amended (the “1940 Act”), a business development company (“BDC”) may not
acquire any “non-qualifying asset” (i.e., an asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “qualifying assets”), unless, at the time the acquisition is made, qualifying assets
represent at least 70% of the BDC’s total assets.
|
(8) |
|
(9) |
|
(10) |
The Company uses the North American Industry Classification System (“NAICS”) code for classifying the industry
grouping of its portfolio companies.
|
(11) |
As of March 31, 2023 PRIME is
|
(12) |
|
Portfolio Company (1)
|
Type of Investment (2)
|
Investment
Date (3)
|
Maturity
Date
|
Interest Rate (4)
|
Fair Value
Hierarchy (5) |
Geographic
Region (6) |
Non-
Qualifying
Asset (7)
|
Principal
Amount (8)
|
Amortized
Cost
|
Fair
Value (9) |
% of
Net Assets
|
|||||||||||||||
Debt Securities - United States
|
|
|
|
|
|
|||||||||||||||||||||
Wholesale Trade (10)
|
|
|
||||||||||||||||||||||||
|
|
|
|
Fixed interest rate
|
|
|
No
|
$
|
|
$
|
|
$
|
|
|
%
|
|||||||||||
|
|
|
|
Fixed interest rate
|
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
Fixed interest rate
|
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
Variable interest rate PRIME(11) +
( |
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
Variable interest rate PRIME(11) +
( |
|
|
No
|
|
|
|
|
|||||||||||||||
|
|
|
|
|
|
$
|
|
|
|
|
||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Total: Debt Securities - United States (
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Total: Debt Securities (
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Total Investment in Securities (
|
|
|
$
|
|
$
|
|
|
%
|
||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Cash equivalents
|
|
|
||||||||||||||||||||||||
State Street Institutional U.S. Government Money Market Fund (12)
|
|
|
|
$
|
|
$
|
|
|
%
|
|||||||||||||||||
Cash equivalents (
|
|
|
|
|
|
|||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||||
Total Portfolio Investments and Cash equivalents (
|
|
|
$
|
|
$
|
|
|
%
|
(1) |
|
(2) |
|
(3) |
|
(4) |
|
(5) |
|
(6) |
|
(7) |
Under the Investment Company Act of 1940, as amended (the “1940 Act”), a business development company (“BDC”) may not
acquire any “non-qualifying asset” (i.e., an asset other than assets of the type listed in Section 55(a) of the 1940 Act, which are referred to as “qualifying assets”), unless, at the time the acquisition is made, qualifying assets
represent at least 70% of the BDC’s total assets.
|
(8) |
|
(9) |
|
(10) |
The Company uses the North American Industry Classification System (“NAICS”) code for classifying the industry
grouping of its portfolio companies.
|
(11) |
As of December 31, 2022 PRIME is
|
(12) |
|
• |
With respect to investments for which market quotations are readily available, those investments will typically be valued at the bid price of those market quotations;
|
• |
With respect to investments for which market quotations are not readily available, the valuation process begins with the Adviser’s valuation committee establishing a preliminary valuation of each investment, which may be based on
valuations, or ranges of valuations, provided by independent valuation firm(s);
|
• |
Preliminary valuations are documented and discussed by the Adviser’s valuation committee and, where appropriate, the independent valuation firm(s); and
|
• |
The Adviser determines the fair value of each investment.
|
• |
Level 1 – Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date;
|
• |
Level 2 – Valuations based on quoted prices for similar assets or liabilities in active markets, or quoted prices for identical or similar assets or liabilities in markets that are not
active, or for which all significant inputs are observable, either directly or indirectly; and
|
• |
Level 3 – Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
|
March 31, 2023
|
|||||||||||||||||
Amortized Cost
|
Fair Value
|
||||||||||||||||
Industry
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Wholesale Trade
|
$
|
|
|
%
|
$
|
|
|
%
|
|||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|
December 31, 2022
|
|||||||||||||||||
Amortized Cost
|
Fair Value
|
||||||||||||||||
Industry
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Wholesale Trade
|
$
|
|
|
%
|
$
|
|
|
%
|
|||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|
March 31, 2023
|
|||||||||||||||||
Amortized Cost
|
Fair Value
|
||||||||||||||||
Geographic Location
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Midwest
|
$
|
|
|
%
|
$
|
|
|
%
|
|||||||||
West
|
|
|
|
|
|||||||||||||
Northeast
|
|
|
|
|
|||||||||||||
Southeast
|
|
|
|
|
|||||||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|
December 31, 2022
|
||||||||||||||||
Amortized Cost
|
Fair Value
|
|||||||||||||||
Geographic Location
|
Amount
|
%
|
Amount
|
%
|
||||||||||||
Midwest
|
$
|
|
|
%
|
$
|
|
|
%
|
||||||||
West
|
|
|
|
|
||||||||||||
Northeast
|
|
|
|
|
||||||||||||
Southeast
|
|
|
|
|
||||||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|
March 31, 2023
|
|||||||||||||||||
Amortized Cost
|
Fair Value
|
||||||||||||||||
Investment
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Senior Secured First Lien Term Loan
|
$
|
|
|
%
|
$
|
|
|
%
|
|||||||||
Senior Secured Notes
|
|
|
|
|
|||||||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|
December 31, 2022
|
|||||||||||||||||
Amortized Cost
|
Fair Value
|
||||||||||||||||
Investment
|
Amount
|
%
|
Amount
|
%
|
|||||||||||||
Senior Secured First Lien Term Loan
|
$
|
|
|
%
|
$
|
|
|
%
|
|||||||||
Senior Secured Notes
|
|
|
|
|
|||||||||||||
Total
|
$
|
|
|
%
|
$
|
|
|
%
|