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New words:
accessible, Banc, Bariatric, Bidco, Boca, bps, breakage, CCO, ceiling, CERT, chosen, Clevertech, collaboration, contradiction, contravention, CTO, deliver, depository, disagreement, domestic, engineering, Explanation, expropriation, figure, flawed, gas, GC, greenhouse, handling, hardware, hostility, impending, inaccuracy, inconsistent, inevitably, injunctive, intelligence, Jersey, jointly, landscape, LRI, machine, mandatory, Manish, Medrina, Metasource, momentum, notification, occasion, partly, penetration, phishing, predominately, Rajguru, receivership, reevaluated, regularly, reliant, resiliency, RumbleOn, scrutinizing, sentiment, shut, shutdown, spending, SSJA, straightforward, Subcomittee, Subcommittee, surrender, threat, today, trademark, training, undergo, undetected, uniform, unrest
Removed:
announced, broader, carryover, checking, Codification, collectible, combined, conclude, corroborated, debenture, deferment, delineated, deploy, depressed, diverted, Division, ease, efficiently, eligibility, encouraged, escrow, euro, examined, exceeding, FCA, half, idle, installment, irrevocably, logo, merger, observe, petty, phase, pooling, proposing, provisionally, PWB, relending, repeated, revoke, selectively, Southern, stimulate, unclear, vi, withdrawal
Financial report summary
?Risks
- Global economic, political and market conditions may adversely affect our business, our ability to access capital, and our results of operations and financial condition, including our revenue growth and profitability.
- Due to economic disruptions, we may not be able to increase our dividends and may reduce or defer our dividends and choose to incur U.S. federal excise tax in order to preserve cash and maintain flexibility.
- Our financial condition and results of operation will depend on our ability to manage our business effectively.
- A significant amount of our portfolio investments are recorded at fair value and OFS Advisor, our “valuation designee,” determines the fair value of our investments in good faith pursuant to Rule 2a-5 under the 1940 Act. As a result, there will be uncertainty as to the value of our portfolio investments and the participation of OFS Advisor’s professionals in our valuation process could result in a conflict of interest.
- Insufficient cash flows may increase our risk of default of our debt obligations, including under our Unsecured Notes and our BNP Facility.
- Because we received the approval of our Board, we became subject to 150% asset coverage effective May 3, 2019.
- Changes in interest rates will affect our cost of capital and net investment income.
- We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
- We may suffer credit losses.
- We will be subject to U.S. federal income tax at corporate rates if we are unable to maintain our tax treatment as a RIC.
- Our subsidiaries and portfolio companies may be unable to make distributions to us that will enable us to meet RIC requirements, which could result in the imposition of an entity-level tax.
- In the future, we may choose to pay distributions in our own stock and stockholders may be required to pay tax in excess of the cash they receive.
- Because we expect to distribute substantially all of our net ordinary income and net realized capital gains to our stockholders, we may need additional capital to finance our growth and such capital may not be available on favorable terms or at all.
- Our Banc of California Credit Facility contains various covenants and restrictions which, if not complied with, could accelerate our repayment obligations under the Banc of California Credit Facility or limit its use, thereby materially and adversely affecting our liquidity, financial condition, results of operations and ability to pay distributions.
- Adverse developments in the credit markets may impair our ability to secure debt financing.
- Our cash and cash equivalents could be adversely affected if the financial institutions in which we hold our cash and cash equivalents fail.
- Changes in the laws or regulations governing our business, or changes in the interpretations thereof, and any failure by us to comply with these laws or regulations, could have a material adverse effect on our, and our portfolio companies’ business, results of operations or financial condition.
- Our Board may change our investment objectives, operating policies and strategies without prior notice or stockholder approval.
- Efforts to comply with the Sarbanes-Oxley Act involve significant expenditures, and non-compliance with Section 404 of the Sarbanes-Oxley Act, including a failure to maintain effective internal controls over financial reporting in accordance therewith, may adversely affect us and the market price of our securities.
- We have potential conflicts of interest related to obligations that OFS Advisor or its affiliates may have to other clients.
- Our independent directors may face conflicts of interest related to their obligations to the Affiliated Funds for which they also serve as independent directors.
- The valuation process for certain of our portfolio holdings may create a conflict of interest.
- The Investment Advisory Agreement with OFS Advisor and the Administration Agreement with OFS Services were not negotiated on an arm’s length basis and may not be as favorable to us as if they had been negotiated with an unaffiliated third party.
- Our ability to enter into transactions with our affiliates is restricted, which may limit the scope of investments available to us.
- Our base management fee may induce OFS Advisor to cause us to incur leverage.
- Our incentive fee may induce OFS Advisor to make certain investments, including speculative investments.
- OFS Advisor’s liability is limited under the Investment Advisory Agreement, and we have agreed to indemnify OFS Advisor against certain liabilities, which may lead OFS Advisor to act in a riskier manner on our behalf than it would when acting for its own account.
- OFS Advisor can resign on 60 days’ notice, and we may not be able to find a suitable replacement within that time, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
- OFS Services can resign from its role as our Administrator under the Administration Agreement, and we may not be able to find a suitable replacement, resulting in a disruption in our operations that could adversely affect our financial condition, business and results of operations.
- Regulations governing our operation as a BDC affect our ability to and the way in which we raise additional capital. As a BDC, we will need to raise additional capital, which will expose us to risks, including the typical risks associated with leverage.
- Our ability to invest in public companies may be limited in certain circumstances.
- If we do not invest a sufficient portion of our assets in qualifying assets, we could fail to continue to qualify as a BDC or be precluded from investing according to our current business strategy.
- Our investments in the debt instruments of leveraged portfolio companies may be risky and, due to the significant volatility of such companies, we could lose all or part of our investment in bankruptcy proceedings or otherwise.
- Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
- Any of our portfolio companies operating in the Health Care and Social Assistance industry are subject to extensive government regulation and certain other risks particular to that industry.
- The documents governing the loans to our portfolio companies and the loans underlying our CLO investments may allow for “priming transactions.”
- Our investments in private and middle-market portfolio companies are generally considered lower credit quality obligations, are risky, and we could lose all or part of our investment.
- Investments in equity securities involve a substantial degree of risk.
- Our equity ownership in a portfolio company may represent a control investment. Our ability to exit a control investment in a timely manner could result in a realized loss on the investment.
- Our investments in Structured Finance Securities carry additional risks to the risks associated with investing in private debt.
- Our investments in Structured Finance Securities are more likely to suffer a loss of all or a portion of their value in the event of a default.
- We will have no influence on the management of underlying investments managed by non-affiliated third-party CLO collateral managers.
- We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient.
- Price declines and illiquidity in the corporate debt markets may adversely affect the fair value of our portfolio investments, reducing our NAV through increased net unrealized depreciation.
- We are a non-diversified management investment company within the meaning of the 1940 Act, and therefore we are not limited by the 1940 Act with respect to the proportion of our assets that may be invested in securities of a single issuer.
- Because we generally do not hold controlling equity interests in our portfolio companies, we may not be able to exercise control over our portfolio companies or prevent decisions by management of our portfolio companies that could decrease the value of our investments.
- The disposition of our investments may result in contingent liabilities.
- Investments in securities of foreign companies, if any, may involve significant risks in addition to the risks inherent in U.S. investments.
- We may not realize gains from our equity investments.
- There is a risk that stockholders may not receive distributions or that our distributions may not grow over time and a portion of our distributions may be a return of capital.
- The market price of our common stock may fluctuate and decrease significantly.
- Sales of substantial amounts of our common stock in the public market may have an adverse effect on the market price of our common stock.
- Certain provisions of the Delaware General Corporation Law and our Certificate of Incorporation and Bylaws could deter takeover attempts and have an adverse impact on the price of our common stock.
- Our common stock may trade below its NAV per share, which limits our ability to raise additional equity capital.
- If we issue preferred stock, debt securities or convertible debt securities, the NAV of our common stock may become more volatile.
- Holders of any preferred stock that we may issue will have the right to elect members of our Board and have class voting rights on certain matters.
- Our Unsecured Notes are effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future and will rank pari passu with, or equal to, all outstanding and future unsecured, unsubordinated indebtedness issued by us and our general liabilities.
- The Unsecured Notes are structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
- The indenture under which the Unsecured Notes were issued contains limited protection for holders of the Unsecured Notes.
- We may choose to redeem the Unsecured Notes when prevailing interest rates are relatively low.
- We may experience fluctuations in our quarterly operating results.
- We incur significant costs as a result of being a publicly traded company.
- Increased data protection regulation may result in increased complexities and risk in connection with the operation of our business.
- We are subject to risks associated with artificial intelligence and machine learning technology.
- We are subject to risks in using custodians, counterparties, administrators and other agents.
- Increased geopolitical unrest, terrorist attacks, acts of war, global health emergencies or natural disasters may impact the businesses in which we invest and harm our business, operating results and financial condition.
- Further downgrades of the U.S. credit rating, impending automatic spending cuts or a government shutdown could negatively impact our liquidity, financial condition and earnings.
Management Discussion
- During the year ended December 31, 2023, our portfolio experienced net losses of $20.4 million, comprised of net realized losses of $11.4 million and net unrealized depreciation of $9.0 million.
- During the year ended December 31, 2023, our net loss of $20.4 million primarily related to net unrealized depreciation of $14.5 million in the common equity of Pfanstiehl Holdings, Inc. During the year ended December 31, 2023, our loan portfolio experienced net losses of $5.2 million, primarily related to net unrealized depreciation of $4.3 million on our non-accrual loans.
- During the year ended December 31, 2023, we recognized net realized losses of $11.4 million, primarily due to the write-off our non-accrual loan and equity investment in Eblens Holdings, Inc., resulting in a realized loss of $10.5 million, of which $9.0 million was recognized in prior fiscal years.