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New words:
absolute, activist, Allspring, apparent, appointed, ascertainable, AssetCo, asymmetrical, background, BB, blue, BNPP, borne, building, cap, catalyst, CCO, chip, CISO, Computershare, confiscated, confiscatory, Constrained, conviction, coupled, culture, cycle, deep, deflationary, diligencing, disburse, disqualification, diversion, domiciled, downgrading, DRMP, elevated, England, evidenced, expert, expropriated, expropriation, forecasted, formula, FSCO, FSSL, furnished, grounded, guided, healthcare, holder, idiosyncratic, impending, incentivized, increasingly, ineffective, innovative, intrinsic, invaded, ix, landscape, levered, logistical, looming, lost, mid, mispriced, misunderstanding, misunderstood, municipal, niche, Nomura, noncorporate, nonpayment, notwithstanding, OBFR, overlevered, paper, permission, perspective, pertinent, PLC, pooled, Pound, presence, proceeding, pursuit, redemption, regional, regularly, reoccur, residual, retaliatory, rotate, rotation, satisfactory, sentiment, SONIA, sought, space, Specialty, spectrum, Sterling, strain, strategic, stressed, subscribed, Subscription, suite, synthetic, Tactical, thinly, threat, tighter, tranche, TRS, turbulence, turnover, unconventional, undue, unforeseen, uniform, unnatural, unpredictable, unstable, usage, VaR, viii, xi
Removed:
Accomplishing, advanced, alteration, American, arrange, arranger, automatically, Bay, bearing, Chinese, circulated, comparing, consisting, distract, dramatically, education, emerge, Eric, estimating, eurocurrency, exploratory, extending, Fargo, feasibility, FL, Gladwyne, Goldman, grace, harvesting, implied, independently, initially, Intermediate, internally, IRS, KS, Leawood, Limetree, magnified, magnifying, mandated, modification, NY, occurring, originally, Orlando, pari, passu, peer, phased, president, quarantine, rebalance, renegotiate, replicate, repo, resource, resumed, setting, Shared, span, stakeholder, suddenly, suspending, Synergy, temporarily, thereon, travel, treat, typical, undrawn, unlisted, unsubordinated, West, WTI, York
Financial report summary
?Competition
StructuReRisks
- Our ability to achieve our investment objectives depends on FS/EIG Advisor’s ability to manage and support our investment process. If our agreement with FS/EIG Advisor were to be terminated, or if FS/EIG Advisor loses any members of its senior management team, our ability to achieve our investment objectives could be significantly harmed.
- Because our business model depends to a significant extent upon relationships with issuers, private equity sponsors, investment banks and commercial banks, the inability of FS/EIG Advisor to maintain or develop these relationships, or the failure of these relationships to generate investment opportunities, could adversely affect our business.
- We operate in a highly competitive market for investment opportunities, which could reduce returns and result in losses.
- Our board of trustees may change our investment policy by providing our shareholders with 60 days’ prior notice, or may modify or waive our current operating policies and strategy without prior notice or shareholder approval, the effects of which may be adverse.
- If we, our affiliates and our and their respective third-party service providers are unable to maintain the availability of electronic data systems and safeguard the security of data, our ability to conduct business may be compromised, which could impair our liquidity, disrupt our business, damage our reputation or otherwise adversely affect our business.
- Changes in laws or regulations governing our operations or the operations of our business partners may adversely affect our business or cause us to alter our business strategy.
- The Small Business Credit Availability Act, or the SBCA Act, allows us to incur additional leverage.
- As an SEC-reporting company, we are subject to regulations not applicable to private companies, such as provisions of the Sarbanes-Oxley Act. Efforts to comply with such regulations involve significant expenditures, and non-compliance with such regulations may adversely affect us.
- We may invest in derivatives or other assets that expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
- We may experience fluctuations in our quarterly results.
- We and our portfolio companies may maintain cash balances at financial institutions that exceed federally insured limits and may otherwise be materially affected by adverse developments affecting the financial services industry, such as actual events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties.
- We and FS/EIG Advisor could be the target of litigation.
- Our business and operations could be negatively affected if we become subject to shareholder activism, which could cause us to incur significant expense, hinder the execution of our investment strategy or impact our share price.
- There may be conflicts of interest related to obligations FS/EIG Advisor’s senior management and investment teams have to our affiliates and to other clients.
- FS/EIG Advisor and its affiliates, including our officers and some of our trustees, face conflicts of interest caused by compensation arrangements with us and our affiliates, which could result in actions that are not in the best interests of our shareholders.
- We may be obligated to pay FS/EIG Advisor incentive compensation even if we incur a net loss due to a decline in the value of our portfolio.
- The time and resources that FS/EIG Advisor and individuals employed by FS/EIG Advisor devote to us may be diverted and we may face additional competition due to the fact that individuals employed by FS/EIG Advisor are not prohibited from raising money for or managing another entity that makes the same types of investments that we target.
- Our incentive fee may induce FS/EIG Advisor to make, and EIG to recommend, speculative investments.
- FS/EIG Advisor’s liability is limited under the FS/EIG investment advisory agreement, and we are required to indemnify FS/EIG Advisor against certain liabilities, which may lead it to act in a riskier manner on our behalf than it would when acting for its own account.
- Failure to maintain our status as a BDC would reduce our operating flexibility.
- We are uncertain of our sources for funding our future capital needs and if we cannot obtain debt or equity financing on acceptable terms, or at all, our ability to acquire investments and to expand our operations will be adversely affected.
- The requirement that we invest a sufficient portion of our assets in qualifying assets could preclude us from investing in accordance with our current business strategy; conversely, the failure to invest a sufficient portion of our assets in qualifying assets could result in our failure to maintain our status as a BDC.
- Regulations governing our operation as a BDC and a RIC will affect our ability to raise, and the way in which we raise, additional capital or borrow for investment purposes, which may have a negative effect on our growth.
- Our ability to enter into transactions with our affiliates is restricted.
- Inflation may adversely affect the business, results of operations and financial condition of our portfolio companies.
- Our investments in prospective portfolio companies may be risky, and we could lose all or part of our investment.
- International investments create additional risks.
- Our investments in private investment funds, including hedge funds, private equity funds, limited liability companies and other business entities, subject us indirectly to the underlying risks of such private investment funds and additional fees and expenses.
- We may acquire various structured financial instruments for purposes of “hedging” or reducing our risks, which may be costly and ineffective and could reduce the cash available to service debt or for distribution to shareholders.
- Investing in middle market companies involves a number of significant risks, any one of which could have a material adverse effect on our operating results.
- If our portfolio is concentrated in a single or limited number of investments at any given time, our performance may be significantly adversely affected by the unfavorable performance of a small number of such investments or a substantial write-down of the value of any one investment.
- Our portfolio companies may incur debt that ranks equally with, or senior to, our investments in such companies.
- There may be circumstances where our debt investments could be subordinated to claims of other creditors or we could be subject to lender liability claims.
- Second priority liens on collateral securing debt investments that we make to our portfolio companies may be subject to control by senior creditors with first priority liens. If there is a default, the value of the collateral may not be sufficient to repay in full both the first priority creditors and us.
- We generally will not control our portfolio companies.
- Declines in market values or fair market values of our investments could result in significant net unrealized depreciation of our portfolio, which, in turn, would reduce our net asset value.
- A significant portion of our investment portfolio does not have a readily available market price and is and will be recorded at fair value in accordance with policies and procedures approved by our board of trustees and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
- We are exposed to risks associated with changes in interest rates.
- A covenant breach by our portfolio companies may harm our operating results.
- Our portfolio companies may be highly leveraged.
- We may not realize gains from our equity investments.
- An investment strategy focused primarily on privately-held companies presents certain challenges, including the lack of available information about these companies.
- A lack of liquidity in certain of our investments may adversely affect our business.
- We may not have the funds or ability to make additional investments in our portfolio companies.
- Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
- Our investments may include original issue discount and PIK instruments.
- We may from time to time enter into total return swaps, credit default swaps, fixed priced swaps or other derivative transactions which expose us to certain risks, including credit risk, market risk, commodity risk, liquidity risk and other risks similar to those associated with the use of leverage.
- We may invest through joint ventures, partnerships or other special purpose vehicles and our investments through these vehicles may entail greater risks, and investments in which we have a non-controlling interest may involve risks specific to third-party management of those investments.
- Because prior to September 29, 2023, our investment policy was to invest, under normal circumstances, at least 80% of our total assets in securities of Energy companies, our portfolio may not be well allocated among various industries.
- An increase or decrease in commodity supply or demand may adversely affect our business.
- An increase or decrease in commodity pricing may adversely affect our business.
- Cyclicality within the Energy sector may adversely affect our business.
- A prolonged continuation of depressed oil and natural gas prices could have a material adverse effect on us.
- Changes in international, foreign, federal, state or local government regulation may adversely affect our business.
- Energy companies are subject to various operational risks.
- Energy companies that focus on exploration and production are subject to numerous reserve and production related risks.
- Competition between Energy companies may adversely affect our business.
- Inability by companies in which we may invest to make accretive acquisitions may adversely affect our business.
- A significant accident or event that is not fully insured could adversely affect the operations and financial condition of Energy companies in which we may invest.
- Energy reserves naturally deplete as they are produced over time and this may adversely affect our business.
- Certain Energy companies are dependent on their parents or sponsors for a majority of their revenues and may be subject to affiliate party risk.
- Changing economic, regulatory and political conditions in some countries, including political and military conflicts, may adversely affect the businesses in which we invest.
- An MLP's cash flow, and consequently its distributions, are subject to operational and general energy industry risks, which may result in disparate quarterly distributions.
- Investments in MLPs may have limited liquidity.
- Investments in MLPs are subject to certain tax risks.
- Our investments in MLPs may be subject to additional fees and expenses, including management and incentive fees, and, as a result, our investments in MLPs may achieve a lower rate of return than our other investments.
- We currently incur indebtedness to make investments, which magnifies the potential for gain or loss on amounts invested in our common shares and may increase the risk of investing in our common shares.
- The agreements governing our debt financing arrangements contain, and agreements governing future debt financing arrangements may contain, various covenants which, if not complied with, could have a material adverse effect on our ability to meet our investment obligations and to pay distributions to our shareholders.
- We will be subject to corporate-level income tax if we are unable to qualify as a RIC under Subchapter M of the Code or to satisfy the RIC Annual Distribution Requirements.
- Some of our investments may be subject to corporate-level income tax.
- We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
- We may be adversely affected if an MLP or other non-corporate business structure in which we invest is treated as a corporation, rather than a partnership, for U.S. federal income tax purposes.
- We may be adversely affected if an MLP or other non-corporate business structure in which we invest is unable to take advantage of certain tax deductions for U.S. federal income tax purposes and our income from investments in MLPs may exceed the cash received from such investments.
- Our portfolio investments may present special tax issues.
- If we do not qualify as a “publicly offered regulated investment company,” as defined in the Code, you may be taxed as though you received a distribution of some of our expenses.
- Legislative or regulatory tax changes could adversely affect investors.
- Our common shares are not listed on an exchange or quoted through a quotation system, and will not be for the foreseeable future, if ever. Therefore, shareholders will have limited liquidity and may not receive a full return of invested capital upon selling common shares.
- We are not obligated to complete a liquidity event by a specified date; therefore, it will be difficult for an investor to sell his or her common shares.
- Only a limited number of common shares may be repurchased pursuant to our share repurchase program, if any, and, to the extent shareholders are able to sell their common shares under our share repurchase program, shareholders may not be able to recover the amount of their investment in those shares.
- There is a risk that investors in our common shares may not receive distributions or that our distributions may not grow over time.
- Our distribution proceeds have exceeded and in the future may exceed our earnings. Therefore, portions of the distributions that we have made represented, and may make in the future may represent, a return of capital to shareholders, which lowers their tax basis in their common shares.
- We may pay distributions from borrowings or the sale of assets to the extent our cash flows from operations, net investment income or earnings are not sufficient to fund declared distributions.
- The timing of our repurchase offers pursuant to our share repurchase program, if any, may be at a time that is disadvantageous to our shareholders.
- A shareholder's interest in us will be diluted if we issue additional common shares, which could reduce the overall value of an investment in us.
- Certain provisions of our declaration of trust and bylaws could deter takeover attempts and have an adverse impact on the value of our common shares.
- Future disruptions or instability in capital markets could negatively impact the valuation of our investments and our ability to raise capital.
- Future economic recessions or downturns could impair our portfolio companies and harm our operating results.
- Events outside of our control, including public health crises, could negatively affect our portfolio companies and our results of operations.
- We are currently operating in a period of capital markets disruption and economic uncertainty.
- If a period of capital market disruption and instability continues for an extended period of time, there is a risk that investors in our equity securities may not receive distributions consistent with historical levels or at all or that our distributions may not grow over time and a portion of our distributions may be a return of capital.
- Our business, results of operations and financial condition could be adversely affected by disruptions in the global oil and energy markets and declines in the price of oil, and the ultimate effect of these events on our business would be highly uncertain and cannot be predicted.
- Global economic, political and market conditions, including potential downgrades of the U.S. credit rating, may adversely affect our business, results of operations and financial condition.
- The Russian invasion of Ukraine and sanctions on Russian energy exports may have a material adverse impact on us and our portfolio companies.
- Changes to United States tariff and import/export regulations may have a negative effect on our portfolio companies.
- Economic sanction laws in the United States and other jurisdictions may prohibit us and our affiliates from transacting with certain countries, individuals and companies.
Management Discussion
- (1) Such revenues represent $137,340, $158,257 and $111,722 of cash income earned as well as $20,382, $26,710 and $38,985 in non-cash portions relating to accretion of discount and PIK interest for the years ended December 31, 2023, 2022 and 2021, respectively. Cash flows related to such non-cash revenues may not occur for a number of reporting periods or years after such revenues are recognized.
- The level of interest income we receive is generally related to the balance of income-producing investments, multiplied by the weighted average yield of our investments. We may experience volatility in the amount of interest income that we earn as the accrual status of existing portfolio investments may fluctuate due to restructuring activity in the portfolio.
- The decrease in the amount of interest income and PIK income for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to a combination of factors including an overall decrease in the size of the investment portfolio, certain investments being placed on non-accrual and the divestiture of certain investments earning PIK income.