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Financial report summary
?Risks
- We have a limited operating history.
- We are a privately-placed, perpetual-life BDC, and our Stockholders may not be able to transfer or otherwise dispose of our Common Stock at desired times or prices, or at all.
- We may have difficulty sourcing investment opportunities.
- We are subject to certain risks related to the Warehousing Transaction.
- We generally will not control the business operations of our portfolio companies.
- Due to the illiquid nature of our holdings in our portfolio companies, we may not be able to dispose of our interests in our portfolio companies.
- We may finance our investments with borrowed money, which will magnify the potential for gain or loss and may increase the risk of investing in us.
- Provisions in the SMBC Credit Agreement and other agreements governing other borrowings may limit discretion in operating our business and defaults thereunder may adversely affect our business, financial condition, results of operations and cash flows.
- We are exposed to risks associated with changes in interest rates.
- We may enter into total return swaps that would expose us to certain risks, including market risk, liquidity risk and other risks similar to those associated with the use of leverage.
- Our investment portfolio will be recorded at fair value as determined in good faith in accordance with procedures established by our Board of Directors and, as a result, there is and will be uncertainty as to the value of our portfolio investments.
- Any unrealized depreciation we experience on our portfolio may be an indication of future realized losses, which could reduce our income available for distribution.
- Our Board of Directors may change our operating policies and strategies without prior notice or Stockholder approval, the effects of which may be adverse to our Stockholders.
- We may face competition for investment opportunities, which could delay further deployment of our capital, reduce returns and result in losses.
- We are dependent on information systems and systems failures could significantly disrupt our business, which may, in turn, negatively affect our liquidity, financial condition or results of operations.
- Our ability to achieve our investment objective depends on the Adviser’s ability to manage and support our investment process.
- The Adviser and its affiliates have no prior experience managing a business development company.
- Our fee structure may create a conflict of interest due to the incentives for the Adviser to make speculative investments or use substantial leverage.
- The Adviser or its affiliates may have incentives to favor their respective other funds, accounts and clients over us, which may result in conflicts of interest that could be adverse to us and our investment opportunities and harmful to us.
- The Adviser and its affiliates may face conflicts of interest with respect to services performed for issuers in which we invest and its use of service providers.
- The Adviser and its affiliates’ personnel will work on other projects and conflicts may arise in the allocation of personnel between us and other funds, accounts or projects.
- Actions by the Adviser or its affiliates on behalf of their other funds, accounts and clients may be adverse to us and our investments and harmful to us.
- Our access to confidential information may restrict our ability to take action with respect to some investments, which, in turn, may negatively affect our results of operations.
- We will be obligated to pay the Adviser an Incentive Fee even if we incur a net loss due to a decline in the value of our portfolio and even if our earned interest income is not payable in cash.
- Our ability to enter into transactions with our affiliates is restricted.
- We may make investments that could give rise to a conflict of interest.
- The recommendations given to us by the Adviser may differ from those rendered to their other clients.
- The Adviser’s liability is limited under the Investment Advisory Agreement, and we are required to indemnify the Adviser against certain liabilities, which may lead the Adviser to act in a riskier manner on our behalf than it would when acting for its own account.
- The Adviser’s failure to comply with pay-to-play laws, regulations and policies could have an adverse effect on the Adviser and, thus, us.
- There are risks associated with any potential merger with or purchase of assets of another fund.
- Our Administrator can resign from its role as Administrator under the Administration Agreement, and a suitable replacement may not be found, resulting in disruptions that could adversely affect our business, results of operations and financial condition.
- Any sub-administrator that the Administrator engages to assist the Administrator in fulfilling its responsibilities could resign from its role as sub-administrator, and a suitable replacement may not be found, resulting in disruptions that could adversely affect our business, results of operations and financial condition.
- Changes in laws or regulations governing our operations may adversely affect our business or cause us to alter our business strategy.
- We are subject to limited restrictions with respect to the proportion of our assets that may be invested in a single issuer.
- 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 business development company.
- Failure to maintain our status as a business development company would reduce our operating flexibility.
- Regulations governing our operation as a business development company and RIC affect our ability to raise capital and the way in which we raise additional capital or borrow for investment purposes, which may have a negative effect on our growth. As a business development company, the necessity of raising additional capital may expose us to risks, including risks associated with leverage.
- Our portfolio companies operate in the technology industry and are subject to risks particular to that industry.
- Our investments in portfolio companies may be risky, and we could lose all or part of our investments.
- We may suffer a loss if a portfolio company defaults on a loan and the underlying collateral is not sufficient, or if the portfolio company has debt that ranks equally with, or senior to, our investments.
- Certain of our investments may be adversely affected by laws relating to fraudulent conveyance or voidable preferences, or we could become subject to lender liability claims.
- The credit ratings of certain of our investments may not be indicative of the actual credit risk of such rated instruments.
- Prepayments of our debt investments by our portfolio companies could adversely impact our results of operations and reduce our return on equity.
- A redemption of convertible securities held by us could have an adverse effect on our ability to achieve our investment objective.
- To the extent original issue discount (OID) and payment-in-kind (PIK) interest income constitute a portion of our income, we will be exposed to risks associated with the deferred receipt of cash representing such income.
- If we cannot obtain debt financing or equity capital on acceptable terms, our ability to acquire investments and to expand our operations will be adversely affected.
- International investments create additional risks.
- The market structure applicable to derivatives imposed by the Dodd-Frank Act, the U.S. Commodity Futures Trading Commission (“CFTC”) and the SEC may affect our ability to use over-the-counter (“OTC”) derivatives for hedging purposes.
- Our ability to enter into transactions involving derivatives and financial commitment transactions may be limited.
- We may enter into long and short positions in all types of swaps, including total return swaps, rate of return swaps, credit default swaps (including index credit default swaps) and interest rate swaps. We may also enter into long and short positions in credit linked securities, which is a form of credit derivative structured as a security with an embedded credit default swap. Credit-linked securities and OTC credit default swaps are bilateral agreements between two parties that transfer a defined credit risk from one party to another.
- Defaults by our portfolio companies could jeopardize a portfolio company’s ability to meet its obligations under the debt or equity investments that we hold which could harm our operating results.
- Our portfolio may be focused on a limited number of portfolio companies or industries, which will subject us to a risk of significant loss if any of these companies defaults on its obligations under any of its debt instruments or if there is a downturn in a particular industry.
- The due diligence investigation that our Adviser carries out with respect to an investment opportunity may not reveal or highlight all relevant facts that may be necessary or helpful in evaluating such investment opportunity, and will not result in the investment being successful.
- The financial projections of our portfolio companies could prove inaccurate.
- Certain investment analyses and decisions by the Adviser may be required to be undertaken on an expedited basis.
- We may not have the funds or ability to make additional investments in our portfolio companies.
- Stockholders will bear varying total expenses and experience different returns, depending on whether their Capital Commitments are fully funded at the time their Subscription Agreement is accepted or drawn down over time by us.
- Stockholders will be obligated to fund drawdowns and may need to maintain a substantial portion of their Capital Commitments in assets that can be readily converted to cash.
- Stockholders who default on their Capital Commitment to us will be subject to significant adverse consequences.
- Certain stockholders may have to comply with 1934 Act filing requirements.
- The fiduciary of any investor governed by the Employee Retirement Income Security Act of 1974 (“ERISA”) fiduciary rules must determine that an investment in the Company is appropriate for such investor.
- If investors domiciled or having their registered office in the European Union participate in the private placement, we may be subject to additional reporting, regulatory and compliance obligations pursuant to the Alternative Investment Fund Managers Directive.
- Investing in our Common Stock involves a high degree of risk.
- The amount of any distributions we may make on our Common Stock is uncertain. We may not be able to pay distributions, or be able to sustain distributions at any particular level, and our distributions per share, if any, may not grow over time, and our distributions per share may be reduced. We have not established any limit on the extent to which we may use borrowings, if any, and we may use offering proceeds to fund distributions (which may reduce the amount of capital we ultimately invest in portfolio companies).
- Distributions on our Common Stock may exceed our taxable earnings and profits, particularly during the period before we have substantially invested the net proceeds from the Private Offering. Therefore, portions of the distributions that we pay may represent a return of capital to you that will lower an investor’s tax basis in their shares of our Common Stock and reduce the amount of funds we have for investment in targeted assets.
- Our shares are not listed on an exchange or quoted through a quotation system and we do not currently intend to seek such listing or quotation. We intend, but are not required, to offer to repurchase shares of Common Stock on a quarterly basis after an initial investment period. As a result, Stockholders will have limited liquidity and may not be able to sell shares promptly, in desired quantities or at desired prices.
- The price at which we may repurchase shares pursuant to the share repurchase program will be determined in accordance with our valuation procedures and, as a result, there may be uncertainty as to the value of our Common Stock.
- A Stockholder’s interest in us will be diluted if we issue additional shares, which could reduce the overall value of an investment in us.
- Certain provisions of our Charter and actions of the Board of Directors could deter takeover attempts and have an adverse impact on the value of shares of our Common Stock.
- The net asset value of our Common Stock may fluctuate significantly.
- Stockholders will experience dilution in their ownership percentage if they do not elect to reinvest their distributions.
- If we issue preferred stock or convertible debt securities, the net asset value of our Common Stock may become more volatile.
- Preferred stock could be issued with rights and preferences that would adversely affect holders of our Common Stock, including the right to elect certain members of the Board of Directors and have class voting rights on certain matters.
- Our Charter provides that, unless we consent in writing to the selection of an alternative forum, state and federal courts in the State of Maryland are the sole and exclusive forum for certain Stockholder litigation matters, which could limit our Stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors and officers.
- We cannot predict how tax reform legislation will affect us, our investments, or our Stockholders, and any such legislation could adversely affect our business.
- We will be subject to corporate-level U.S. federal income tax if we are unable to qualify for and maintain our tax treatment as a RIC under Subchapter M of the Code or if we make investments through taxable subsidiaries.
- We may have difficulty paying our required distributions if we recognize income before or without receiving cash representing such income.
- If we are not treated as a “publicly offered regulated investment company,” as defined in the Code, certain U.S. Stockholders will be treated as having received a dividend from us in the amount of such U.S. Stockholders’ allocable share of the Management Fee and Incentive Fee paid to the Adviser and some of our expenses, and these fees and expenses will be treated as miscellaneous itemized deductions of such U.S. Stockholders.
- We may experience fluctuations in our operating results.
- We will expend significant financial and other resources to comply with the requirements of being a reporting entity under the 1934 Act.
- We do not currently have comprehensive documentation of our internal controls.
- We are an “emerging growth company” under the JOBS Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our Common Stock less attractive to investors.
- Global economic, political and market conditions may adversely affect our business, financial condition and results of operations, including our revenue growth and profitability.
- Economic recessions or downturns could impair our portfolio companies and harm our operating results.
- We are subject to risks related to corporate social responsibility.
- Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or nonperformance by financial institutions, could adversely affect our business, financial condition or results of operations.
Management Discussion
- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
- The information contained in this section should be read in conjunction with “Item 8. Consolidated Financial Statements and Supplementary Data”. This discussion contains forward-looking statements, which relate to future events or the future performance or financial condition of Vista Credit Strategic Lending Corp. and involves numerous risks and uncertainties, including, but not limited to, those described in “Item 1A. Risk Factors”. This discussion also should be read in conjunction with the section titled “Forward-Looking Statements” appearing elsewhere in this Annual Report on Form 10-K. Actual results could differ materially from those implied or expressed in any forward- looking statements.
- We were incorporated under the laws of the State of Maryland on March 15, 2022. We have elected to be treated as a BDC under the 1940 Act. We also intend to elect to be treated, and intend to qualify annually thereafter, as a RIC under Subchapter M of Code for U.S. federal income tax purposes. As a BDC, we are required to comply with various regulatory requirements, such as the requirement to invest at least 70% of our assets in “qualifying” assets, source of income limitations, asset diversification requirements and the requirement to distribute annually at least 90% of our taxable income and tax-exempt interest.