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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________________________________________
FORM 10-Q
_______________________________________________________________________
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2024
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 814-01481
_______________________________________________________________________
MSD Investment Corp.
(Exact name of Registrant as specified in its Charter)
_______________________________________________________________________
Maryland | 87-4195402 | |
(State or other jurisdiction of | (I.R.S. Employer | |
One Vanderbilt Avenue, 26th Floor | 10017 | |
(Address of principal executive offices) | (Zip Code) |
212-303-4728
Registrant’s telephone number, including area code:
_______________________________________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading | Name of each exchange | ||
None | None | None |
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, smaller reporting company, or an emerging growth company. See the definition 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 Act). YES ☐ NO ☒
The number of shares of Registrant’s Common Stock, $0.001 par value per share, outstanding as of May 10, 2024 was 50,590,553.
|
Table of Contents
Page | ||
PART I | FINANCIAL INFORMATION |
|
Item 1. |
| |
| 2 | |
| Consolidated Statements of Operations for the three months ended March 31, 2024 and 2023 (Unaudited) | 3 |
| 4 | |
| Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023 (Unaudited) | 5 |
| Consolidated Schedules of Investments as of March 31, 2024 (Unaudited) and December 31, 2023 | 6 |
| 18 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 36 |
Item 3. | 42 | |
Item 4. | 43 | |
PART II | OTHER INFORMATION | |
Item 1. | 43 | |
Item 1A. | 44 | |
Item 2. | 44 | |
Item 3. | 44 | |
Item 4. | 44 | |
Item 5. | 44 | |
Item 6. | 46 | |
| 47 |
CERTAIN DEFINITIONS
· the terms “we,” “us,” “our,” and “Company” refer to MSD Investment, LLC prior to the Corporate Conversion (as defined below) and MSD Investment Corp. after the Corporate Conversion;
· the terms “Adviser” and “MSD” refer to MSD Partners, L.P., a Delaware limited partnership, in its capacity as our investment adviser; and the term “Administrator” refers to MSD Partners, L.P., a Delaware limited partnership, in its capacity as our administrator.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements that involve substantial risks and uncertainties. Such statements involve known and unknown risks, uncertainties and other factors and undue reliance should not be placed thereon. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about MSD Investment Corp. (together, with its consolidated subsidiaries, the “Company,” “we,” “us” or “our”), our current and prospective portfolio investments, our industry, our beliefs and opinions, and our assumptions. Words such as “anticipates,” “expects,” “intends,” “plans,” “will,” “may,” “continue,” “believes,” “seeks,” “estimates,” “would,” “could,” “should,” “targets,” “projects,” “outlook,” “potential,” “predicts” and variations of these words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control and difficult to predict and could cause actual results to differ materially from those expressed or forecasted in the forward-looking statements, including without limitation:
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. 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. These forward-looking statements apply only as of the date of this report. We do not undertake any obligation to update or revise any forward-looking statements or any other information contained herein, except as required by applicable law. The safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which preclude civil liability for certain forward-looking statements, do not apply to the forward-looking statements in this report because we are an investment company. In addition to the other information set forth in this report, you should carefully consider the risk factors set forth in our most recent Annual Report on Form 10-K filed with the SEC on March 25, 2024, which is accessible on the SEC’s website at sec.gov. These factors could materially affect our business, financial condition and/or operating results.
1
MSD Investment Corp.
Consolidated Statements of Assets and Liabilities
(in thousands, except share and per share amounts)
| March 31, 2024 |
|
| December 31, 2023 |
| ||
| (Unaudited) |
|
|
|
| ||
ASSETS |
|
|
|
|
| ||
Non-controlled/non-affiliated investments, at fair value (1) | $ | 2,549,352 |
|
| $ | 2,197,053 |
|
Cash and cash equivalents |
| 139,687 |
|
|
| 98,606 |
|
Subscription receivable |
| 98,239 |
|
|
| — |
|
Interest and dividends receivable |
| 20,530 |
|
|
| 19,276 |
|
Principal receivable |
| 9,259 |
|
|
| — |
|
Unrealized appreciation on forward contracts |
| 151 |
|
|
| — |
|
Prepaid expenses and other assets |
| 94 |
|
|
| 1,128 |
|
Total assets | $ | 2,817,312 |
|
| $ | 2,316,063 |
|
|
|
|
|
|
| ||
LIABILITIES |
|
|
|
|
| ||
SPV I facility | $ | 449,000 |
|
| $ | 378,000 |
|
SPV II facility |
| 424,000 |
|
|
| 295,000 |
|
Collateralized loan obligations |
| 390,000 |
|
|
| 390,000 |
|
Subscription facility |
| 100,000 |
|
|
| 35,000 |
|
Loan repurchase obligations |
| 158,331 |
|
|
| 50,025 |
|
Deferred financing costs net of accumulated amortization |
| (12,919 | ) |
|
| (13,239 | ) |
Total debt, net of financing costs |
| 1,508,412 |
|
|
| 1,134,786 |
|
Payable for investments purchased |
| 59,079 |
|
|
| 214,584 |
|
Interest payable |
| 26,005 |
|
|
| 17,800 |
|
Distributions payable |
| 6,165 |
|
|
| — |
|
Income based incentive fee payable |
| 6,120 |
|
|
| 5,123 |
|
Management fees payable |
| 4,561 |
|
|
| 3,784 |
|
Capital gains incentive fee payable |
| 1,071 |
|
|
| — |
|
Accrued expenses and other liabilities |
| 737 |
|
|
| 608 |
|
Accrued professional fees |
| 708 |
|
|
| 432 |
|
Due to affiliates |
| 659 |
|
|
| 449 |
|
Financing costs payable |
| 65 |
|
|
| 114 |
|
Unrealized depreciation on forward contracts |
| — |
|
|
| 797 |
|
Total liabilities | $ | 1,613,582 |
|
| $ | 1,378,477 |
|
Commitments and contingencies (Note 8) |
|
|
|
|
| ||
NET ASSETS |
|
|
|
|
| ||
Preferred Stock, par value $0.001 (250 shares authorized and outstanding) (2) | $ | — |
|
| $ | — |
|
Paid-in capital in excess of par value of Preferred Stock |
| 750 |
|
|
| 750 |
|
Common stock, par value $0.001 (100,000,000 shares authorized, 50,590,553 and 40,279,212 shares issued and outstanding, respectively) |
| 51 |
|
|
| 40 |
|
Paid-in capital in excess of par value |
| 1,197,169 |
|
|
| 952,139 |
|
Distributable earnings (accumulated losses) |
| 5,760 |
|
|
| (15,343 | ) |
Total net assets | $ | 1,203,730 |
|
| $ | 937,586 |
|
Net asset value per common share | $ | 23.78 |
|
| $ | 23.26 |
|
The accompanying notes are an integral part of these consolidated financial statements.
2
MSD Investment Corp.
Consolidated Statement of Operations (Unaudited)
(in thousands, except share and per share amounts)
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
Investment income: |
|
|
|
|
| ||
From non-controlled/non-affiliated investments: |
|
|
|
|
| ||
Interest income | $ | 69,883 |
|
| $ | 31,516 |
|
Dividend Income |
| 26 |
|
|
| — |
|
Payment-in-kind interest income |
| 3,258 |
|
|
| 2,228 |
|
Payment-in-kind dividend income |
| 1,053 |
|
|
| 931 |
|
Other income |
| 2,763 |
|
|
| 443 |
|
Total investment income |
| 76,983 |
|
|
| 35,118 |
|
Expenses: |
|
|
|
|
| ||
Interest expense |
| 28,832 |
|
|
| 11,665 |
|
Income based incentive fee |
| 6,120 |
|
|
| 3,030 |
|
Management fees |
| 4,561 |
|
|
| 2,026 |
|
Administration expense |
| 1,946 |
|
|
| 677 |
|
Capital gains incentive fee |
| 1,071 |
|
|
| — |
|
Professional fees |
| 443 |
|
|
| 204 |
|
Custody expense |
| 179 |
|
|
| 61 |
|
General and other expenses |
| 100 |
|
|
| 45 |
|
Board of directors’ fee |
| 78 |
|
|
| 77 |
|
Organization and offering costs |
| 25 |
|
|
| 18 |
|
Transfer agency fees |
| 16 |
|
|
| 52 |
|
Total expenses |
| 43,371 |
|
|
| 17,855 |
|
Net investment income (loss) |
| 33,612 |
|
|
| 17,263 |
|
|
|
|
|
|
| ||
Realized and unrealized gain (loss): |
|
|
|
|
| ||
Net realized gains (losses): |
|
|
|
|
| ||
Non-controlled/non-affiliated investments |
| 3,626 |
|
|
| (1,128 | ) |
Foreign currency forward contracts |
| 1,031 |
|
|
| 606 |
|
Foreign currency transactions |
| (111 | ) |
|
| (220 | ) |
Net realized gain (loss) |
| 4,546 |
|
|
| (742 | ) |
Net change in unrealized appreciation (depreciation): |
|
|
|
|
| ||
Non-controlled/non-affiliated investments |
| 8,190 |
|
|
| 9,114 |
|
Foreign currency forward contracts |
| 947 |
|
|
| (1,245 | ) |
Foreign currency transactions |
| 13 |
|
|
| (3 | ) |
Net change in unrealized appreciation (depreciation) |
| 9,150 |
|
|
| 7,866 |
|
Net realized and unrealized gain (loss) |
| 13,696 |
|
|
| 7,124 |
|
Net increase (decrease) in net assets resulting from operations | $ | 47,308 |
|
| $ | 24,387 |
|
|
|
|
|
|
| ||
Preferred Stock Dividends |
| (23 | ) |
|
| — |
|
Net increase (decrease) in net assets resulting from operations applicable to common shareholders | $ | 47,285 |
|
| $ | 24,387 |
|
|
|
|
|
|
| ||
Per share information - basic and diluted: |
|
|
|
|
| ||
Net investment income (loss) per share (basic and diluted) | $ | 0.82 |
|
| $ | 0.76 |
|
Earnings per share (basic and diluted) | $ | 1.16 |
|
| $ | 1.07 |
|
Distributions declared per common share | $ | 0.65 |
|
| $ | 0.65 |
|
Weighted average shares outstanding (basic and diluted) |
| 40,830,247 |
|
|
| 22,812,352 |
|
The accompanying notes are an integral part of these consolidated financial statements.
3
MSD Investment Corp.
Consolidated Statement of Changes in Net Assets (Unaudited)
(in thousands, except shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Earnings |
|
|
|
| |||||||
| Preferred Shares |
|
| Common Shares |
|
| Paid-in-Capital in |
|
| (Loss), Net of |
|
| Total |
| |||||||||||||
| Shares |
|
| Par Value |
|
| Shares |
|
| Par Value |
|
| Excess of Par Value |
|
| Distributions |
|
| Net Assets |
| |||||||
Balance, December 31, 2023 (1) |
| 250 |
|
| $ | — |
|
|
| 40,279,212 |
|
| $ | 40 |
|
| $ | 952,889 |
|
| $ | (15,343 | ) |
| $ | 937,586 |
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 33,612 |
|
|
| 33,612 |
|
Net realized gain (loss) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 4,546 |
|
|
| 4,546 |
|
Net change in unrealized appreciation (depreciation) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 9,150 |
|
|
| 9,150 |
|
Net increase (decrease) in net assets resulting from operations |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 47,308 |
|
|
| 47,308 |
|
Shareholder distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Distributions to shareholders |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,205 | ) |
|
| (26,205 | ) |
Net increase (decrease) in net assets resulting from shareholder distributions |
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,205 | ) |
|
| (26,205 | ) | ||
Capital Share Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Common Shares issued from reinvestment of distributions |
| — |
|
|
| — |
|
|
| 861,529 |
|
|
| 1 |
|
|
| 20,040 |
|
|
| — |
|
|
| 20,041 |
|
Issuance of preferred shares |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
| |
Issuance of common shares |
| — |
|
|
| — |
|
|
| 9,449,812 |
|
|
| 10 |
|
|
| 224,990 |
|
|
| — |
|
|
| 225,000 |
|
Net increase (decrease) for the period |
| — |
|
|
| — |
|
|
| 10,311,341 |
|
|
| 11 |
|
|
| 245,030 |
|
|
| 21,103 |
|
|
| 266,144 |
|
Balance, March 31, 2024 (1) |
| 250 |
|
| $ | — |
|
|
| 50,590,553 |
|
| $ | 51 |
|
| $ | 1,197,919 |
|
| $ | 5,760 |
|
| $ | 1,203,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Accumulated Earnings |
|
|
|
| |||||||
| Preferred Shares |
|
| Common Shares |
|
| Paid-in-Capital in |
|
| (Loss), Net of |
|
| Total |
| |||||||||||||
| Shares |
|
| Par Value |
|
| Shares |
|
| Par Value |
|
| Excess of Par Value |
|
| Distributions |
|
| Net Assets |
| |||||||
Balance, December 31, 2022 |
| — |
|
| $ | — |
|
|
| 22,126,135 |
|
| $ | 22 |
|
| $ | 535,300 |
|
| $ | (53,476 | ) |
| $ | 481,846 |
|
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net investment income |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 17,263 |
|
|
| 17,263 |
|
Net realized gain (loss) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (742 | ) |
|
| (742 | ) |
Net change in unrealized appreciation (depreciation) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7,866 |
|
|
| 7,866 |
|
Net increase (decrease) in net assets resulting from operations |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 24,387 |
|
|
| 24,387 |
|
Shareholder distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Distributions paid or accrued |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,073 | ) |
|
| (16,073 | ) |
Net increase (decrease) in net assets resulting from shareholder distributions |
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,073 | ) |
|
| (16,073 | ) | ||
Capital Share Transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Issuance of shares |
| — |
|
|
| — |
|
|
| 2,601,908 |
|
|
| 3 |
|
|
| 59,997 |
|
|
| — |
|
|
| 60,000 |
|
Net increase (decrease) for the period |
|
|
|
| — |
|
|
| 2,601,908 |
|
|
| 3 |
|
|
| 59,997 |
|
|
| 8,314 |
|
|
| 68,314 |
| |
Balance, March 31, 2023 |
| — |
|
| $ | — |
|
|
| 24,728,043 |
|
| $ | 25 |
|
| $ | 595,297 |
|
| $ | (45,162 | ) |
| $ | 550,160 |
|
The accompanying notes are an integral part of these consolidated financial statements.
4
MSD Investment Corp.
Consolidated Statement of Cash Flows (Unaudited)
(in thousands, except shares)
|
| For the Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Cash flow from operating activities |
|
|
|
|
|
| ||
Net increase (decrease) in net assets resulting from operations |
| $ | 47,308 |
|
| $ | 24,387 |
|
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash used in operating activities: |
|
|
|
|
|
| ||
Accrued interest and dividends received in-kind |
|
| (4,311 | ) |
|
| (2,228 | ) |
Net accretion of discount and amortization of premium |
|
| (4,774 | ) |
|
| (1,877 | ) |
Proceeds from sale of investments and principal repayments |
|
| 160,018 |
|
|
| 37,348 |
|
Purchases of investments |
|
| (491,415 | ) |
|
| (230,754 | ) |
Net realized (gains) losses on investments |
|
| (3,626 | ) |
|
| 1,128 |
|
Net change in unrealized (appreciation) depreciation on investments |
|
| (8,190 | ) |
|
| (9,114 | ) |
Net receipt of settlement of derivatives |
|
| 1,031 |
|
|
| 606 |
|
Net realized (gains) losses on derivatives |
|
| (1,031 | ) |
|
| (606 | ) |
Net change in unrealized (appreciation) depreciation on foreign currency forward contracts |
|
| (947 | ) |
|
| 1,245 |
|
Amortization of deferred financing costs |
|
| 835 |
|
|
| 401 |
|
(Increase) decrease in operating assets: |
|
|
|
|
|
| ||
Interest and dividends receivable |
|
| (1,254 | ) |
|
| (1,778 | ) |
Principal receivable |
|
| (9,259 | ) |
|
| 9,847 |
|
Prepaid expenses and other assets |
|
| 1,034 |
|
|
| 995 |
|
Increase (decrease) in operating liabilities: |
|
|
|
|
|
| ||
Due to affiliates |
|
| 210 |
|
|
| 543 |
|
Payable for investments purchased |
|
| (155,505 | ) |
|
| 18,078 |
|
Management fees payable |
|
| 777 |
|
|
| 2,026 |
|
Income based incentive fee payable |
|
| 997 |
|
|
| 3,030 |
|
Capital gains incentive fee payable |
|
| 1,071 |
|
|
| — |
|
Interest payable |
|
| 8,205 |
|
|
| 6,439 |
|
Accrued professional fees |
|
| 276 |
|
|
| 184 |
|
Accrued expenses and other liabilities |
|
| 129 |
|
|
| 180 |
|
Net cash provided (used in) by operating activities |
|
| (458,421 | ) |
|
| (139,920 | ) |
Cash flow from financing activities |
|
|
|
|
|
| ||
Proceeds from issuance of common shares (net of change in subcriptions receivable) |
|
| 126,761 |
|
|
| 60,000 |
|
Proceeds from repurchase obligations |
|
| 158,331 |
|
|
| — |
|
Repayment of repurchase obligations |
|
| (50,025 | ) |
|
| — |
|
Debt borrowings |
|
| 365,000 |
|
|
| 228,000 |
|
Debt repayments |
|
| (100,000 | ) |
|
| (80,000 | ) |
Deferred financing costs paid |
|
| (565 | ) |
|
| — |
|
Net cash provided by (used in) financing activities |
|
| 499,502 |
|
|
| 208,000 |
|
Net increase in cash, cash equivalents, and restricted cash |
|
| 41,081 |
|
|
| 68,080 |
|
Cash, cash equivalents, and restricted cash, beginning of period |
|
| 98,606 |
|
|
| 40,936 |
|
Cash, cash equivalents, and restricted cash, end of period |
| $ | 139,687 |
|
| $ | 109,016 |
|
Reconciliation of cash, cash equivalents, and restricted cash |
|
|
|
|
|
| ||
Cash and cash equivalents |
| $ | 139,687 |
|
| $ | 42,360 |
|
Restricted cash |
| $ | — |
|
| $ | 66,656 |
|
Total cash, cash equivalents, and restricted cash |
| $ | 139,687 |
|
| $ | 109,016 |
|
Supplemental disclosure of cash flow information and non-cash financing activities |
|
|
|
|
|
| ||
Change in subscription receivable |
| $ | 98,239 |
|
| $ | — |
|
Cash paid for interest |
| $ | 19,790 |
|
| $ | 4,824 |
|
Reinvestment of shareholder distributions |
| $ | 20,041 |
|
| $ | — |
|
Change in distributions payable |
| $ | 6,165 |
|
| $ | 16,073 |
|
The accompanying notes are an integral part of these consolidated financial statements.
5
MSD Investment Corp.
Consolidated Schedule of Investments (Unaudited)
March 31, 2024
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Aerospace & Defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Frontgrade Technologies Inc. | (8) |
| S + 6.75% |
| 0.75% |
| 12.06% |
| 1/9/2030 |
|
| 9,755 |
|
|
| 9,574 |
|
|
| 9,638 |
|
|
| 0.80 |
|
|
Frontgrade Technologies Inc. | (8) |
| S + 6.75% |
| 0.75% |
| 12.06% |
| 1/9/2030 |
|
| 50,242 |
|
|
| 48,962 |
|
|
| 49,643 |
|
|
| 4.12 |
|
|
Frontgrade Technologies Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 6.75% |
| 0.75% |
| 12.05% |
| 1/9/2028 |
|
| — |
|
|
| (152 | ) |
|
| (86 | ) |
|
| (0.01 | ) |
|
Systems Planning and Analysis, Inc. | (8) |
| S + 6.15% |
| 1.00% |
| 11.08% |
| 8/16/2027 |
|
| 10,686 |
|
|
| 10,544 |
|
|
| 10,529 |
|
|
| 0.87 |
|
|
Systems Planning and Analysis, Inc. - Delayed Draw Term Loan A | (8)(9)(12) |
| S + 6.15% |
| 0.00% |
| 11.23% |
| 8/16/2027 |
|
| 7,714 |
|
|
| 7,295 |
|
|
| 7,299 |
|
|
| 0.61 |
|
|
Systems Planning and Analysis, Inc. - Delayed Draw Term Loan | (8) |
| S + 6.15% |
| 0.00% |
| 11.37% |
| 8/16/2027 |
|
| 6,673 |
|
|
| 6,558 |
|
|
| 6,575 |
|
|
| 0.55 |
|
|
Systems Planning and Analysis, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 6.15% |
| 1.00% |
| 11.37% |
| 8/16/2027 |
|
| — |
|
|
| (37 | ) |
|
| (46 | ) |
|
| (0.00 | ) |
|
The Nordam Group Inc. |
|
| S + 5.60% |
| 0.00% |
| 10.93% |
| 4/9/2026 |
|
| 11,614 |
|
|
| 10,768 |
|
|
| 10,917 |
|
|
| 0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 93,512 |
|
|
| 94,469 |
|
|
| 7.85 |
|
| |
Automotive |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Titan Purchaser, Inc. | (9) |
| S + 6.00% |
| 1.00% |
| 11.34% |
| 1/30/2030 |
|
| 10,000 |
|
|
| 9,901 |
|
|
| 10,125 |
|
|
| 0.84 |
|
|
Banking, Finance, Insurance & Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accession Risk Management - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.00% |
| 0.75% |
| 11.34% |
| 11/1/2029 |
|
| 21,862 |
|
|
| 21,264 |
|
|
| 21,187 |
|
|
| 1.76 |
|
|
Ardonagh Midco 3 PLC | UK(8)(10)(11) |
| S + 4.75% |
| 0.50% |
| 10.04% |
| 2/15/2031 |
|
| 45,783 |
|
|
| 45,105 |
|
|
| 45,096 |
|
|
| 3.75 |
|
|
Ardonagh Midco 3 PLC - Delayed Draw Term Loan | UK(8)(9)(10)(11)(12) |
| S + 4.75% |
| 0.50% |
| 10.05% |
| 2/15/2031 |
|
| — |
|
|
| (31 | ) |
|
| (32 | ) |
|
| (0.00 | ) |
|
Foundation Risk Partners - Delayed Draw Term Loan | (8)(9)(12) |
| S + 5.60% |
| 0.75% |
| 10.91% |
| 10/29/2028 |
|
| 13,050 |
|
|
| 12,539 |
|
|
| 12,530 |
|
|
| 1.04 |
|
|
Galway Borrower LLC - Delayed Draw Term Loan | (8)(9)(12) |
| S + 5.10% |
| 0.75% |
| 10.40% |
| 9/30/2028 |
|
| — |
|
|
| (104 | ) |
|
| (107 | ) |
|
| (0.01 | ) |
|
Galway Borrower LLC - Revolving Credit Facility | (8)(9)(12) |
| S + 5.35% |
| 0.75% |
| 10.66% |
| 9/30/2028 |
|
| 452 |
|
|
| 425 |
|
|
| 425 |
|
|
| 0.04 |
|
|
Highgate Hotels, L.P. | (8) |
| S + 5.50% |
| 1.00% |
| 10.81% |
| 11/5/2029 |
|
| 99,750 |
|
|
| 97,915 |
|
|
| 97,864 |
|
|
| 8.13 |
|
|
Highgate Hotels, L.P. - Revolving Credit Facility | (8)(9)(12) |
| S + 5.50% |
| 1.00% |
| 10.80% |
| 10/26/2029 |
|
| — |
|
|
| (233 | ) |
|
| (236 | ) |
|
| (0.02 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 176,880 |
|
|
| 176,727 |
|
|
| 14.69 |
|
| |
Beverage, Food & Tobacco |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
LJ Perimeter Buyer, Inc. | (8) |
| S + 6.65% |
| 1.00% |
| 11.96% |
| 10/31/2028 |
|
| 19,267 |
|
|
| 18,795 |
|
|
| 18,832 |
|
|
| 1.56 |
|
|
LJ Perimeter Buyer, Inc. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.65% |
| 1.00% |
| 11.98% |
| 10/31/2028 |
|
| 2,477 |
|
|
| 2,393 |
|
|
| 2,398 |
|
|
| 0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21,188 |
|
|
| 21,230 |
|
|
| 1.76 |
|
| |
Capital Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Circor International, Inc. | (8) |
| S + 6.00% |
| 1.00% |
| 11.30% |
| 10/18/2030 |
|
| 67,241 |
|
|
| 65,957 |
|
|
| 65,976 |
|
|
| 5.48 |
|
|
Circor International, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 6.00% |
| 1.00% |
| 11.30% |
| 10/18/2029 |
|
| — |
|
|
| (144 | ) |
|
| (146 | ) |
|
| (0.01 | ) |
|
Faraday Buyer, LLC | (8) |
| S + 6.00% |
| 1.00% |
| 11.31% |
| 10/11/2028 |
|
| 33,391 |
|
|
| 32,758 |
|
|
| 32,760 |
|
|
| 2.72 |
|
|
Faraday Buyer, LLC - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.00% |
| 1.00% |
| 11.30% |
| 10/11/2028 |
|
| — |
|
|
| (30 | ) |
|
| (31 | ) |
|
| (0.00 | ) |
|
Neptune Platform Buyer, LLC | (8) |
| S + 5.25% |
| 0.75% |
| 10.55% |
| 1/19/2031 |
|
| 6,970 |
|
|
| 6,868 |
|
|
| 6,868 |
|
|
| 0.57 |
|
|
Neptune Platform Buyer, LLC - Delayed Draw Term Loan | (8)(9)(12) |
| S + 5.25% |
| 0.75% |
| 10.55% |
| 1/19/2031 |
|
| — |
|
|
| (15 | ) |
|
| (14 | ) |
|
| (0.00 | ) |
|
Trillium FlowControl | LU(8)(10)(11) |
| S + 5.76% |
| 1.00% |
| 11.07% |
| 6/28/2026 |
|
| 17,685 |
|
|
| 17,579 |
|
|
| 17,245 |
|
|
| 1.43 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 122,973 |
|
|
| 122,658 |
|
|
| 10.19 |
|
|
6
MSD Investment Corp.
Consolidated Schedule of Investments (Unaudited) - (Continued)
March 31, 2024
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
First Lien Debt (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chemicals, Plastics & Rubber |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Dubois Chemicals Group Inc. |
|
| S + 4.60% |
| 0.00% |
| 9.93% |
| 9/30/2026 |
|
| 2,718 |
|
|
| 2,715 |
|
|
| 2,713 |
|
|
| 0.23 |
|
|
Hexion Holdings Corporation |
|
| S + 4.65% |
| 0.50% |
| 9.98% |
| 3/15/2029 |
|
| 9,825 |
|
|
| 9,219 |
|
|
| 9,658 |
|
|
| 0.80 |
|
|
Hexion Holdings Corporation - Incremental Term Loan | (8) |
| S + 6.25% |
| 0.50% |
| 11.58% |
| 3/15/2028 |
|
| 20,000 |
|
|
| 19,423 |
|
|
| 19,413 |
|
|
| 1.61 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31,357 |
|
|
| 31,784 |
|
|
| 2.64 |
|
| |
Construction & Building |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cook & Boardman Group | (8) |
| S + 6.00% |
| 1.00% |
| 11.32% |
| 3/4/2030 |
|
| 125,000 |
|
|
| 122,504 |
|
|
| 122,500 |
|
|
| 10.18 |
|
|
Consumer Goods: Durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mattress Firm, Inc. |
|
| S + 4.51% |
| 0.75% |
| 9.81% |
| 9/25/2028 |
|
| 1,315 |
|
|
| 1,261 |
|
|
| 1,316 |
|
|
| 0.11 |
|
|
Parfums Holding Company, Inc. |
|
| S + 6.26% |
| 1.50% |
| 11.57% |
| 6/30/2026 |
|
| 34,398 |
|
|
| 33,853 |
|
|
| 34,226 |
|
|
| 2.84 |
|
|
Victra Finance Corp. |
|
| S + 6.50% |
| 0.75% |
| 11.83% |
| 3/31/2029 |
|
| 62,117 |
|
|
| 61,802 |
|
|
| 62,467 |
|
|
| 5.19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 96,916 |
|
|
| 98,009 |
|
|
| 8.14 |
|
| |
Containers, Packaging & Glass |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Confluent Holdings LLC | (8) |
| S + 7.00% |
| 2.00% |
| 12.31% |
| 3/28/2029 |
|
| 28,789 |
|
|
| 27,926 |
|
|
| 27,925 |
|
|
| 2.32 |
|
|
Confluent Holdings LLC - Delayed Draw Term Loan | (8)(9)(12) |
| S + 7.00% |
| 1.00% |
| 12.30% |
| 3/28/2029 |
|
| — |
|
|
| (7 | ) |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 27,919 |
|
|
| 27,925 |
|
|
| 2.32 |
|
| |
Energy: Oil & Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CITGO Petroleum Corp. |
|
| N/A |
| N/A |
| 6.38% |
| 6/15/2026 |
|
| 2,121 |
|
|
| 2,144 |
|
|
| 2,130 |
|
|
| 0.18 |
|
|
Saturn Oil and Gas Inc. | CN(8)(10)(11) |
| C + 11.50% |
| 1.00% |
| 16.83% |
| 2/28/2026 |
|
| CAD 84,606 |
|
|
| 62,441 |
|
|
| 61,152 |
|
|
| 5.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 64,585 |
|
|
| 63,282 |
|
|
| 5.26 |
|
| |
Healthcare & Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Bayer Environmental Services |
|
| S + 4.38% |
| 0.50% |
| 9.71% |
| 10/4/2029 |
|
| 19,751 |
|
|
| 18,405 |
|
|
| 19,721 |
|
|
| 1.64 |
|
|
Charlotte Buyer, Inc. |
|
| S + 5.25% |
| 0.00% |
| 10.57% |
| 2/11/2028 |
|
| 57,791 |
|
|
| 55,574 |
|
|
| 57,929 |
|
|
| 4.81 |
|
|
Natural Partners, Inc. | (8) |
| S + 4.65% |
| 1.00% |
| 9.99% |
| 11/29/2027 |
|
| 37,669 |
|
|
| 37,160 |
|
|
| 36,945 |
|
|
| 3.07 |
|
|
Natural Partners, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 4.65% |
| 1.00% |
| 9.95% |
| 11/29/2027 |
|
| — |
|
|
| (36 | ) |
|
| (54 | ) |
|
| (0.00 | ) |
|
Press Ganey Holdings - 2022 Term Loan | (9) |
| S + 3.85% |
| 0.75% |
| 9.18% |
| 7/24/2026 |
|
| 4,108 |
|
|
| 3,943 |
|
|
| 4,082 |
|
|
| 0.34 |
|
|
Press Ganey Holdings |
|
| S + 3.61% |
| 0.00% |
| 8.94% |
| 7/24/2026 |
|
| 6,056 |
|
|
| 5,715 |
|
|
| 6,017 |
|
|
| 0.50 |
|
|
Press Ganey Holdings - Incremental Term Loan |
|
| S + 3.86% |
| 0.75% |
| 9.19% |
| 7/24/2026 |
|
| 14,832 |
|
|
| 14,298 |
|
|
| 14,711 |
|
|
| 1.22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 135,059 |
|
|
| 139,351 |
|
|
| 11.58 |
|
| |
High Tech Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Alteryx, Inc. | (8) |
| S + 6.50% |
| 0.75% |
| 11.83% |
| 3/18/2031 |
|
| 26,125 |
|
|
| 25,735 |
|
|
| 25,733 |
|
|
| 2.15 |
|
|
Alteryx, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 6.50% |
| 0.75% |
| 11.83% |
| 3/18/2031 |
|
| — |
|
|
| (142 | ) |
|
| (142 | ) |
|
| (0.01 | ) |
|
Alteryx, Inc. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.50% |
| 0.75% |
| 11.83% |
| 3/18/2031 |
|
| — |
|
|
| (441 | ) |
|
| (445 | ) |
|
| (0.04 | ) |
|
Inmar, Inc. |
|
| S + 5.50% |
| 1.00% |
| 10.83% |
| 5/1/2026 |
|
| 44,690 |
|
|
| 43,588 |
|
|
| 44,662 |
|
|
| 3.72 |
|
|
Watchguard Technologies, Inc. |
|
| S + 5.25% |
| 0.75% |
| 10.58% |
| 7/2/2029 |
|
| 41,498 |
|
|
| 39,232 |
|
|
| 40,685 |
|
|
| 3.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 107,972 |
|
|
| 110,493 |
|
|
| 9.20 |
|
|
7
MSD Investment Corp.
Consolidated Schedule of Investments (Unaudited) - (Continued)
March 31, 2024
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
First Lien Debt (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Hotel, Gaming & Leisure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chuck E. Cheese |
|
| N/A |
| N/A |
| 6.75% |
| 5/1/2026 |
|
| 17,534 |
|
|
| 16,775 |
|
|
| 17,391 |
|
|
| 1.44 |
|
|
ClubCorp Holdings Inc. | (9) |
| S + 5.26% |
| 0.00% |
| 10.56% |
| 9/18/2026 |
|
| 80,301 |
|
|
| 76,779 |
|
|
| 80,366 |
|
|
| 6.68 |
|
|
Hotel Equities Group, LLC | (8) |
| S + 5.75% |
| 2.00% |
| 11.07% |
| 1/22/2029 |
|
| 35,000 |
|
|
| 34,419 |
|
|
| 34,323 |
|
|
| 2.85 |
|
|
Hotel Equities Group, LLC - Revolving Credit Facility | (8)(9)(12) |
| S + 5.75% |
| 2.00% |
| 11.09% |
| 1/22/2029 |
|
| 5,825 |
|
|
| 5,631 |
|
|
| 5,632 |
|
|
| 0.47 |
|
|
K1 Speed Inc. | (8) |
| S + 6.25% |
| 1.00% |
| 11.58% |
| 1/2/2029 |
|
| 18,214 |
|
|
| 17,866 |
|
|
| 17,862 |
|
|
| 1.48 |
|
|
K1 Speed Inc. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.25% |
| 1.00% |
| 11.55% |
| 1/2/2029 |
|
| — |
|
|
| (58 | ) |
|
| (59 | ) |
|
| (0.00 | ) |
|
Sandlot Baseball Borrower Co. | (8) |
| S + 5.75% |
| 1.00% |
| 11.06% |
| 12/27/2028 |
|
| 66,500 |
|
|
| 65,244 |
|
|
| 65,237 |
|
|
| 5.42 |
|
|
Sandlot Baseball Borrower Co. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 5.75% |
| 1.00% |
| 11.05% |
| 12/27/2028 |
|
| — |
|
|
| 34 |
|
|
| 33 |
|
| 0.00 |
|
| |
TouchTunes |
|
| S + 5.00% |
| 0.50% |
| 10.30% |
| 4/2/2029 |
|
| 37,508 |
|
|
| 37,201 |
|
|
| 37,618 |
|
|
| 3.13 |
|
|
Viad Corp. | (11) |
| S + 5.11% |
| 0.50% |
| 10.44% |
| 7/30/2028 |
|
| 3,539 |
|
|
| 3,536 |
|
|
| 3,539 |
|
|
| 0.29 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 257,427 |
|
|
| 261,942 |
|
|
| 21.76 |
|
| |
Media: Advertising, Printing & Publishing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Emerald Exhibitions | (11) |
| S + 5.10% |
| 0.00% |
| 10.43% |
| 5/22/2026 |
|
| 49,625 |
|
|
| 48,438 |
|
|
| 49,786 |
|
|
| 4.14 |
|
|
Sheffield United F.C. | UK(8)(9)(10)(11) |
| N/A |
| N/A |
| 13.07% |
| 7/22/2026 |
|
| GBP 13,968 |
|
|
| 17,297 |
|
|
| 17,569 |
|
|
| 1.46 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 65,735 |
|
|
| 67,355 |
|
|
| 5.60 |
|
| |
Media: Diversified & Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Getty Images Inc. | (11) |
| S + 4.60% |
| 0.00% |
| 9.91% |
| 2/19/2026 |
|
| 17,445 |
|
|
| 17,415 |
|
|
| 17,418 |
|
|
| 1.45 |
|
|
Candle Media Co Ltd | (8) |
| S + 6.10% |
| 0.75% |
| 11.41% (Incl 4.00% PIK) |
| 6/18/2027 |
|
| 43,836 |
|
|
| 43,307 |
|
|
| 42,877 |
|
|
| 3.56 |
|
|
Candle Media Co Ltd -Delayed Draw Term Loan | (8) |
| S + 6.10% |
| 0.75% |
| 11.41% (Incl 4.00% PIK) |
| 6/18/2027 |
|
| 17,354 |
|
|
| 17,162 |
|
|
| 16,974 |
|
|
| 1.41 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 77,884 |
|
|
| 77,269 |
|
|
| 6.42 |
|
| |
Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Xponential Fitness LLC | (8)(11) |
| S + 6.76% |
| 1.00% |
| 12.09% |
| 3/15/2026 |
|
| 80,539 |
|
|
| 79,411 |
|
|
| 80,539 |
|
|
| 6.69 |
|
|
MED ParentCo, LP |
|
| S + 4.36% |
| 0.00% |
| 9.69% |
| 8/31/2026 |
|
| 99,479 |
|
|
| 95,565 |
|
|
| 99,230 |
|
|
| 8.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 174,976 |
|
|
| 179,769 |
|
|
| 14.93 |
|
| |
Services: Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
AVSC Holding Corporation |
|
| S + 3.65% |
| 1.00% |
| 8.93% |
| 3/1/2025 |
|
| 16,136 |
|
|
| 15,373 |
|
|
| 16,147 |
|
|
| 1.34 |
|
|
BDO USA, P.C. | (8) |
| S + 6.00% |
| 2.00% |
| 11.33% |
| 8/31/2028 |
|
| 66,153 |
|
|
| 64,957 |
|
|
| 64,964 |
|
|
| 5.40 |
|
|
Clarion Events Limited | (11) |
| S + 5.73% |
| 1.00% |
| 10.28% |
| 9/30/2027 |
|
| 13,228 |
|
|
| 13,017 |
|
|
| 12,919 |
|
|
| 1.07 |
|
|
Clarion Events Limited - Incremental Term Loan | UK(10)(11) |
| S + 5.73% |
| 1.00% |
| 10.28% |
| 9/30/2027 |
|
| 20,000 |
|
|
| 19,600 |
|
|
| 19,533 |
|
|
| 1.62 |
|
|
DISA Holdings Corp. | (8) |
| S + 5.00% |
| 0.50% |
| 10.34% |
| 9/9/2028 |
|
| 16,663 |
|
|
| 16,416 |
|
|
| 16,413 |
|
|
| 1.36 |
|
|
DISA Holdings Corp. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 5.00% |
| 0.50% |
| 10.30% |
| 9/9/2028 |
|
| — |
|
|
| (90 | ) |
|
| (94 | ) |
|
| (0.01 | ) |
|
DISA Holdings Corp. - Revolving Credit Facility | (8)(9)(12) |
| S + 5.00% |
| 0.50% |
| 10.30% |
| 9/9/2028 |
|
| — |
|
|
| (61 | ) |
|
| (62 | ) |
|
| (0.01 | ) |
|
Momentive Global | (8) |
| S + 7.00% |
| 1.00% |
| 12.31% |
| 5/31/2030 |
|
| 63,804 |
|
|
| 62,618 |
|
|
| 64,312 |
|
|
| 5.34 |
|
|
Momentive Global - Revolving Credit Facility | (8)(9)(12) |
| S + 7.00% |
| 1.00% |
| 12.33% |
| 5/31/2029 |
|
| — |
|
|
| (98 | ) |
|
| 45 |
|
| 0.00 |
|
| |
Radar Bidco S.A.R.L | LU(8)(9)(10)(11) |
| S + 4.25% |
| 0.00% |
| 9.56% |
| 3/27/2031 |
|
| 5,000 |
|
|
| 4,975 |
|
|
| 4,994 |
|
|
| 0.41 |
|
|
Travelport Finance (Luxembourg) S.A.R.L. | LU(10)(11) |
| S + 8.26% |
| 1.00% |
| 13.61% (6.61% PIK) |
| 9/30/2028 |
|
| 52,878 |
|
|
| 52,511 |
|
|
| 49,144 |
|
|
| 4.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 249,218 |
|
|
| 248,315 |
|
|
| 20.60 |
|
|
8
MSD Investment Corp.
Consolidated Schedule of Investments (Unaudited) - (Continued)
March 31, 2024
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
First Lien Debt (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Services: Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CSC Serviceworks | (9) |
| S + 4.26% |
| 0.75% |
| 9.59% |
| 3/4/2028 |
|
| 219 |
|
|
| 202 |
|
|
| 202 |
|
|
| 0.02 |
|
|
PetVet Care Centers | (8) |
| S + 6.00% |
| 0.75% |
| 11.33% |
| 11/15/2030 |
|
| 53,389 |
|
|
| 52,369 |
|
|
| 52,372 |
|
|
| 4.35 |
|
|
PetVet Care Centers - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.00% |
| 0.75% |
| 11.30% |
| 11/15/2030 |
|
| — |
|
|
| (62 | ) |
|
| (63 | ) |
|
| (0.01 | ) |
|
PetVet Care Centers - Revolving Credit Facility | (8)(9)(12) |
| S + 6.00% |
| 0.75% |
| 11.30% |
| 11/15/2029 |
|
| — |
|
|
| (131 | ) |
|
| (133 | ) |
|
| (0.01 | ) |
|
Vision Purchaser Corp. | (8) |
| S + 6.40% |
| 1.00% |
| 11.73% |
| 6/10/2025 |
|
| 28,570 |
|
|
| 28,356 |
|
|
| 28,204 |
|
|
| 2.34 |
|
|
Vision Purchaser Corp. - Incremental Term Loan | (8) |
| S + 6.40% |
| 1.00% |
| 11.73% |
| 6/10/2025 |
|
| 2,492 |
|
|
| 2,471 |
|
|
| 2,460 |
|
|
| 0.20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 83,205 |
|
|
| 83,042 |
|
|
| 6.89 |
|
| |
Transportation: Cargo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Boasso Global - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.75% |
| 0.75% |
| 12.07% |
| 10/3/2024 |
|
| 8,139 |
|
|
| 7,921 |
|
|
| 8,072 |
|
|
| 0.67 |
|
|
Boasso Global - Revolving Credit Facility | (8)(9)(12) |
| P + 5.75% |
| 0.75% |
| 14.25% |
| 7/1/2026 |
|
| 1,736 |
|
|
| 1,606 |
|
|
| 1,606 |
|
|
| 0.13 |
|
|
Boasso Global | (8) |
| S + 6.75% |
| 0.75% |
| 12.07% |
| 7/3/2028 |
|
| 58,781 |
|
|
| 57,260 |
|
|
| 58,248 |
|
|
| 4.84 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 66,787 |
|
|
| 67,926 |
|
|
| 5.64 |
|
| |
Transportation: Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Virgin Atlantic | UK(8)(10)(11) |
| L + 3.25% |
| 0.00% |
| 8.83% |
| 11/17/2026 |
|
| 29,903 |
|
|
| 28,927 |
|
|
| 28,628 |
|
|
| 2.38 |
|
|
Beacon Mobility Corp. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 8.60% |
| 0.00% |
| 13.91% PIK |
| 12/31/2025 |
|
| 1,206 |
|
|
| 1,176 |
|
|
| 1,173 |
|
|
| 0.10 |
|
|
Beacon Mobility Corp. | (8) |
| S + 8.60% |
| 0.00% |
| 13.89% PIK |
| 12/31/2025 |
|
| 51,851 |
|
|
| 50,724 |
|
|
| 50,684 |
|
|
| 4.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 80,827 |
|
|
| 80,485 |
|
|
| 6.69 |
|
| |
Telecommunications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
FirstLight Fiber - Initial Term Loan |
|
| S + 3.61% |
| 0.00% |
| 8.94% |
| 7/23/2025 |
|
| 14,293 |
|
|
| 13,917 |
|
|
| 14,079 |
|
|
| 1.17 |
|
|
FirstLight Fiber - 2023 Incremental Term Loan | (8) |
| S + 4.11% |
| 0.00% |
| 9.44% |
| 7/23/2025 |
|
| 15,423 |
|
|
| 15,312 |
|
|
| 15,535 |
|
|
| 1.29 |
|
|
Innovate Corp. | (11) |
| N/A |
| N/A |
| 8.50% |
| 2/1/2026 |
|
| 24,000 |
|
|
| 24,031 |
|
|
| 17,352 |
|
|
| 1.44 |
|
|
Ligado Networks LLC | (9)(13) |
| N/A |
| N/A |
| 15.50% PIK |
| 11/1/2023 |
|
| 12,853 |
|
|
| 11,071 |
|
|
| 1,946 |
|
|
| 0.16 |
|
|
Maxar Technologies Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 7.25% |
| 1.00% |
| 12.56% |
| 5/3/2029 |
|
| 5,663 |
|
|
| 5,338 |
|
|
| 5,562 |
|
|
| 0.46 |
|
|
Maxar Technologies Inc. | (8) |
| S + 7.25% |
| 1.00% |
| 12.56% |
| 5/3/2030 |
|
| 81,800 |
|
|
| 79,564 |
|
|
| 81,153 |
|
|
| 6.74 |
|
|
ViaSat, Inc. | (11) |
| S + 4.61% |
| 0.50% |
| 9.93% |
| 5/30/2030 |
|
| 49,750 |
|
|
| 46,440 |
|
|
| 48,158 |
|
|
| 4.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 195,673 |
|
|
| 183,785 |
|
|
| 15.26 |
|
| |
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
DFS Holdings Company, Inc. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 7.10% |
| 0.75% |
| 12.43% |
| 1/31/2029 |
|
| 1,607 |
|
|
| 1,540 |
|
|
| 1,550 |
|
|
| 0.13 |
|
|
DFS Holdings Company, Inc. | (8) |
| S + 7.10% |
| 0.75% |
| 12.43% |
| 1/31/2029 |
|
| 21,932 |
|
|
| 21,381 |
|
|
| 21,443 |
|
|
| 1.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,921 |
|
|
| 22,993 |
|
|
| 1.91 |
|
| |
Total First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2,285,419 |
|
|
| 2,291,434 |
|
|
| 190.35 |
| % |
9
MSD Investment Corp.
Consolidated Schedule of Investments (Unaudited) - (Continued)
March 31, 2024
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
Second Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chemicals, Plastics & Rubber |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Hexion Holdings Corporation | (9) |
| S + 7.54% |
| 0.50% |
| 12.87% |
| 3/15/2030 |
|
| 35,000 |
|
|
| 34,210 |
|
|
| 30,800 |
|
|
| 2.56 |
|
|
Consumer goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Protective Industrial Products Inc. | (8) |
| S + 8.36% |
| 1.00% |
| 13.69% |
| 12/30/2028 |
|
| 34,199 |
|
|
| 33,550 |
|
|
| 33,759 |
|
|
| 2.80 |
|
|
Hotel, Gaming & Leisure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mohegan Gaming & Entertainment | (9) |
| N/A |
| N/A |
| 8.00% |
| 2/1/2026 |
|
| 22,550 |
|
|
| 22,207 |
|
|
| 22,099 |
|
|
| 1.84 |
|
|
Services: Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
DISA Holdings Corp. | (8) |
| S + 8.50% |
| 0.75% |
| 13.83% (Incl 2.00% PIK) |
| 3/9/2029 |
|
| 14,949 |
|
|
| 14,572 |
|
|
| 14,724 |
|
|
| 1.22 |
|
|
DISA Holdings Corp. - Delayed Draw Term Loan | (8)(9) |
| S + 8.50% |
| 0.75% |
| 13.83% (Incl 2.00% PIK) |
| 3/9/2029 |
|
| 2,803 |
|
|
| 2,735 |
|
|
| 2,761 |
|
|
| 0.23 |
|
|
Trace3 Inc. | (8) |
| S + 7.76% |
| 0.50% |
| 13.09% |
| 10/8/2029 |
|
| 33,750 |
|
|
| 33,021 |
|
|
| 33,109 |
|
|
| 2.75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 50,328 |
|
|
| 50,594 |
|
|
| 4.20 |
|
| |
Services: Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Midwest Veterinary Partners LLC | (8) |
| S + 7.60% |
| 0.75% |
| 12.93% |
| 4/26/2029 |
|
| 50,000 |
|
|
| 50,009 |
|
|
| 46,990 |
|
|
| 3.90 |
|
|
Southern Veterinary Partners LLC | (8) |
| S + 7.85% |
| 1.00% |
| 13.18% |
| 10/5/2028 |
|
| 45,000 |
|
|
| 44,207 |
|
|
| 45,000 |
|
|
| 3.74 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 94,216 |
|
|
| 91,990 |
|
|
| 7.64 |
|
| |
Telecommunications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
FirstLight Fiber | (9) |
| S + 7.61% |
| 0.00% |
| 12.94% |
| 7/23/2026 |
|
| 100 |
|
|
| 98 |
|
|
| 98 |
|
|
| 0.01 |
|
|
Total Second Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 234,609 |
|
|
| 229,340 |
|
|
| 19.05 |
| % | |
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Banking, Finance, Insurance & Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accession Risk Management - Preferred Stock | (8)(9) |
|
|
|
|
| 13.25% PIK |
|
|
|
| — |
|
|
| 106 |
|
|
| 106 |
|
|
| 0.01 |
|
|
Consumer goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Protective Industrial Products Inc. - Series A Preferred | (8)(9) |
|
|
|
|
| 13.00% PIK |
|
|
|
| 33 |
|
|
| 32,519 |
|
|
| 28,247 |
|
|
| 2.36 |
|
|
Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Xponential Fitness LLC - Series A Preferred Stock | (8)(9)(11) |
|
|
|
|
| 6.50% |
| 7/27/2031 |
|
| — |
|
|
| 272 |
|
|
| 224 |
|
|
| 0.02 |
|
|
Total Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 32,897 |
|
|
| 28,577 |
|
|
| 2.39 |
|
| |
Total Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,552,925 |
|
| $ | 2,549,351 |
|
|
| 211.79 |
| % | |
Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and Cash Equivalents | (14) |
|
|
|
|
|
|
|
|
|
|
|
| $ | 139,687 |
|
| $ | 139,687 |
|
|
| 11.60 |
|
| |
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 139,687 |
|
|
| 139,687 |
|
|
| 11.60 |
|
| |
Total Portfolio Investments, Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,692,612 |
|
| $ | 2,689,038 |
|
|
| 223.39 |
| % |
March 31, 2024 |
| |||||||||||||||||
Derivative Counterparty |
| Settlement Date |
| Amount Purchased |
|
| Amount Sold |
|
| Fair Value |
|
| % of Net Assets |
| ||||
Foreign Currency Forward Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Macquarie |
| June 20, 2024 |
| $ | 66,681 |
|
|
| CAD 90,212 |
|
| $ | 9 |
|
|
| 0.0 | % |
Macquarie |
| June 20, 2024 |
| $ | 17,972 |
|
|
| GBP 14,904 |
|
| $ | 142 |
|
|
| 0.0 | % |
|
|
|
|
|
|
|
|
|
| $ | 151 |
|
|
| 0.0 | % |
10
March 31, 2024 |
| |||||||||||
Investments—non-controlled/non-affiliated |
| Commitment Type |
| Commitment |
| Unfunded |
|
| Fair |
| ||
First Lien Debt |
|
|
|
|
|
|
|
|
|
| ||
Accession Risk Management |
| Delayed Draw |
| 11/1/2029 |
| $ | 27,761 |
|
| $ | (378 | ) |
Ardonagh Midco 3 PLC |
| Delayed Draw |
| 2/15/2031 |
|
| 4,217 |
|
|
| (32 | ) |
Azurite Intermediate Holdings, Inc. |
| Delayed Draw |
| 3/18/2031 |
|
| 59,375 |
|
|
| (445 | ) |
Azurite Intermediate Holdings, Inc. |
| Revolver |
| 3/18/2031 |
|
| 9,500 |
|
|
| (143 | ) |
Beacon Mobility Corp. |
| Delayed Draw |
| 12/31/2025 |
|
| 247 |
|
|
| (6 | ) |
Boasso Global |
| Delayed Draw |
| 10/3/2024 |
|
| 5,213 |
|
|
| 7 |
|
Boasso Global |
| Revolver |
| 7/1/2026 |
|
| 4,514 |
|
|
| (94 | ) |
Circor International, Inc. |
| Revolver |
| 10/18/2029 |
|
| 7,759 |
|
|
| (146 | ) |
Confluent Holdings LLC |
| Delayed Draw |
| 3/28/2029 |
|
| 14,394 |
|
|
| — |
|
DFS Holding Company |
| Delayed Draw |
| 1/31/2029 |
|
| 3,000 |
|
|
| (22 | ) |
Disa Holdings Corp. |
| Delayed Draw |
| 9/9/2028 |
|
| 12,497 |
|
|
| (94 | ) |
Disa Holdings Corp. |
| Revolver |
| 9/9/2028 |
|
| 4,166 |
|
|
| (62 | ) |
Faraday Buyer, LLC |
| Delayed Draw |
| 10/11/2028 |
|
| 3,514 |
|
|
| (31 | ) |
Foundation Risk Partners |
| Delayed Draw |
| 10/29/2028 |
|
| 31,950 |
|
|
| (277 | ) |
Frontgrade Technologies Inc. |
| Revolver |
| 1/9/2028 |
|
| 7,211 |
|
|
| (86 | ) |
Galway Borrower LLC |
| Delayed Draw |
| 9/30/2028 |
|
| 22,203 |
|
|
| (107 | ) |
Galway Borrower LLC |
| Revolver |
| 9/30/2028 |
|
| 2,345 |
|
|
| (23 | ) |
Highgate Hotels, L.P. |
| Revolver |
| 10/26/2029 |
|
| 12,500 |
|
|
| (236 | ) |
Hotel Equities Group, LLC |
| Revolver |
| 1/22/2029 |
|
| 4,175 |
|
|
| (81 | ) |
K1 Speed Inc. |
| Delayed Draw |
| 1/2/2029 |
|
| 3,036 |
|
|
| (59 | ) |
LJ Perimeter Buyer, Inc |
| Delayed Draw |
| 10/31/2028 |
|
| 3,042 |
|
|
| (23 | ) |
Maxar Technologies Inc. |
| Revolver |
| 5/3/2029 |
|
| 7,125 |
|
|
| (56 | ) |
Momentive Global |
| Revolver |
| 5/31/2029 |
|
| 5,714 |
|
|
| 45 |
|
Natural Partners, Inc. |
| Revolver |
| 11/29/2027 |
|
| 2,813 |
|
|
| (54 | ) |
Neptune Platform Buyer, LLC |
| Delayed Draw |
| 1/19/2031 |
|
| 2,030 |
|
|
| (15 | ) |
PetVet Care Centers |
| Delayed Draw |
| 11/15/2030 |
|
| 6,981 |
|
|
| (63 | ) |
PetVet Care Centers |
| Revolver |
| 11/15/2029 |
|
| 6,981 |
|
|
| (133 | ) |
Sandlot Baseball Borrower Co. |
| Delayed Draw |
| 12/27/2028 |
|
| 33,333 |
|
|
| 33 |
|
Systems Planning and Analysis, Inc. |
| Delayed Draw |
| 8/16/2027 |
|
| 42,286 |
|
|
| (302 | ) |
Systems Planning and Analysis, Inc. |
| Revolver |
| 8/16/2027 |
|
| 3,136 |
|
|
| (46 | ) |
Total Unfunded Commitments |
|
|
|
|
| $ | 353,018 |
|
| $ | (2,929 | ) |
11
The accompanying notes are an integral part of these consolidated financial statements.
12
MSD Investment Corp.
Consolidated Schedule of Investments
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Aerospace & Defense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chromalloy Holdings LLC | (8) |
| S + 7.00% |
| 1.00% |
| 12.37% |
| 11/23/2028 |
|
| 49,500 |
|
| $ | 47,794 |
|
| $ | 47,873 |
|
|
| 5.11 |
| % |
Chromalloy Holdings LLC - Revolving Credit Facility | (8)(9)(12) |
| S + 7.00% |
| 1.00% |
| 12.33% |
| 11/23/2027 |
|
| — |
|
|
| (144 | ) |
|
| (152 | ) |
|
| (0.02 | ) |
|
Frontgrade Technologies Inc. | (8)(15) |
| S + 6.75% |
| 0.75% |
| 12.10% |
| 1/9/2030 |
|
| 9,779 |
|
|
| 9,592 |
|
|
| 9,557 |
|
|
| 1.02 |
|
|
Frontgrade Technologies Inc. | (8)(15) |
| S + 6.75% |
| 0.75% |
| 12.10% |
| 1/9/2030 |
|
| 50,369 |
|
|
| 49,046 |
|
|
| 49,223 |
|
|
| 5.25 |
|
|
Frontgrade Technologies Inc. - Revolving Credit Facility | (8)(9)(12)(15) |
| S + 6.75% |
| 0.75% |
| 12.08% |
| 1/9/2028 |
|
| — |
|
|
| (162 | ) |
|
| (164 | ) |
|
| (0.02 | ) |
|
Systems Planning and Analysis, Inc. | (8) |
| S + 6.15% |
| 1.00% |
| 11.33% |
| 8/16/2027 |
|
| 10,713 |
|
|
| 10,562 |
|
|
| 10,595 |
|
|
| 1.13 |
|
|
Systems Planning and Analysis, Inc. - Delayed Draw Term Loan | (8)(12) |
| S + 6.15% |
| 0.00% |
| 11.33% |
| 8/16/2027 |
|
| 5,522 |
|
|
| 5,423 |
|
|
| 5,457 |
|
|
| 0.58 |
|
|
Systems Planning and Analysis, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 6.15% |
| 1.00% |
| 11.31% |
| 8/16/2027 |
|
| — |
|
|
| (40 | ) |
|
| (34 | ) |
|
| (0.00 | ) |
|
The Nordam Group Inc. |
|
| S + 5.60% |
| 0.00% |
| 10.96% |
| 4/9/2026 |
|
| 11,644 |
|
|
| 10,705 |
|
|
| 10,643 |
|
|
| 1.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 132,776 |
|
|
| 132,998 |
|
|
| 14.19 |
|
| |
Automobile |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
McLaren Finance PLC | UK(10)(11) |
| N/A |
| N/A |
| 7.50% |
| 8/1/2026 |
|
| 1,258 |
|
|
| 1,268 |
|
|
| 1,096 |
|
|
| 0.12 |
|
|
Banking, Finance, Insurance & Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accession Risk Management - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.00% |
| 0.75% |
| 11.43% |
| 11/1/2029 |
|
| 8,982 |
|
|
| 8,325 |
|
|
| 8,276 |
|
|
| 0.88 |
|
|
Foundation Risk Partners - Delayed Draw Term Loan | (8)(9)(12) |
| S + 5.60% |
| 0.75% |
| 10.93% |
| 10/29/2028 |
|
| — |
|
|
| (428 | ) |
|
| (435 | ) |
|
| (0.05 | ) |
|
Highgate Hotels, L.P. | (8) |
| S + 5.50% |
| 1.00% |
| 10.84% |
| 11/5/2029 |
|
| 100,000 |
|
|
| 98,085 |
|
|
| 98,027 |
|
|
| 10.47 |
|
|
Highgate Hotels, L.P. - Revolving Credit Facility | (8)(9)(12) |
| S + 5.50% |
| 1.00% |
| 10.85% |
| 10/26/2029 |
|
| — |
|
|
| (243 | ) |
|
| (247 | ) |
|
| (0.03 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 105,739 |
|
|
| 105,621 |
|
|
| 11.27 |
|
| |
Beverage, Food & Tobacco |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
LJ Perimeter Buyer, Inc. | (8) |
| S + 6.65% |
| 1.00% |
| 12.03% |
| 10/31/2028 |
|
| 19,316 |
|
|
| 18,819 |
|
|
| 18,965 |
|
|
| 2.02 |
|
|
LJ Perimeter Buyer, Inc. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.65% |
| 1.00% |
| 12.03% |
| 10/31/2028 |
|
| 2,483 |
|
|
| 2,393 |
|
|
| 2,428 |
|
|
| 0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 21,212 |
|
|
| 21,393 |
|
|
| 2.28 |
|
| |
Capital Equipment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Circor International, Inc. | (8) |
| S + 6.00% |
| 1.00% |
| 11.40% |
| 10/18/2030 |
|
| 67,241 |
|
|
| 65,911 |
|
|
| 65,809 |
|
|
| 7.02 |
|
|
Circor International, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 6.00% |
| 1.00% |
| 11.35% |
| 10/18/2029 |
|
| — |
|
|
| (150 | ) |
|
| (165 | ) |
|
| (0.02 | ) |
|
Faraday Buyer, LLC | (8) |
| S + 6.00% |
| 1.00% |
| 11.33% |
| 10/11/2028 |
|
| 33,559 |
|
|
| 32,893 |
|
|
| 32,897 |
|
|
| 3.51 |
|
|
Faraday Buyer, LLC - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.00% |
| 1.00% |
| 11.33% |
| 10/11/2028 |
|
| — |
|
|
| (33 | ) |
|
| (34 | ) |
|
| (0.00 | ) |
|
Trillium FlowControl | LU(8)(10)(11) |
| S + 5.76% |
| 1.00% |
| 11.11% |
| 6/28/2026 |
|
| 17,730 |
|
|
| 17,613 |
|
|
| 17,102 |
|
|
| 1.82 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 116,234 |
|
|
| 115,609 |
|
|
| 12.33 |
|
| |
Chemicals, Plastics & Rubber |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Dubois Chemicals Group Inc. |
|
| S + 4.60% |
| 0.00% |
| 9.96% |
| 9/30/2026 |
|
| 2,725 |
|
|
| 2,720 |
|
|
| 2,702 |
|
|
| 0.29 |
|
|
Hexion Holdings Corporation |
|
| S + 4.65% |
| 0.50% |
| 10.02% |
| 3/15/2029 |
|
| 9,850 |
|
|
| 9,219 |
|
|
| 9,444 |
|
|
| 1.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 11,939 |
|
|
| 12,146 |
|
|
| 1.30 |
|
| |
Consumer Goods: Durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mattress Firm, Inc. |
|
| L + 4.25% |
| 0.75% |
| 9.95% |
| 9/25/2028 |
|
| 1,319 |
|
|
| 1,262 |
|
|
| 1,306 |
|
|
| 0.14 |
|
|
Parfums Holding Company, Inc. | (9) |
| S + 6.26% |
| 1.50% |
| 11.61% |
| 6/30/2026 |
|
| 24,842 |
|
|
| 24,278 |
|
|
| 24,309 |
|
|
| 2.59 |
|
|
Victra Finance Corp. |
|
| S + 7.25% |
| 0.75% |
| 12.60% |
| 3/31/2029 |
|
| 14,310 |
|
|
| 14,013 |
|
|
| 13,934 |
|
|
| 1.49 |
|
|
Victra Finance Corp. - Corporate Bond | (9) |
| N/A |
| N/A |
| 7.75% |
| 2/15/2026 |
|
| 100 |
|
|
| 91 |
|
|
| 96 |
|
|
| 0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 39,644 |
|
|
| 39,645 |
|
|
| 4.23 |
|
|
13
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
First Lien Debt (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Energy: Oil & Gas |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CITGO Petroleum Corp. |
|
| N/A |
| N/A |
| 6.38% |
| 6/15/2026 |
|
| 2,121 |
|
|
| 2,146 |
|
|
| 2,113 |
|
|
| 0.22 |
|
|
Saturn Oil and Gas Inc. | CN(8)(10)(11) |
| C + 11.50% |
| 1.00% |
| 16.94% |
| 2/28/2026 |
|
| CAD 101,548 |
|
|
| 74,803 |
|
|
| 74,817 |
|
|
| 7.98 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 76,949 |
|
|
| 76,930 |
|
|
| 8.20 |
|
| |
Healthcare & Pharmaceuticals |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Bayer Environmental Services |
|
| S + 4.38% |
| 0.50% |
| 9.77% |
| 10/4/2029 |
|
| 19,800 |
|
|
| 18,404 |
|
|
| 19,489 |
|
|
| 2.08 |
|
|
Charlotte Buyer, Inc. |
|
| S + 5.25% |
| 0.00% |
| 10.61% |
| 2/11/2028 |
|
| 57,937 |
|
|
| 55,591 |
|
|
| 58,122 |
|
|
| 6.20 |
|
|
Natural Partners, Inc. | (8) |
| S + 4.65% |
| 1.00% |
| 10.04% |
| 11/29/2027 |
|
| 37,765 |
|
|
| 37,224 |
|
|
| 37,239 |
|
|
| 3.97 |
|
|
Natural Partners, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 4.65% |
| 1.00% |
| 9.98% |
| 11/29/2027 |
|
| — |
|
|
| (39 | ) |
|
| (39 | ) |
|
| (0.00 | ) |
|
PetVet Care Centers | (8) |
| S + 6.00% |
| 0.75% |
| 11.36% |
| 11/15/2030 |
|
| 53,523 |
|
|
| 52,466 |
|
|
| 52,465 |
|
|
| 5.60 |
|
|
PetVet Care Centers - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.00% |
| 0.75% |
| 11.35% |
| 11/15/2030 |
|
| — |
|
|
| (67 | ) |
|
| (68 | ) |
|
| (0.01 | ) |
|
PetVet Care Centers - Revolving Credit Facility | (8)(9)(12) |
| S + 6.00% |
| 0.75% |
| 11.35% |
| 11/15/2029 |
|
| — |
|
|
| (137 | ) |
|
| (138 | ) |
|
| (0.01 | ) |
|
Press Ganey Holdings - 2022 Term Loan | (9) |
| S + 3.85% |
| 0.75% |
| 9.20% |
| 7/25/2026 |
|
| 4,118 |
|
|
| 3,937 |
|
|
| 4,062 |
|
|
| 0.43 |
|
|
Press Ganey Holdings |
|
| S + 3.61% |
| 0.00% |
| 8.97% |
| 7/24/2026 |
|
| 9,072 |
|
|
| 8,562 |
|
|
| 8,963 |
|
|
| 0.96 |
|
|
Press Ganey Holdings - Incremental Term Loan |
|
| S + 3.86% |
| 0.75% |
| 9.22% |
| 7/25/2026 |
|
| 14,870 |
|
|
| 14,282 |
|
|
| 14,647 |
|
|
| 1.56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 190,223 |
|
|
| 194,742 |
|
|
| 20.78 |
|
| |
High Tech Industries |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Inmar, Inc. |
|
| S + 5.50% |
| 1.00% |
| 10.86% |
| 5/1/2026 |
|
| 39,800 |
|
|
| 38,615 |
|
|
| 39,236 |
|
|
| 4.19 |
|
|
Watchguard Technologies, Inc. |
|
| S + 5.25% |
| 0.75% |
| 10.61% |
| 7/2/2029 |
|
| 41,603 |
|
|
| 39,243 |
|
|
| 39,705 |
|
|
| 4.24 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 77,858 |
|
|
| 78,941 |
|
|
| 8.43 |
|
| |
Hotel, Gaming & Leisure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chuck E. Cheese |
|
| N/A |
| N/A |
| 6.75% |
| 5/1/2026 |
|
| 17,534 |
|
|
| 16,693 |
|
|
| 17,111 |
|
|
| 1.83 |
|
|
ClubCorp Holdings Inc. | (9) |
| S + 5.26% |
| 0.00% |
| 10.61% |
| 9/18/2026 |
|
| 81,447 |
|
|
| 77,787 |
|
|
| 78,342 |
|
|
| 8.36 |
|
|
Sandlot Baseball Borrower Co. | (8) |
| S + 5.75% |
| 1.00% |
| 11.10% |
| 12/27/2028 |
|
| 66,667 |
|
|
| 65,334 |
|
|
| 65,333 |
|
|
| 6.97 |
|
|
Sandlot Baseball Borrower Co. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 5.75% |
| 1.00% |
| 11.08% |
| 12/27/2028 |
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
TouchTunes |
|
| S + 5.00% |
| 0.50% |
| 10.35% |
| 4/2/2029 |
|
| 37,604 |
|
|
| 37,282 |
|
|
| 37,237 |
|
|
| 3.97 |
|
|
Viad Corp. | (11) |
| S + 5.11% |
| 0.50% |
| 10.47% |
| 7/30/2028 |
|
| 3,550 |
|
|
| 3,545 |
|
|
| 3,528 |
|
|
| 0.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 200,643 |
|
|
| 201,551 |
|
|
| 21.51 |
|
| |
Media: Advertising, Printing & Publishing |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Clear Channel Outdoor | (11) |
| S + 3.76% |
| 0.00% |
| 9.14% |
| 8/21/2026 |
|
| 4,671 |
|
|
| 4,479 |
|
|
| 4,616 |
|
|
| 0.50 |
|
|
Emerald Exhibitions | (11) |
| S + 5.10% |
| 0.00% |
| 10.46% |
| 5/22/2026 |
|
| 49,750 |
|
|
| 48,430 |
|
|
| 49,949 |
|
|
| 5.33 |
|
|
Sheffield United F.C. | UK(8)(9)(10)(11) |
| N/A |
| N/A |
| 13.07% |
| 7/22/2026 |
|
| 14,704 |
|
|
| 18,200 |
|
|
| 18,668 |
|
|
| 1.99 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 71,109 |
|
|
| 73,233 |
|
|
| 7.82 |
|
| |
Media: Diversified & Production |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Getty Images Inc. | (11) |
| S + 4.60% |
| 0.00% |
| 9.95% |
| 2/19/2026 |
|
| 17,516 |
|
|
| 17,481 |
|
|
| 17,578 |
|
|
| 1.86 |
|
|
Candle Media Co Ltd | (8) |
| S + 6.10% |
| 0.75% |
| 11.47% |
| 6/18/2027 |
|
| 43,368 |
|
|
| 42,803 |
|
|
| 42,131 |
|
|
| 4.49 |
|
|
Candle Media Co Ltd -Delayed Draw Term Loan | (8) |
| S + 6.10% |
| 0.75% |
| 11.47% |
| 6/18/2027 |
|
| 17,169 |
|
|
| 16,964 |
|
|
| 16,679 |
|
|
| 1.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 77,248 |
|
|
| 76,388 |
|
|
| 8.13 |
|
| |
Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Xponential Fitness LLC | (8)(11) |
| S + 6.76% |
| 1.00% |
| 12.14% |
| 2/28/2025 |
|
| 68,273 |
|
|
| 67,265 |
|
|
| 68,273 |
|
|
| 7.28 |
|
|
MED ParentCo, LP |
|
| S + 4.36% |
| 0.00% |
| 9.72% |
| 8/31/2026 |
|
| 99,739 |
|
|
| 95,446 |
|
|
| 98,606 |
|
|
| 10.52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 162,711 |
|
|
| 166,879 |
|
|
| 17.80 |
|
|
14
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
First Lien Debt (continued) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Services: Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
AVSC Holding Corporation |
|
| S + 3.65% |
| 1.00% |
| 8.96% |
| 3/1/2025 |
|
| 16,168 |
|
|
| 15,281 |
|
|
| 15,799 |
|
|
| 1.69 |
|
|
BDO USA, P.C. | (8) |
| S + 6.00% |
| 2.00% |
| 11.36% |
| 8/31/2028 |
|
| 66,319 |
|
|
| 65,047 |
|
|
| 65,060 |
|
|
| 6.94 |
|
|
Momentive Global | (8) |
| S + 7.00% |
| 1.00% |
| 12.38% |
| 5/31/2030 |
|
| 63,964 |
|
|
| 62,731 |
|
|
| 63,197 |
|
|
| 6.74 |
|
|
Momentive Global - Revolving Credit Facility | (8)(9)(12) |
| S + 7.00% |
| 1.00% |
| 12.35% |
| 5/31/2029 |
|
| — |
|
|
| (103 | ) |
|
| (69 | ) |
|
| (0.01 | ) |
|
Travelport Finance (Luxembourg) S.A.R.L. | LU(10)(11) |
| S + 8.26% |
| 1.00% |
| 13.61% (6.61% PIK) |
| 9/30/2028 |
|
| 52,878 |
|
|
| 52,491 |
|
|
| 51,043 |
|
|
| 5.43 |
|
|
Wood Mackenzie, Inc. | (8) |
| S + 6.75% |
| 0.75% |
| 12.13% |
| 2/1/2030 |
|
| 36,759 |
|
|
| 35,760 |
|
|
| 36,402 |
|
|
| 3.88 |
|
|
Wood Mackenzie, Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 6.75% |
| 0.75% |
| 12.08% |
| 2/1/2028 |
|
| — |
|
|
| (73 | ) |
|
| (29 | ) |
|
| (0.00 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 231,134 |
|
|
| 231,403 |
|
|
| 24.67 |
|
| |
Services: Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CSC Serviceworks | (9) |
| S + 4.26% |
| 0.75% |
| 9.62% |
| 3/4/2028 |
|
| 220 |
|
|
| 202 |
|
|
| 192 |
|
|
| 0.02 |
|
|
Equinox Holdings, Inc. | (9) |
| S + 3.00% |
| 1.00% |
| 8.61% |
| 3/8/2024 |
|
| 35,976 |
|
|
| 34,994 |
|
|
| 35,111 |
|
|
| 3.74 |
|
|
Vision Purchaser Corp. | (8) |
| S + 6.40% |
| 1.00% |
| 11.75% |
| 6/10/2025 |
|
| 28,645 |
|
|
| 28,389 |
|
|
| 27,914 |
|
|
| 2.98 |
|
|
Vision Purchaser Corp. - Incremental Term Loan | (8) |
| S + 6.40% |
| 1.00% |
| 11.75% |
| 6/10/2025 |
|
| 2,498 |
|
|
| 2,473 |
|
|
| 2,434 |
|
|
| 0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 66,058 |
|
|
| 65,651 |
|
|
| 7.00 |
|
| |
Transportation: Cargo |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Boasso Global | (8) |
| S + 6.75% |
| 0.75% |
| 12.11% |
| 7/3/2028 |
|
| 58,930 |
|
|
| 57,326 |
|
|
| 57,415 |
|
|
| 6.12 |
|
|
Boasso Global - Delayed Draw Term Loan | (8)(9)(12) |
| S + 6.75% |
| 0.75% |
| 12.11% |
| 10/3/2024 |
|
| 7,585 |
|
|
| 7,363 |
|
|
| 7,371 |
|
|
| 0.79 |
|
|
Boasso Global - Revolving Credit Facility | (8)(9)(12) |
| S + 6.75% |
| 0.75% |
| 12.08% |
| 7/1/2026 |
|
| — |
|
|
| (144 | ) |
|
| (161 | ) |
|
| (0.02 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 64,545 |
|
|
| 64,625 |
|
|
| 6.89 |
|
| |
Transportation: Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Virgin Atlantic | UK(8)(9)(10)(11) |
| S + 3.25% |
| 0.00% |
| 8.91% |
| 11/17/2026 |
|
| 29,931 |
|
|
| 28,359 |
|
|
| 28,507 |
|
|
| 3.04 |
|
|
Beacon Mobility Corp. | (8)(9) |
| S + 8.60% |
| 0.00% |
| 14.08% PIK |
| 12/31/2025 |
|
| 50,185 |
|
|
| 48,903 |
|
|
| 48,895 |
|
|
| 5.22 |
|
|
Beacon Mobility Corp. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 8.60% |
| 0.00% |
| 13.98% |
| 12/31/2025 |
|
| 829 |
|
|
| 792 |
|
|
| 793 |
|
|
| 0.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 78,054 |
|
|
| 78,195 |
|
|
| 8.34 |
|
| |
Telecommunications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
FirstLight Fiber - Initial Term Loan |
|
| S + 3.61% |
| 0.00% |
| 8.97% |
| 7/23/2025 |
|
| 14,331 |
|
|
| 13,886 |
|
|
| 14,080 |
|
|
| 1.50 |
|
|
FirstLight Fiber - 2023 Incremental Term Loan | (8) |
| S + 4.11% |
| 0.00% |
| 9.47% |
| 7/23/2025 |
|
| 15,500 |
|
|
| 15,367 |
|
|
| 15,490 |
|
|
| 1.65 |
|
|
Innovate Corp. | (11) |
| N/A |
| N/A |
| 8.50% |
| 2/1/2026 |
|
| 24,000 |
|
|
| 24,035 |
|
|
| 18,375 |
|
|
| 1.96 |
|
|
Ligado Networks LLC | (9)(13) |
| N/A |
| N/A |
| 15.50% PIK |
| 11/1/2023 |
|
| 12,853 |
|
|
| 11,071 |
|
|
| 2,429 |
|
|
| 0.26 |
|
|
Maxar Technologies Inc. | (8) |
| S + 7.25% |
| 1.00% |
| 12.60% |
| 5/3/2030 |
|
| 82,006 |
|
|
| 79,697 |
|
|
| 79,777 |
|
|
| 8.51 |
|
|
Maxar Technologies Inc. - Revolving Credit Facility | (8)(9)(12) |
| S + 7.25% |
| 1.00% |
| 12.60% |
| 5/3/2029 |
|
| 4,202 |
|
|
| 3,861 |
|
|
| 3,854 |
|
|
| 0.41 |
|
|
ViaSat, Inc. | (11) |
| S + 4.61% |
| 0.50% |
| 9.96% |
| 5/30/2030 |
|
| 49,875 |
|
|
| 46,460 |
|
|
| 48,815 |
|
|
| 5.21 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 194,377 |
|
|
| 182,820 |
|
|
| 19.50 |
|
| |
Wholesale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
DFS Holdings Company, Inc. | (8) |
| S + 7.10% |
| 0.75% |
| 12.46% |
| 1/31/2029 |
|
| 21,988 |
|
|
| 21,406 |
|
|
| 21,436 |
|
|
| 2.29 |
|
|
DFS Holdings Company, Inc. - Delayed Draw Term Loan | (8)(9)(12) |
| S + 7.10% |
| 0.75% |
| 12.46% |
| 1/31/2029 |
|
| 1,611 |
|
|
| 1,538 |
|
|
| 1,541 |
|
|
| 0.16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 22,944 |
|
|
| 22,977 |
|
|
| 2.45 |
|
| |
Total First Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1,942,665 |
|
|
| 1,942,843 |
|
|
| 207.25 |
| % |
15
MSD Investment Corp.
Consolidated Schedule of Investments - (Continued)
December 31, 2023
(in thousands, except shares)
Investments (1)(2)(3) | Footnotes |
| Reference Rate and Spread (4) |
| Interest Rate Floor |
| Interest Rate (5) |
| Maturity Date |
| Par Amount / Shares (6) |
|
| Cost (7) |
|
| Fair Value |
|
| Percentage of Net Assets |
|
| ||||
Second Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Chemicals, Plastics & Rubber |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Hexion Holdings Corporation | (9) |
| S + 7.54% |
| 0.50% |
| 12.89% |
| 3/15/2030 |
|
| 35,000 |
|
|
| 34,174 |
|
|
| 29,269 |
|
|
| 3.12 |
|
|
Consumer goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Protective Industrial Products Inc. | (8) |
| S + 8.36% |
| 1.00% |
| 13.72% |
| 12/30/2028 |
|
| 34,199 |
|
|
| 33,512 |
|
|
| 33,626 |
|
|
| 3.59 |
|
|
Hotel, Gaming & Leisure |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mohegan Gaming & Entertainment | (9) |
| N/A |
| N/A |
| 8.00% |
| 2/1/2026 |
|
| 22,550 |
|
|
| 22,165 |
|
|
| 21,282 |
|
|
| 2.27 |
|
|
Services: Business |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
DISA Holdings Corp. | (8) |
| S + 10.00% |
| 0.75% |
| 15.36% (Incl 2.00% PIK) |
| 3/9/2029 |
|
| 14,869 |
|
|
| 14,477 |
|
|
| 14,554 |
|
|
| 1.55 |
|
|
DISA Holdings Corp. - Delayed Draw Term Loan | (8)(9) |
| S + 10.00% |
| 0.75% |
| 15.36% (Incl 2.00% PIK) |
| 3/9/2029 |
|
| 2,788 |
|
|
| 2,717 |
|
|
| 2,729 |
|
|
| 0.29 |
|
|
Trace3 Inc. | (8) |
| L + 7.76% |
| 0.50% |
| 13.17% |
| 10/8/2029 |
|
| 33,750 |
|
|
| 32,995 |
|
|
| 33,080 |
|
|
| 3.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 50,189 |
|
|
| 50,363 |
|
|
| 5.37 |
|
| |
Services: Consumer |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Midwest Veterinary Partners LLC | (8) |
| S + 7.60% |
| 0.75% |
| 12.96% |
| 4/26/2029 |
|
| 50,000 |
|
|
| 50,011 |
|
|
| 46,886 |
|
|
| 5.00 |
|
|
Southern Veterinary Partners LLC |
|
| S + 7.85% |
| 1.00% |
| 13.21% |
| 10/5/2028 |
|
| 45,000 |
|
|
| 44,157 |
|
|
| 44,794 |
|
|
| 4.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 94,168 |
|
|
| 91,680 |
|
|
| 9.78 |
|
| |
Telecommunications |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
FirstLight Fiber - 2nd Lien Term Loan | (9) |
| S + 7.61% |
| 0.00% |
| 12.97% |
| 7/23/2026 |
|
| 100 |
|
|
| 98 |
|
|
| 98 |
|
|
| 0.01 |
|
|
Total Second Lien Debt |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 234,306 |
|
|
| 226,318 |
|
|
| 24.14 |
| % | |
Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Banking, Finance, Insurance & Real Estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accession Risk Management - Preferred Stock | (8)(9) |
|
|
|
|
| 13.25% PIK |
|
|
|
| 105 |
|
|
| 102 |
|
|
| 102 |
|
|
| 0.01 |
|
|
Consumer goods: Non-durable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Protective Industrial Products Inc. - Series A Preferred | (8)(9) |
|
|
|
|
| 13.00% PIK |
|
|
|
| 31,597 |
|
|
| 31,469 |
|
|
| 27,600 |
|
|
| 2.94 |
|
|
Retail |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Xponential Fitness LLC - Series A Preferred Stock | (8)(9)(11) |
|
|
|
|
| 6.50% |
| 7/27/2031 |
|
| 187 |
|
|
| 275 |
|
|
| 190 |
|
|
| 0.02 |
|
|
Total Preferred Equity |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 31,846 |
|
|
| 27,892 |
|
|
| 2.97 |
|
| |
Total Investments - non-controlled/non-affiliated |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,208,817 |
|
| $ | 2,197,053 |
|
|
| 234.35 |
| % | |
Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and Cash Equivalents | (14) |
|
|
|
|
|
|
|
|
|
|
|
| $ | 98,606 |
|
| $ | 98,606 |
|
|
| 10.52 |
|
| |
Total Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
|
| 98,606 |
|
|
| 98,606 |
|
|
| 10.52 |
|
| |
Total Portfolio Investments, Cash and Cash Equivalents |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 2,307,423 |
|
| $ | 2,295,659 |
|
|
| 244.87 |
| % |
December 31, 2023 |
| |||||||||||||||||
Derivative Counterparty |
| Settlement Date |
| Amount Purchased |
|
| Amount Sold |
|
| Fair Value |
|
| % of Net Assets |
| ||||
Foreign Currency Forward Contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Macquarie |
| March 20, 2024 |
| $ | 76,165 |
|
|
| CAD 101,611 |
|
| $ | (663 | ) |
|
| (0.01 | )% |
Macquarie |
| March 20, 2024 |
| $ | 18,870 |
|
|
| GBP 14,904 |
|
| $ | (134 | ) |
|
| (0.0 | )% |
|
|
|
|
|
|
|
|
|
| $ | (797 | ) |
|
| (0.1 | )% |
16
December 31, 2023 |
| |||||||||||
Investments—non-controlled/non-affiliated |
| Commitment Type |
| Commitment |
| Unfunded |
|
| Fair |
| ||
First Lien Debt |
|
|
|
|
|
|
|
|
|
| ||
Accession Risk Management |
| Delayed Draw |
| 11/1/2029 |
| $ | 40,719 |
|
| $ | (578 | ) |
Beacon Mobility Corp. |
| Delayed Draw |
| 12/31/2025 |
|
| 592 |
|
|
| (15 | ) |
Boasso Global |
| Delayed Draw |
| 10/3/2024 |
|
| 1,750 |
|
|
| (19 | ) |
Boasso Global |
| Revolver |
| 7/1/2026 |
|
| 6,250 |
|
|
| (161 | ) |
Chromalloy Holdings LLC |
| Revolver |
| 11/23/2027 |
|
| 4,615 |
|
|
| (152 | ) |
Circor International, Inc. |
| Revolver |
| 10/18/2029 |
|
| 7,759 |
|
|
| (165 | ) |
DFS Holding Company |
| Delayed Draw |
| 1/31/2029 |
|
| 3,000 |
|
|
| (30 | ) |
Faraday Buyer, LLC |
| Delayed Draw |
| 10/11/2028 |
|
| 3,514 |
|
|
| (34 | ) |
Foundation Risk Partners |
| Delayed Draw |
| 10/29/2028 |
|
| 45,000 |
|
|
| (435 | ) |
Frontgrade Technologies Inc. |
| Revolver |
| 1/9/2028 |
|
| 7,211 |
|
|
| (164 | ) |
Highgate Hotels, L.P. |
| Revolver |
| 10/26/2029 |
|
| 12,500 |
|
|
| (247 | ) |
LJ Perimeter Buyer, Inc |
| Delayed Draw |
| 10/31/2028 |
|
| 3,042 |
|
|
| (10 | ) |
Maxar Technologies Inc. |
| Revolver |
| 5/3/2029 |
|
| 8,587 |
|
|
| (233 | ) |
Momentive Global |
| Revolver |
| 5/31/2029 |
|
| 5,714 |
|
|
| (69 | ) |
Natural Partners, Inc. |
| Revolver |
| 11/29/2027 |
|
| 2,813 |
|
|
| (39 | ) |
PetVet Care Centers |
| Delayed Draw |
| 11/15/2030 |
|
| 6,981 |
|
|
| (68 | ) |
PetVet Care Centers |
| Revolver |
| 11/15/2029 |
|
| 6,981 |
|
|
| (138 | ) |
Sandlot Baseball Borrower Co. |
| Delayed Draw |
| 12/27/2028 |
|
| 33,333 |
|
|
| — |
|
Systems Planning and Analysis, Inc. |
| Delayed Draw |
| 8/16/2027 |
|
| 1,165 |
|
|
| (4 | ) |
Systems Planning and Analysis, Inc. |
| Revolver |
| 8/16/2027 |
|
| 3,136 |
|
|
| (34 | ) |
Wood Mackenzie, Inc. |
| Revolver |
| 2/1/2028 |
|
| 2,963 |
|
|
| (29 | ) |
Total Unfunded Commitments |
|
|
|
|
| $ | 207,625 |
|
| $ | (2,624 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
17
MSD Investment Corp.
Notes to Consolidated Financial Statements (Unaudited)
(in thousands, except share/per share data, percentages and as otherwise noted)
Note 1. Organization
MSD Investment Corp. (together with its consolidated subsidiaries, the “Company”) was originally established as a Delaware limited liability company on February 18, 2021, converted to a Maryland limited liability company named MSD Investment, LLC on October 22, 2021 and converted into a Maryland corporation (the “Corporate Conversion”) effective January 1, 2022, pursuant to Articles of Conversion filed on December 28, 2021. In connection with the Corporate Conversion the Company changed its name from “MSD Investment, LLC” to “MSD Investment Corp.” As a result of the Corporate Conversion, the issued and outstanding equity interests of MSD Investment, LLC were converted into a corresponding number of shares of common stock, par value $0.001 per share, of the Company (the “Shares,” and each a “Share”), and each holder of equity interests of MSD Investment, LLC became a shareholder of the Company (collectively the “Shareholders”). The Company is structured as an externally managed, non-diversified closed-end investment company. On December 29, 2021, the Company elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”). In addition, the Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a regulated investment company (“RIC”), as defined under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
On January 1, 2023, MSD Partners, L.P., a Delaware limited partnership (“MSD”) completed a previously announced business combination with BDT & Company Holdings, L.P. (the “Transaction”), and its subsidiaries, which includes BDT Capital Partners, LLC (“BDT Capital”), an SEC-registered investment adviser, and BDT & MSD Partners, LLC, an SEC registered broker-dealer and member of the Financial Industry Regulatory Authority (“FINRA”). Upon the closing of the Transaction, BDT & Company Holdings, L.P. was renamed BDT & MSD Holdings, L.P. (“BDT”) and BDT, and its subsidiaries, became affiliates of the Adviser (as defined below) and the Company. BDT, together with BDT Capital, MSD and their affiliated entities, are collectively referred to as “BDT & MSD.”
The Company’s investment objective is to invest in a broad range of portfolio companies, primarily through senior secured loans and notes where we believe the probability of losses are limited and the opportunity to generate attractive risk adjusted returns is maximized. The Adviser (as defined below) expects to execute this strategy by continuing its long history of leveraging its network to source and diligence what it believes to be attractive opportunities across a broad range of industries. The strategy will be executed by a team of experienced investment professionals who have more than a 20-year history of successfully deploying capital in both liquid and illiquid investments.
On November 24, 2021, the Company entered into an investment advisory agreement (the “Original Advisory Agreement”) with MSD (in its capacity as the Company’s investment adviser, the “Adviser”), under which the Adviser provided certain investment advisory and management services to the Company. Additionally, the Company previously entered into an administrative services agreement (the “Original Administration Agreement”) with MSD (in its capacity as the Company’s administrator, the “Administrator”) under which the Administrator provided certain administrative and other services necessary for the Company to operate.
Effective January 1, 2023, the Company entered into a new investment advisory agreement (the “Advisory Agreement”), by and between the Company and the Adviser, and a new administrative agreement (the “Administration Agreement” and together with the Advisory Agreement, the “New Agreements”), by and between the Company and the Administrator. The terms of the New Agreements are substantially identical to those of the Original Advisory Agreement and Original Administrative Agreement, except that the reimbursement required to be made to the Administrator by the Company pursuant to the Administration Agreement will be capped such that the amounts will not exceed 0.15% of total gross assets of the Company in any one calendar year.
MSD BDC SPV I, LLC (“SPV I”) is a Delaware limited liability company formed on June 14, 2021 and commenced operations on December 21, 2021, the date the first investment transaction closed. MSD BDC SPV II, LLC (“SPV II”) is a Delaware limited liability company formed on January 4, 2023 and commenced operations on March 31, 2023. MSD BDC CLO I, LLC (“CLO I” and together with SPV I, and SPV II, the “SPVs” ) is a Delaware limited liability company formed on August 18, 2023 and commenced operations on November 15, 2023. The SPVs’ investment objectives are the same as the Company’s. The SPVs are wholly owned subsidiaries of the Company and are consolidated in these consolidated financial statements, in accordance with the Company’s consolidation policy discussed in Note 2 Significant Accounting Policies.
The Company may from time to time conduct a private offering (each a “Private Offering”) of its Shares (i) to “accredited investors,” as defined in Rule 501(a) of Regulation D under the Securities Act of 1933, as amended (the “1933 Act”), and (ii) in the case of Shares sold outside the United States, to persons that are not “U.S. persons,” as defined in Regulation S under the 1933 Act, in reliance on exemptions from the registration requirements of the 1933 Act. At each closing of the Private Offering, each investor makes a capital commitment (“Capital Commitments”) to purchase Shares pursuant to a subscription agreement entered into with the Company. Investors are required to fund drawdowns to purchase the Company’s Shares up to the amount of their Capital Commitments on an as-needed basis each time the Company delivers a notice to investors.
The first closing date of a Private Offering (the “Initial Closing Date”) took place on December 21, 2021. Additional closings are expected to occur from time to time as determined by the Company (each, a “Subsequent Closing”), and the final such closing (the “Final Closing”) will occur no later than the fifth anniversary of the Initial Closing Date, subject to a one-year extension at the discretion of the Board of Directors of the Company (the “Board”) (the “Commitment Period”). The proceeds received at the Initial Closing Date were used to acquire the initial portfolio of the Company from several funds managed by the Adviser or its affiliates prior to the Corporate Conversion. Following the Initial Closing Date, proceeds from the sale of Shares in Subsequent Closings were used to acquire investments in accordance with the Company’s investment guidelines and for other permitted purposes.
On November 29, 2023, the Company issued 250 shares of its 12.0% Series A Cumulative Preferred Stock (the “Series A Preferred Stock”) for an aggregate offering price of $0.75 million. Each individual investor in the offering was entitled to purchase only one share of Series A Preferred Stock. Each holder of Series A Preferred Shares is entitled to a liquidation preference of $3,000.00 per share (the “Liquidation Value”), plus additional amounts as set forth in the Articles Supplementary to the Company’s Articles of Incorporation Relating to the 12.0% Series A Cumulative Preferred Stock. With respect to distributions, including the payment of dividends and distribution of the Company’s assets upon dissolution, liquidation, or winding up, the Series A Preferred
18
Stock will be senior to all other classes and series of the Company’s common shares, whether such class or series is now existing or is created in the future, to the extent of the aggregate Liquidation Value and all accrued but unpaid dividends and any applicable redemption premium on the Series A Preferred Stock. Holders of shares of the Series A Preferred Stock will not, however, participate in any appreciation in the value of the Company.
Note 2. Significant Accounting Policies
Basis of Presentation
Management has determined that the Company meets the definition of an investment company and adheres to the accounting and reporting guidance in Accounting Standards Codification (“ASC”) Topic 946, Financial Services – Investment Companies (“ASC 946”) issued by the Financial Accounting Standards Board (“FASB”). Accounting principles generally accepted in the United States (“U.S. GAAP”) for an investment company requires investments to be recorded at fair value.
The accompanying consolidated financial statements and related financial information have been prepared in accordance with U.S. GAAP and pursuant to the requirements for reporting on Form 10-Q and Regulation S-X under the 1933 Act.
Use of Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the reported amounts of income and expenses during the reporting period and (iii) disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Actual results could differ materially from those estimates under different assumptions and conditions.
Basis of Consolidation
As provided under ASC 946, the Company will not consolidate its investment in a company other than an investment company subsidiary or a controlled operating company whose business consists of providing services to the Company. Accordingly, the Company consolidates the results of its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated.
Cash and Cash Equivalents
Cash and cash equivalents consist of demand deposits and highly liquid investments, such as money market funds, with original maturities of 90 days or less. Cash and cash equivalents are carried at cost, which approximates fair value. The Company deposits its cash and cash equivalents with financial institutions and, at times, these deposits may exceed the Federal Deposit Insurance Corporation insured limit.
Restricted Cash
Restricted cash has consisted of cash collateral that had been pledged to cover obligations of the Company according to its derivative contracts and demand deposits held at Goldman Sachs International, in addition to cash funded to escrow for prefunding deals. Management believes the credit risk related to its demand deposits is minimal.
Investments
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds received from a sale or paydown and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. The net change in unrealized gains or losses primarily reflects the change in investment values, including the reversal of previously recorded unrealized gains or losses with respect to investments realized during the period.
Valuation of Investments
The Company measures the value of its investments in accordance with ASC Topic 820, Fair Value Measurement and Disclosures (“ASC 820”). Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Market participants are defined as buyers and sellers in the principal or most advantageous market (which may be a hypothetical market) that are independent, knowledgeable and willing and able to transact. In accordance with ASC 820, the Company considers its principal market to be the market that has the greatest volume and level of activity.
ASC 820 defines hierarchical levels of fair value that prioritize and rank the level of observability of inputs used in determination of fair value. These levels are summarized below:
19
In certain cases, the inputs used to measure fair value may fall within different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. Depending on the relative liquidity in the markets for certain investments, the Company may transfer investments to Level 3 if it determines that observable quoted prices, obtained directly or indirectly, are severely limited, or not available, or otherwise not reliable. Transfers between levels, if any, are recognized at the beginning of the quarter in which the transfer occurs. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and the consideration of factors specific to the investment.
Under procedures established by the Board, the Company intends to value investments for which market quotations are readily available at such market quotations. Assets listed on an exchange will be valued at their last sales prices as reported to the consolidated quotation service at 4:00 p.m. Eastern Time on the date of determination. If no such sales of such securities occurred, such securities will be valued at the bid price as reported by an independent, third-party pricing service on the date of determination. Debt and equity securities that are not publicly traded or whose market prices are not readily available will be valued at fair value as determined by the Adviser as the Company's valuation designee (in such capacity, the “Valuation Designee”), subject to the overall supervision of the Board. Such determination of fair values may involve subjective judgments and estimates, although the Company will also engage independent valuation providers to review the valuation of each investment that constitutes a material portion of the Company’s portfolio and that does not have a readily available market quotation at least once annually. With respect to unquoted securities, the Valuation Designee, together with any independent valuation advisers, and subject to the oversight of the Board, will fair value each investment considering, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. The types of factors that may be considered in determining the fair values of investments include, but are not limited to, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings. The Company intends to retain one or more independent providers of financial advisory services to assist the Valuation Designee and the Board by performing certain third-party valuation services. The Company may appoint additional or different third-party valuation firms in the future.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs with respect to a fair-valued portfolio company or comparable company, the Valuation Designee will use the pricing indicated by the external event to corroborate and/or assist the Company in the valuation of such portfolio company. Because the Company expects that there will not be readily available market quotations for many of the investments in its portfolio, the Company expects to value many of its investments at fair value as determined in good faith by the Valuation Designee using a documented valuation policy and a consistently applied valuation process. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market quotation, the fair value of the Company’s investments may differ significantly from the values that would have been used had readily available market quotations existed for such investments, and the differences could be material.
On a quarterly basis, with respect to investments for which market quotations are not readily available, the Valuation Designee will undertake a multi-step valuation process, as described below:
The Company utilizes several valuation techniques that use unobservable pricing inputs and assumptions in determining the fair value of its Level 3 investments. The valuation techniques, as well as the key unobservable inputs that have a significant impact on the Company’s investments classified and valued as Level 3 in the valuation hierarchy, are described in Note 6. Fair Value Measurements. The unobservable inputs and assumptions may differ by asset and in the application of the Company's valuation methodologies. The reported fair value estimates could vary materially if the Company had chosen to incorporate different unobservable inputs and assumptions.
All values assigned to investments by the procedures established by the Board will be binding on all Company investors. When pricing of the Company’s Shares is necessary outside of the normal quarterly process, the Adviser will, among other things, review whether, to its knowledge, significant events have occurred since the last quarterly valuation which might affect the fair value of any of the Company's portfolio investments.
The determination of fair value involves subjective judgments and estimates. Due to the inherent uncertainty of determining the fair value of portfolio investments that do not have a readily available market quotation, the fair value of investments may differ materially from the values that would have been determined had a readily available market quotation existed for such investments. Further, such investments are generally less liquid than publicly traded securities. If the Company was required to liquidate a portfolio investment that does not have a readily available market quotation in a forced or liquidation sale, the Company could realize significantly less value than the value recorded by the Company.
Securities and Exchange Commission (“SEC”) Disclosure Update and Simplification
The SEC adopted rule 2a-5 under the 1940 Act (“Rule 2a-5”) providing a framework for fund valuation practices. Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 permits (but does not require) boards, subject to board oversight and certain other conditions, to designate certain parties to perform fair value determinations. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must determine the fair value of a security. Rule 31a-4 under the 1940 Act (“Rule 31a-4”) provides the recordkeeping requirements associated with fair value determinations. On August 3, 2023, the Board elected to designate the Adviser as the
20
Company's Valuation Designee, which became effective for the quarter ended September 30, 2023. The Company has adopted certain revisions to its valuation policies and procedures in order to comply with the applicable requirements of Rule 2a-5 and Rule 31a-4.
Receivables/Payables From Investments Sold/Purchased
Receivables/payables from investments sold/purchased consist of amounts receivable or payable by the Company for transactions that have not settled at the reporting date.
Foreign Currency Transactions
Amounts denominated in foreign currencies are translated into U.S. dollars on the following basis: (i) investments and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates effective on the last business day of the period; and (ii) purchases and sales of investments, borrowings and repayments of such borrowings, income, and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates prevailing on the transaction dates.
The Company includes net changes in fair values on investments held resulting from foreign exchange rate fluctuations in translation of assets and liabilities in foreign currencies on the Consolidated Statements of Operations, if any. 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 more volatile than those of comparable U.S. companies or U.S. government securities.
Derivative Instruments
We may invest in derivative instruments, such as foreign currency forward contracts. All derivative instruments as assets or liabilities are recognized at fair value in the consolidated financial statements. Foreign currency forward contracts are not designated as hedging instruments, and as a result, changes in fair value through net change in unrealized appreciation (depreciation) on foreign currency forward contracts are presented in the Consolidated Statements of Operations. Realized gains and losses that occur upon the cash settlement of the foreign currency forward contracts are included in net realized gains (losses) on foreign currency forward contracts on the Consolidated Statements of Operations.
Revenue Recognition
Interest Income
Interest income is recorded on an accrual basis and includes the accretion of discounts and amortization of premiums. Discounts from and premiums to par value on debt investments purchased are accreted/amortized into interest income over the life of the respective security using the effective interest method. The amortized cost of debt investments represents the original cost, including loan origination fees and upfront fees received that are deemed to be an adjustment to yield, adjusted for the accretion of discounts and amortization of premiums, if any. Upon prepayment of a loan or debt security, any prepayment premiums are recorded as interest income in the current period.
The Company has investments in its portfolio that contain PIK provisions. PIK represents interest that is accrued and recorded at the contractual rates, increases the loan principal on the respective capitalization dates, and is generally due at maturity. Such income is included in interest income in the Consolidated Statement of Operations. If at any point the Company believes PIK is not expected to be realized, the investment generating PIK will be placed on non-accrual status. When a PIK investment is placed on non-accrual status, the accrued, uncapitalized income is generally reversed through interest income. To maintain the Company’s status as a RIC after the Corporate Conversion, this non-cash source of income must be paid out to shareholders in the form of dividends, even though the Company has not yet collected cash.
If the portfolio company's valuation indicates the value of the PIK security is not sufficient to cover the contractual PIK interest, the Company will not accrue additional PIK interest income and will record an allowance for any accrued PIK interest receivable as a reduction of interest income in the period the Company determines it is not collectible.
Debt investments are generally placed on non-accrual status when interest payments are at least 90 days past due or 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. Additionally, any original issue discount and market discount are no longer accreted to interest income as of the date the 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 regarding collectability. Non-accrual loans are restored to accrual status when past due principal and interest is paid current and, in management’s judgment, are likely to remain current. Management may make exceptions to this treatment and determine to not place a loan on non-accrual status if the loan has sufficient collateral value and is in the process of collection.
Dividend Income
Dividend income on preferred equity securities is recorded on the accrual basis to the extent that such amounts are payable by the portfolio company and are expected to be collected. Dividend income on common equity securities is recorded on the record date for private portfolio companies or on the ex-dividend date for publicly-traded portfolio companies.
Other Income
The Company may receive various fees in the ordinary course of business such as structuring, consent, waiver, amendment, syndication fees as well as fees for managerial assistance rendered by the Company to the portfolio companies. Such fees are recognized as income when earned or the services are rendered.
Organization Expenses and Offering Expenses
Costs associated with the organization of the Company were expensed on the Company's consolidated statement of operations as incurred. These expenses consist primarily of legal fees and other costs of forming and organizing the Company.
21
Costs associated with the offering of the Company’s Shares, and any additional expenses for other offerings, are capitalized and included in prepaid expenses and other assets on the consolidated statement of assets and liabilities and amortized over a twelve-month period beginning with the commencement of operations or the point in time when the cost was incurred if after the commencement of operations. These expenses consist primarily of legal fees and other costs incurred in connection with the Company’s Private Offering of its Shares.
Deferred Financing Costs and Debt Issuance Costs
Deferred financing and debt issuance costs represent fees and other direct incremental costs incurred in connection with the Company’s borrowings. These expenses are deferred and amortized into interest expense over the life of the related debt instrument using the straight-line method. Debt issuance costs are presented in the consolidated statement of assets and liabilities as a direct deduction of the debt liability to which the costs pertain.
Income Taxes
The Company has elected to be regulated as a BDC under the 1940 Act. The Company has elected, and intends to qualify annually, to be treated for U.S. federal income tax purposes as a RIC under the Code. So long as the Company maintains its tax treatment as a RIC, it generally will not be subject to U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as dividends. Rather, any tax liability related to income earned and distributed by the Company would represent obligations of the Company’s investors and would not be reflected in the consolidated financial statements of the Company.
To qualify for and maintain qualification as a RIC, the Company must, among other things, meet certain source-of-income and asset diversification requirements. In addition, to qualify for RIC tax treatment, the Company must distribute to its shareholders, for each taxable year, at least 90% of the sum of (i) its “investment company taxable income” for that year (without regard to the deduction for dividends paid), which is generally its ordinary income plus the excess, if any, of its realized net short-term capital gains over its realized net long-term capital losses and (ii) its net tax-exempt income.
The Company is generally subject to a 4% nondeductible federal excise tax if it does not distribute to its shareholders in a timely manner in each taxable year an amount at least equal to the sum of (i) 98% of its ordinary income for the calendar year, (ii) 98.2% of capital gain net income (both long-term and short-term) for the one-year period ending October 31 in that calendar year and (iii) any income realized, but not distributed, in prior years.
The Company follows ASC 740, Income Taxes (“ASC 740”). ASC 740 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. ASC 740 requires the Company to evaluate tax positions taken or expected to be taken in the course of preparing its consolidated financial statements to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax authority. Tax positions not deemed to meet the “more-likely-than-not” threshold are reserved and recorded as a tax benefit or expense in the current year. All penalties and interest associated with income taxes are included in income tax expense. Conclusions regarding tax positions are subject to review and may be adjusted at a later date based on factors including, but not limited to, on-going analyses of tax laws, regulations and interpretations thereof.
The Company’s tax returns are subject to tax examination by major taxing authorities for a period of three years from when they are filed. The Company is additionally not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. As a result, no income tax liability or expense has been recorded on the accompanying consolidated financial statements as of both March 31, 2024 and December 31, 2023. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense on the consolidated statement of operations. During the three months ended March 31, 2024 and 2023, the Company did not incur any interest or penalties.
Prior to the Corporate Conversion, the Company was treated as a partnership for U.S. federal income tax purposes and incurred no U.S. federal, state, city, or foreign income tax liability on income earned during that period. Instead, each partner reported his or her share of the Company's income, capital gain/(loss) and credit on his or her own tax return. Consequently, no provision for income taxes had been recorded in the consolidated financial statements.
Distributions
To the extent that the Company has taxable income available, the Company intends to make quarterly distributions to its common Shareholders. Distributions to Shareholders are recorded on the record date. All distributions will be paid at the discretion of the Board and will depend on the Company's earnings, financial condition, maintenance of the Company's tax treatment as a RIC, compliance with applicable BDC regulations and such other factors as the Board may deem relevant from time to time.
Recent Accounting Pronouncements
In January 2021, the FASB issued Accounting Standards Update 2021-01 (“ASU 2021-01”), Reference Rate Reform (Topic 848), which expanded the scope of Topic 848 to include derivative instruments impacted by discounting transition. ASU 2021-01 was effective for all entities through December 31, 2022. On December 21, 2022, the FASB issued Accounting Standards Update 2022-06 (“ASU 2022-06“) to defer the sunset date of ASC 848 until December 31, 2024. The expedients and exceptions provided by the amendments do not apply to contract modifications and hedging relationships entered into or evaluated after December 31, 2024, except for hedging transactions as of December 31, 2024, that an entity has elected certain optional expedients for and that are retained through the end of the hedging relationship. The Company has evaluated and will continue to evaluate the adoption of ASU 2021-01 and has determined it has no material impact on its consolidated financial statements at this time.
22
Initial Portfolio Acquisition
Commencing on the Initial Closing Date and concluding prior to the Company's election to be regulated as a BDC, the Company completed its purchase of a portfolio of investments (the “Initial Portfolio”) pursuant to agreements entered into with several funds managed by the Adviser (the “Initial Portfolio Acquisition”). Subsequent to the Initial Portfolio Acquisition the Company elected to be regulated as a BDC.
Investment Advisory Agreement
On November 24, 2021, the Company entered into the Original Advisory Agreement with the Adviser. Effective January 1, 2023, the Company entered into the Advisory Agreement. The terms of the Advisory Agreement are substantially identical to those of the Original Advisory Agreement. Pursuant to the Advisory Agreement the Adviser is responsible for managing the investment and reinvestment of the assets of the Company, subject to the supervision of the Board, in accordance with the investment objective, policies and restrictions that are set forth in the Company’s registration statement on Form 10. The Adviser is also responsible for originating prospective investments, conducting research and due diligence investigations on potential investments, analyzing investment opportunities, negotiating and structuring the Company’s investments and monitoring its investments and portfolio companies on an ongoing basis. For its services, the Adviser is entitled to receive a base management fee and an incentive fee as set forth in the Advisory Agreement.
The Advisory Agreement may be terminated at any time, without the payment of any penalty upon 60 days' written notice, by the vote of a majority of the Board, or by a majority of the holders of our outstanding voting securities, in accordance with the requirements of the 1940 Act, or by the Adviser. Additionally, the Advisory Agreement will automatically terminate in event of an assignment, as defined in the 1940 Act. Unless earlier terminated, the Advisory Agreement will remain in effect for a period of two years from January 1, 2023 and will remain in effect year to year thereafter if approved annually (i) by a majority of the Board who are not “interested persons” as defined in section 2(a)(19) of the 1940 Act (each an “Independent Director”) and (ii) the Board or the holders of a majority of the Company's outstanding voting securities.
From time to time, the Adviser may pay amounts owed by the Company to third-party providers of goods and services, and the Company will subsequently reimburse the Adviser for such amounts paid on its behalf. Amounts payable to the Adviser are settled in the normal course of business without formal payment terms
The Company pays the Adviser a fee for its services under the Advisory Agreement consisting of two components: a management fee (the “Management Fee”) and an incentive fee (the “Incentive Fee”). The cost of both the Management Fee and the Incentive Fee will ultimately be borne by the Shareholders.
Management Fee
The Management Fee is payable quarterly in arrears and shall be calculated as follows:
For purposes of the Advisory Agreement, gross assets means the Company’s total assets determined on a consolidated basis in accordance with U.S. GAAP, including assets purchased with borrowed amounts. For avoidance of a doubt total assets does not include any undrawn Capital Commitments. For the first calendar quarter in which the Company had operations, gross assets were measured as the average of gross assets at the Initial Drawdown Date and at the end of such first calendar quarter. The Management Fee will be appropriately adjusted for any share issuances or repurchases during the applicable period. If an Exchange Listing occurs on a date other than the first day of a calendar quarter, the management fee will be calculated for such calendar quarter at a weighted rate calculated based on the fee rates applicable before and after the Exchange Listing based on the number of days in such calendar quarter before and after the Exchange Listing.
Incentive Fees
The incentive fee consists of two components that are determined independently of each other, with the result that one component may be payable even if the other is not. One component is based on income (the “Income-Based Fee”) and the other component is based on capital gains (the “Capital Gains Fee”), each as described below:
The Company pays the Income-Based Fee with respect to the pre-incentive fee net investment income in each calendar quarter as follows:
23
These calculations are prorated for any period of less than three months and adjusted for any share issuances or repurchases during the relevant quarter.
The Capital Gains Fee will be determined and payable in arrears as of the end of each calendar year in an amount equal to 15% of 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 as calculated in accordance with U.S. GAAP. The Company will accrue, but will not pay, a capital gains incentive fee with respect to unrealized appreciation because a capital gains incentive fee would be owed to the Adviser if the Company were to sell the relevant investment and realize a capital gain.
Administration Agreement
On November 24, 2021, the Company entered into the Original Administration Agreement with the Administrator. Effective January 1, 2023, the Company entered into the Administration Agreement. Under the terms of the Administration Agreement, the Administrator provides, or oversees the performance of, administrative and compliance services, including, but not limited to, maintaining financial records, overseeing the calculation of NAV, compliance monitoring (including diligence and oversight of the Company’s other service providers), preparing reports to Shareholders and reports filed with the SEC, preparing materials and coordinating meetings of the Board, managing the payment of expenses and the performance of administrative and professional services rendered by others and providing office space, equipment and office services. The Administrator may also offer to provide, on the Company’s behalf, managerial assistance to the Company’s portfolio companies. The terms of the Administration Agreement are substantially similar to the Original Administration Agreement, except that the reimbursements required to be made to the Administrator by the Company will be capped such that the amounts will not exceed an amount of 0.15% of the total gross assets of the Company in any one calendar year. Under the Administration Agreement, the Administrator furnishes the Company with office facilities and equipment and provides clerical, bookkeeping, recordkeeping and other administrative services at such facilities.
The Administration Agreement may be terminated at any time, without the payment of any penalty upon 60 days' written notice, by a vote of the outstanding voting securities of the Company, by the vote of a majority of the Board, or by the Administrator. Unless earlier terminated, the Administration Agreement will remain in effect for a period of two years from January 1, 2023 and will remain in effect year to year thereafter if approved annually (i) by a majority of the Independent Directors and (ii) the Board or the holders of a majority of the Company's outstanding voting securities
For providing these services, the Company will reimburse the Administrator for its costs, expenses and allocable portion of overhead (including rent, office equipment and utilities) and other expenses incurred by the Administrator in performing its administrative obligations under the Administration Agreement, including but not limited to: (i) the Company’s chief compliance officer, chief financial officer and their respective staffs; (ii) investor relations, legal, information technology, operations and other non-investment professionals at the Administrator that perform duties for the Company; and (iii) any internal audit group personnel of MSD or any of its affiliates, subject to the limitations described in the Administration Agreement.
Co-Investment Transactions Exemptive Relief
The Company was granted an SEC exemptive order, which grants the Company exemptive relief permitting the Company, subject to the satisfaction of specific conditions and requirements, to co-invest in privately negotiated investment transactions with certain affiliates of the Adviser.
License Agreement
The Company has entered into a license agreement (the “License Agreement”), pursuant to which the Adviser has granted the Company a non-exclusive license to use the name “MSD.” Under the License Agreement, the Company has a right to use the MSD name for so long as the Adviser or one of its affiliates remains the Company’s investment adviser. Other than with respect to this limited license, the Company will have no legal right to the “MSD” name or logo.
The following table presents the related party fees, expenses and transactions for the three months ended March 31, 2024 and 2023:
|
|
| For the Three Months Ended March 31, |
| |||||
Related Party |
| Source Agreement & Description | 2024 |
|
| 2023 |
| ||
| Consolidated statement of operations: |
|
|
|
|
| |||
Adviser |
| Advisory Agreement - management fees | $ | 4,561 |
|
| $ | 2,026 |
|
Adviser |
| Advisory Agreement - income based incentive fee |
| 6,120 |
|
|
| 3,030 |
|
Adviser |
| Advisory Agreement - board of directors' fees |
| 78 |
|
|
| 77 |
|
Adviser |
| Advisory Agreement - capital gains incentive fee |
| 1,071 |
|
|
| — |
|
Administrator |
| Administration Agreement - administration expense |
| 1,708 |
|
|
| 548 |
|
Note 4. Investments
The composition of the Company’s investment portfolio at amortized cost and fair value as of March 31, 2024 and December 31, 2023 was as follows:
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||||||||||||||||||
|
| Amortized Cost |
|
| Fair Value |
|
| % of Total Investments at Fair Value |
|
| Amortized Cost |
|
| Fair Value |
|
| % of Total Investments at Fair Value |
| ||||||
First lien debt |
| $ | 2,285,419 |
|
| $ | 2,291,434 |
|
|
| 89.88 | % |
| $ | 1,942,665 |
|
| $ | 1,942,843 |
|
|
| 88.43 | % |
Second lien debt |
|
| 234,609 |
|
|
| 229,340 |
|
|
| 9.00 |
|
|
| 234,306 |
|
|
| 226,318 |
|
|
| 10.30 |
|
Preferred equity |
|
| 32,897 |
|
|
| 28,577 |
|
|
| 1.12 |
|
|
| 31,846 |
|
|
| 27,892 |
|
|
| 1.27 |
|
Total investments |
| $ | 2,552,925 |
|
| $ | 2,549,351 |
|
|
| 100.00 | % |
| $ | 2,208,817 |
|
| $ | 2,197,053 |
|
|
| 100.00 | % |
24
The industry composition of investments at fair value as of March 31, 2024 and December 31, 2023 was as follows:
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Aerospace & Defense |
|
| 3.71 | % |
|
| 6.06 | % |
Automotive |
|
| 0.40 |
|
|
| 0.05 |
|
Banking, Finance, Insurance & Real Estate |
|
| 6.94 |
|
|
| 4.81 |
|
Beverage, Food & Tobacco |
|
| 0.83 |
|
|
| 0.97 |
|
Capital Equipment |
|
| 4.81 |
|
|
| 5.26 |
|
Chemicals, Plastics & Rubber |
|
| 2.45 |
|
|
| 1.88 |
|
Construction & Building |
|
| 4.82 |
|
|
| — |
|
Consumer goods: Durable |
|
| 3.84 |
|
|
| 1.80 |
|
Consumer goods: Non-durable |
|
| 2.43 |
|
|
| 2.79 |
|
Containers, Packaging & Glass |
|
| 1.10 |
|
|
| — |
|
Energy: Oil & Gas |
|
| 2.48 |
|
|
| 3.50 |
|
Healthcare & Pharmaceuticals |
|
| 5.47 |
|
|
| 8.87 |
|
High Tech Industries |
|
| 4.33 |
|
|
| 3.59 |
|
Hotel, Gaming & Leisure |
|
| 11.14 |
|
|
| 10.14 |
|
Media: Advertising, Printing & Publishing |
|
| 2.64 |
|
|
| 3.33 |
|
Media: Diversified & Production |
|
| 3.03 |
|
|
| 3.48 |
|
Retail |
|
| 7.06 |
|
|
| 7.60 |
|
Services: Business |
|
| 11.72 |
|
|
| 12.82 |
|
Services: Consumer |
|
| 6.87 |
|
|
| 7.16 |
|
Telecommunications |
|
| 7.21 |
|
|
| 8.33 |
|
Transportation: Cargo |
|
| 2.66 |
|
|
| 2.94 |
|
Transportation: Consumer |
|
| 3.16 |
|
|
| 3.56 |
|
Wholesale |
|
| 0.90 |
|
|
| 1.06 |
|
Total |
|
| 100.00 | % |
|
| 100.00 | % |
The geographic composition of investments at cost and fair value as of March 31, 2024 and December 31, 2023 was as follows:
|
| March 31, 2024 |
| |||||||||||||
|
| Amortized Cost |
|
| Fair Value |
|
| % of Total Investments at Fair Value |
|
| Fair Value as % of Net Assets |
| ||||
United States |
| $ | 2,304,521 |
|
| $ | 2,306,022 |
|
|
| 90.46 | % |
|
| 191.57 | % |
Canada |
|
| 62,441 |
|
|
| 61,152 |
|
|
| 2.40 |
|
|
| 5.08 |
|
Luxembourg |
|
| 75,065 |
|
|
| 71,383 |
|
|
| 2.80 |
|
|
| 5.93 |
|
United Kingdom |
|
| 110,898 |
|
|
| 110,794 |
|
|
| 4.35 |
|
|
| 9.20 |
|
Total |
| $ | 2,552,925 |
|
| $ | 2,549,351 |
|
|
| 100.00 | % |
|
| 211.79 | % |
| December 31, 2023 |
| ||||||||||||||
| Amortized Cost |
|
| Fair Value |
|
| % of Total Investments at Fair Value |
|
| Fair Value as % of Net Assets |
| |||||
United States |
| $ | 2,016,083 |
|
| $ | 2,005,820 |
|
|
| 91.30 | % |
|
| 213.95 | % |
Canada |
|
| 74,803 |
|
|
| 74,817 |
|
|
| 3.40 |
|
|
| 7.98 |
|
Luxembourg |
|
| 70,104 |
|
|
| 68,145 |
|
|
| 3.10 |
|
|
| 7.27 |
|
United Kingdom |
|
| 47,827 |
|
|
| 48,271 |
|
|
| 2.20 |
|
|
| 5.15 |
|
Total |
| $ | 2,208,817 |
|
| $ | 2,197,053 |
|
|
| 100.00 | % |
|
| 234.35 | % |
As of both March 31, 2024 and December 31, 2023, one investment in the portfolio was on non-accrual status.
As of March 31, 2024, on a fair value basis, approximately 96.9% of our performing debt investments bore interest at a floating rate and approximately 3.1% of our performing debt investments bore interest at a fixed rate.
As of December 31, 2023, on a fair value basis, approximately 96.3% of our performing debt investments bore interest at a floating rate and approximately 3.7% of our performing debt investments bore interest at a fixed rate.
25
Note 5. Derivative Instruments
The Company may enter into foreign currency forward contracts from time to time to facilitate the settlement of purchases and sales of investments denominated in foreign currencies and to economically hedge the impact that an adverse change in foreign exchange rates would have on the value of investments denominated in foreign currencies. A foreign currency forward contract is a commitment to purchase or sell a foreign currency at a future date at a negotiated forward rate. These contracts are marked-to-market by recognizing the difference between the contract forward exchange rate and the forward market exchange rate on the last day of the period presented as unrealized appreciation or depreciation. Realized gains or losses are recognized when forward contracts are settled. Risks arise as a result of the potential inability of the counterparties to meet the terms of their contracts; we attempt to limit counterparty risk by only dealing with well-known counterparties and those that we believe have the financial resources to honor their obligations. The foreign currency forward contracts open at the end of the period are generally indicative of the volume of activity during the period.
The following tables present the open foreign currency forward contracts as of March 31, 2024 and December 31, 2023:
March 31, 2024 |
| |||||||||||||||||||||
Foreign Currency |
| Settlement Date |
| Statement of Assets and Liabilities Location |
| Counterparty |
| Amount Transacted |
|
| Notional Value at Settlement |
|
| Notional Value at Period End |
|
| Fair Value |
| ||||
CAD |
| June 20, 2024 |
| Unrealized appreciation on foreign currency forward contracts |
| Macquarie |
|
| CAD 90,212 |
|
| $ | 66,681 |
|
| $ | 66,672 |
|
| $ | 9 |
|
GBP |
| June 20, 2024 |
| Unrealized appreciation on foreign currency forward contracts |
| Macquarie |
|
| GBP 14,904 |
|
|
| 17,972 |
|
|
| 17,830 |
|
|
| 142 |
|
Total |
|
|
|
|
|
|
|
|
|
| $ | 84,653 |
|
| $ | 84,502 |
|
| $ | 151 |
|
December 31, 2023 |
| |||||||||||||||||||||
Foreign Currency |
| Settlement Date |
| Statement of Assets and Liabilities Location |
| Counterparty |
| Amount Transacted |
|
| Notional Value at Settlement |
|
| Notional Value at Period End |
|
| Fair Value |
| ||||
CAD |
| March 20, 2024 |
| Unrealized depreciation on foreign currency forward contracts |
| Macquarie |
|
| CAD 101,611 |
|
| $ | 76,165 |
|
| $ | 76,828 |
|
| $ | (663 | ) |
GBP |
| March 20, 2024 |
| Unrealized depreciation on foreign currency forward contracts |
| Macquarie |
|
| GBP 14,904 |
|
|
| 18,870 |
|
|
| 19,004 |
|
|
| (134 | ) |
Total |
|
|
|
|
|
|
|
|
|
| $ | 95,034 |
|
| $ | 95,831 |
|
| $ | (797 | ) |
The following table presents the net realized and unrealized gains and losses on derivative instruments recorded for the three months ended March 31, 2024 and 2023:
|
|
|
| For the Three Months Ended March 31, |
| |||||
|
| Statement of Operations Location |
| 2024 |
|
| 2023 |
| ||
Net realized gains (losses) |
|
|
|
|
|
|
|
| ||
Foreign currency forward contracts |
| Net realized gains (losses) on foreign currency forward contracts |
| $ | 1,031 |
|
| $ | 606 |
|
Net change in unrealized appreciation (depreciation) |
|
|
|
|
|
|
|
| ||
Foreign currency forward contracts |
| Net change in unrealized appreciation (depreciation) on foreign currency forward contracts |
|
| 947 |
|
|
| (1,245 | ) |
Net realized and unrealized gains on foreign currency forward contracts |
|
|
| $ | 1,978 |
|
| $ | (639 | ) |
For derivatives traded under an International Swaps and Derivatives Association Master Agreement (“ISDA Master Agreement”), the collateral requirements are typically calculated by netting the mark-to-market amount for each transaction under such agreement and comparing that amount to the value of any collateral currently pledged by the Company or the counterparty. Cash collateral that has been pledged, if any, to cover obligations of the Company and cash collateral received from the counterparty, if any, is reported on the consolidated statements of assets and liabilities as collateral deposits (received) for foreign currency forward contracts. Generally, the amount of collateral due from or to a party has to exceed a minimum transfer amount threshold before a transfer is required. To the extent amounts due to the Company from a counterparty are not fully collateralized, the Company bears the risk of loss from counterparty non-performance.
The following table presents the derivative assets and liabilities by counterparty, net of amounts available for offset under a master netting agreement or similar arrangement, and net of related collateral received for assets or pledged for liabilities as of March 31, 2024 and December 31, 2023:
26
As of |
| Counterparty |
| Gross Derivative Assets in Consolidated Statement of Assets and Liabilities |
|
| Gross Derivative Liabilities in Consolidated Statement of Assets and Liabilities |
|
| Collateral Pledged (1) |
|
| Net position of Derivative Assets, Liabilities and Pledged Collateral |
| ||||
March 31, 2024 |
| Macquarie |
| $ | 151 |
|
| $ | — |
|
| $ | — |
|
| $ | 151 |
|
As of |
| Counterparty |
| Gross Derivative Assets in Consolidated Statement of Assets and Liabilities |
|
| Gross Derivative Liabilities in Consolidated Statement of Assets and Liabilities |
|
| Collateral Pledged (1) |
|
| Net position of Derivative Assets, Liabilities and Pledged Collateral |
| ||||
December 31, 2023 |
| Macquarie |
| $ | — |
|
| $ | (797 | ) |
| $ | — |
|
| $ | (797 | ) |
Note 6. Fair Value Measurements
The following tables present the fair value hierarchy of financial instruments, as of March 31, 2024 and December 31, 2023, according to the fair value hierarchy as described in Note 2. Significant Accounting Policies:
|
| March 31, 2024 |
| |||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
First lien debt |
| $ | — |
|
| $ | 806,187 |
|
| $ | 1,485,247 |
|
| $ | 2,291,434 |
|
Second lien debt |
|
| — |
|
|
| 52,997 |
|
|
| 176,343 |
|
|
| 229,340 |
|
Preferred equity |
|
| — |
|
|
| — |
|
|
| 28,577 |
|
|
| 28,577 |
|
Cash and cash equivalents |
|
| 139,687 |
|
|
| — |
|
|
| — |
|
|
| 139,687 |
|
Total Portfolio Investments, Cash and Cash Equivalents |
| $ | 139,687 |
|
| $ | 859,184 |
|
| $ | 1,690,167 |
|
| $ | 2,689,038 |
|
Percentage of total |
|
| 5.19 | % |
|
| 31.95 | % |
|
| 62.85 | % |
|
| 100.00 | % |
Foreign currency forward contracts |
| $ | — |
|
| $ | 151 |
|
| $ | — |
|
| $ | 151 |
|
| December 31, 2023 |
| ||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
First lien debt |
| $ | — |
|
| $ | 742,678 |
|
| $ | 1,200,165 |
|
| $ | 1,942,843 |
|
Second lien debt |
|
| — |
|
|
| 95,443 |
|
|
| 130,875 |
|
|
| 226,318 |
|
Preferred equity |
|
| — |
|
|
| — |
|
|
| 27,892 |
|
|
| 27,892 |
|
Cash and cash equivalents |
|
| 98,606 |
|
|
| — |
|
|
| — |
|
|
| 98,606 |
|
Total Portfolio Investments, Cash and Cash Equivalents |
| $ | 98,606 |
|
| $ | 838,121 |
|
| $ | 1,358,932 |
|
| $ | 2,295,659 |
|
Percentage of total |
|
| 4.30 | % |
|
| 36.51 | % |
|
| 59.20 | % |
|
| 100.00 | % |
Foreign currency forward contracts |
| $ | — |
|
| $ | (797 | ) |
| $ | — |
|
| $ | (797 | ) |
The following tables present changes in the fair value of financial instruments for which Level 3 inputs were used to determine the fair value for the three months ended March 31, 2024:
| For the Three Months Ended March 31, 2024 |
| |||||||||||||
| First Lien Debt |
|
| Second Lien Debt |
|
| Preferred Equity |
|
| Total Investments |
| ||||
Fair value, beginning of year | $ | 1,200,165 |
|
| $ | 130,876 |
|
| $ | 27,892 |
|
| $ | 1,358,933 |
|
Purchase of investments (including PIK) |
| 381,680 |
|
|
| 94 |
|
|
| 1,054 |
|
|
| 382,828 |
|
Proceeds from principal repayments and sales of investments |
| (104,610 | ) |
|
| — |
|
|
| — |
|
|
| (104,610 | ) |
Amortization of premium/accretion of discount, net |
| 2,345 |
|
|
| 130 |
|
|
| (3 | ) |
|
| 2,472 |
|
Net realized gain (loss) on investments |
| 2,955 |
|
|
| — |
|
|
| — |
|
|
| 2,955 |
|
Net change in unrealized appreciation (depreciation) on investments |
| 2,712 |
|
|
| 449 |
|
|
| (366 | ) |
|
| 2,795 |
|
Transfers to Level 3 (1) |
| — |
|
|
| 44,794 |
|
|
| — |
|
|
| 44,794 |
|
Fair value, end of period | $ | 1,485,247 |
|
| $ | 176,343 |
|
| $ | 28,577 |
|
| $ | 1,690,167 |
|
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliated company investments still held at March 31, 2024 | $ | 3,472 |
|
| $ | 449 |
|
| $ | (366 | ) |
| $ | 3,555 |
|
27
The following tables present changes in the fair value of financial instruments for which Level 3 inputs were used to determine the fair value for the three months ended March 31, 2023.
| For the Three Months Ended March 31, 2023 |
| |||||||||||||
| First Lien Debt |
|
| Second Lien Debt |
|
| Preferred Equity |
|
| Total Investments |
| ||||
Fair value, beginning of year | $ | 494,159 |
|
| $ | 195,687 |
|
| $ | 22,267 |
|
| $ | 712,113 |
|
Purchase of investments (including PIK) |
| 212,848 |
|
|
| — |
|
|
| 1,443 |
|
|
| 214,291 |
|
Proceeds from principal repayments and sales of investments |
| (34,411 | ) |
|
| — |
|
|
| (214 | ) |
|
| (34,625 | ) |
Amortization of premium/accretion of discount, net |
| 823 |
|
|
| 97 |
|
|
| (3 | ) |
|
| 917 |
|
Net realized gain (loss) on investments |
| (683 | ) |
|
| — |
|
|
| (1 | ) |
|
| (684 | ) |
Net change in unrealized appreciation (depreciation) on investments |
| 3,095 |
|
|
| 143 |
|
|
| (336 | ) |
|
| 2,902 |
|
Transfers out of Level 3 (1) |
| (40,185 | ) |
|
| (68,250 | ) |
|
| — |
|
|
| (108,435 | ) |
Transfers to Level 3 (2) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Fair value, end of period | $ | 635,646 |
|
| $ | 127,677 |
|
| $ | 23,156 |
|
| $ | 786,479 |
|
Net change in unrealized depreciation on non-controlled/non-affiliated company investments still held at March 31, 2023 |
| 2,248 |
|
|
| 143 |
|
|
| (336 | ) |
|
| 2,055 |
|
The Company generally employs the Income Based Approach (as described below) to estimate the fair value of the investment. Additionally, the Company may employ the Market Based Approach (as described below) to assess the total enterprise value of the portfolio company or any applicable collateral, in order to evaluate coverage of the Company’s debt investment.
Income Based Approach: The Company may use a discounted cash flow analysis to estimate the fair value of the investment, specifically the yield method. Projected cash flows represent the relevant investment’s contractual interest, fee and principal payments plus the assumption of full principal recovery at the investment’s expected maturity date. These cash flows are discounted at a rate that is calibrated to the initial transaction and monitored over time to adjust for changes in observed market spreads and yields since the issuance of the investment as well as changes in company specific factors. Significant increases or decreases in the discount rate would result in a decrease or increase in the fair value measurement.
Market Based Approach: The Company may estimate the total enterprise value of each portfolio company by utilizing cash flow (typically EBITDA or revenue, or the relevant industry metric) multiples of publicly traded comparable companies and comparable transactions. The Company considers numerous factors when selecting the appropriate companies whose trading multiples are used to value its portfolio companies. These factors include, but are not limited to, the type of organization, similarity to the business being valued, and relevant risk factors, as well as size, profitability and growth expectations. The Company may apply an average of various relevant comparable company multiples to the portfolio company’s latest twelve month EBITDA, revenue or other applicable metric to calculate the enterprise value of the portfolio company. The Company may also consider projected multiples in the assessment if applicable.
The following tables present quantitative information about the significant unobservable inputs of the Company’s Level 3 financial instruments as of March 31, 2024 and December 31, 2023, respectively. The tables are not intended to be all-inclusive, but instead capture the significant unobservable inputs relevant to the Company’s determination of fair value.
| March 31, 2024 |
| ||||||||||||||||||
|
|
|
|
|
|
|
| Range |
|
|
|
| ||||||||
| Fair Value |
|
| Valuation Technique |
| Unobservable Input (1) |
| Low |
|
| High |
|
| Weighted Average (2) |
| |||||
First lien debt |
| $ | 1,243,041 |
|
| Market Yield Analysis |
| Market Yield Discount Rates |
|
| 8.83 | % |
|
| 25.00 | % |
|
| 11.97 | % |
|
|
| 237,210 |
|
| Recent Transaction |
| Transaction Price |
|
| 97.00 |
|
|
| 99.02 |
|
|
| 98.07 |
|
|
|
| 1,480,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Second lien debt |
|
| 131,343 |
|
| Market Yield Analysis |
| Market Yield Discount Rates |
|
| 12.37 | % |
|
| 14.09 | % |
|
| 13.62 | % |
|
|
| 131,343 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Preferred equity |
|
| 28,573 |
|
| Market Yield Analysis |
| Market Yield Discount Rates |
|
| 9.43 | % |
|
| 20.17 | % |
|
| 17.39 | % |
|
|
|
|
| Black-Scholes |
| Volatility |
|
| 37.88 | % |
|
| 37.88 | % |
|
| 37.88 | % | |
Total |
| $ | 1,640,167 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
28
| December 31, 2023 |
| ||||||||||||||||||
|
|
|
|
|
|
|
| Range |
|
|
|
| ||||||||
| Fair Value |
|
| Valuation Technique |
| Unobservable Input (1) |
| Low |
|
| High |
|
| Weighted Average (2) |
| |||||
First lien debt |
| $ | 1,126,991 |
|
| Market Yield Analysis |
| Market Yield Discount Rates |
|
| 9.31 | % |
|
| 25.00 | % |
|
| 12.11 | % |
|
| 73,174 |
|
| Recent Transaction |
| Transaction Price |
|
| 98.00 |
|
|
| 98.58 |
|
|
| 98.07 |
| |
|
| 1,200,165 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Second lien debt |
|
| 130,876 |
|
| Market Yield Analysis |
| Market Yield Discount Rates |
|
| 12.01 | % |
|
| 14.97 | % |
|
| 13.40 | % |
|
|
| 130,876 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Preferred equity |
|
| 27,892 |
|
| Market Yield Analysis |
| Market Yield Discount Rates |
|
| 9.42 | % |
|
| 19.78 | % |
|
| 17.01 | % |
|
|
|
|
| Black-Scholes |
| Volatility |
|
| 34.90 | % |
|
| 34.90 | % |
|
| 34.90 | % | |
Total |
| $ | 1,358,933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Instruments Disclosed, But Not Carried at Fair Value
Debt
The fair value of the Company’s credit facilities and loan repurchase obligations, which would be categorized as Level 3 within the fair value hierarchy, as of both March 31, 2024 and December 31, 2023, respectively, approximates their carrying value as the credit facilities have variable interest based on selected short-term rates.
Other
The carrying amounts of the Company’s assets and liabilities, other than investments at fair value and debt, approximate fair value. These financial instruments are categorized as Level 3 within the fair value hierarchy.
Note 7. Borrowings
In accordance with the 1940 Act, with certain limitations, the Company is allowed to borrow amounts such that its asset coverage, as defined in the 1940 Act, is at least 150% after such borrowing if certain requirements are met.
The Company’s outstanding debt obligations as of March 31, 2024 and December 31, 2023 were as follows:
| March 31, 2024 | |||||||||||||||||
| Aggregate |
|
| Outstanding |
|
| Carrying |
|
| Unused |
|
| Maturity Date | |||||
SPV I facility |
| $ | 485,000 |
|
| $ | 449,000 |
|
| $ | 445,976 |
|
| $ | 36,000 |
|
| 12/21/2026 |
SPV II facility |
|
| 495,000 |
|
|
| 424,000 |
|
|
| 418,141 |
|
|
| 71,000 |
|
| 8/15/2028 |
Collateralized loan obligations |
|
| 390,000 |
|
|
| 390,000 |
|
|
| 386,469 |
|
|
| — |
|
| 11/15/2035 |
Subscription facility |
|
| 200,000 |
|
|
| 100,000 |
|
|
| 99,495 |
|
|
| 100,000 |
|
| 12/18/2024 |
Loan repurchase obligations |
|
| 158,331 |
|
|
| 158,331 |
|
|
| 158,331 |
|
|
| — |
|
| Various (3) |
Total |
| $ | 1,728,331 |
|
| $ | 1,521,331 |
|
| $ | 1,508,412 |
|
| $ | 207,000 |
|
|
|
|
| December 31, 2023 | ||||||||||||||||
| Aggregate |
|
| Outstanding |
|
| Carrying |
|
| Unused |
|
| Maturity Date | |||||
SPV I facility |
| $ | 485,000 |
|
| $ | 378,000 |
|
| $ | 374,700 |
|
| $ | 107,000 |
|
| 12/21/2026 |
SPV II facility |
|
| 445,000 |
|
|
| 295,000 |
|
|
| 289,349 |
|
|
| 150,000 |
|
| 8/15/2028 |
Collateralized loan obligations |
|
| 390,000 |
|
|
| 390,000 |
|
|
| 386,393 |
|
|
| — |
|
| 11/15/2035 |
Subscription facility |
|
| 200,000 |
|
|
| 35,000 |
|
|
| 34,319 |
|
|
| 165,000 |
|
| 12/18/2024 |
Loan repurchase obligations |
|
| 50,025 |
|
|
| 50,025 |
|
|
| 50,025 |
|
|
| — |
|
| Various (3) |
Total |
| $ | 1,570,025 |
|
| $ | 1,148,025 |
|
| $ | 1,134,786 |
|
| $ | 422,000 |
|
|
|
29
The components of interest expense for the three months ended March 31, 2024 and 2023 were as follows:
|
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| |||
Stated interest expense |
| $ | 27,477 |
|
| $ | 10,938 |
|
Unused/undrawn fees |
|
| 214 |
|
|
| 31 |
|
Administration fees |
|
| 306 |
|
|
| 295 |
|
Amortization of deferred financing costs |
|
| 835 |
|
|
| 401 |
|
Total interest expense |
| $ | 28,832 |
|
| $ | 11,665 |
|
Average borrowings |
| $ | 1,353,025 |
|
| $ | 634,462 |
|
|
|
|
|
|
| |||
Weighted average interest rate (1) |
|
| 8.28 | % |
|
| 7.10 | % |
Amortization of financing costs |
|
| 0.25 | % |
|
| 0.25 | % |
Total borrowing costs |
|
| 8.53 | % |
|
| 7.35 | % |
Description of the Company's Credit Facilities and Loan Repurchase Obligations
SPV I Facility
On December 21, 2021, SPV I, the Company’s wholly-owned subsidiary, entered into the Loan Financing and Servicing Agreement (as amended from time to time,"LFSA") with Deutsche Bank AG, New York Branch (“DB”) (the “SPV I Facility”). DB serves as facility agent, U.S. Bank National Association serves as collateral agent and collateral custodian and the Company serves as servicer under the SPV I Facility.
As of the amendment on November 21, 2022, advances under the SPV I Facility bear interest at a per annum rate equal to the three-month SOFR in effect, plus the applicable margin of 2.41% per annum, inclusive of a credit spread adjustment (“CSA”) of 0.26%, with a SOFR floor of 0.25%. SPV I pays a commitment fee of 0.25% per annum (or 0.50% per annum if borrowings are less than 75% of the commitment amount) on the average daily unused amount of the financing commitments until the third anniversary of the SPV I Facility. Additionally, SPV I pays DB an administrative agent fee 0.25% of the total commitment amount for serving as facility agent.
Prior to the amendment on November 21, 2022, Advances under the SPV I Facility bore interest at a per annum rate equal to the three-month LIBOR in effect, plus the applicable margin of 2.15% per annum with a LIBOR floor of 0.25%. The commitment fee and the administrative agent fee were unchanged.
In connection with the amendment on December 16, 2022, the maximum commitment amount of the SPV I Facility increased from $400 million to $485 million. Proceeds from borrowings under the SPV I Facility are used to fund portfolio investments by SPV I. The period during which SPV I may make borrowings under the SPV I Facility expires on December 31, 2024 and the SPV I Facility is scheduled to mature on December 21, 2026.
As of both March 31, 2024 and December 31, 2023, respectively, the Company was in compliance with all covenants associated with the SPV I Facility.
SPV II Facility
On August 15, 2023, SPV II entered into a Loan and Security Agreement (together with the exhibits and schedules thereto, and as amended from time to time, the “Loan and Security Agreement”) with Citizens Bank N.A as lender and administrative agent, the Company as collateral manager, the other lenders party thereto, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian (the “SPV II Facility”).
Advances under the SPV II Facility bear interest at a per annum rate equal to SOFR in effect, plus an applicable margin of 2.75% per annum with a SOFR floor of 0.00%. SPV II pays a commitment fee of 0.25% per annum (or 0.50% per annum if borrowings are less than 75% of the commitment amount) on the average daily unused amount of the financing commitments until the third anniversary of the SPV II Facility.
In connection with the September 8, 2023 amendment, the maximum commitment amount of the SPV II Facility increased from $370 million to $445 million. Subsequently, in connection with the March 21, 2024 amendment, the maximum commitment amount of the SPV II Facility increased from $445 million to $495 million. Proceeds from borrowings under the SPV II Facility may be used to fund portfolio investments by SPV II. The period during which SPV II may make borrowings under the SPV II Facility expires on August 15, 2026 and the SPV II Facility is scheduled to mature on August 15, 2028.
As of both March 31, 2024 and December 31, 2023, respectively, the Company was in compliance with all covenants associated with the SPV II Facility.
Subscription Facility
On December 21, 2021, the Company entered into a senior secured revolving credit facility with Bank of America, N.A. (“BAML”) (as amended from time to time the “Subscription Facility”). BAML serves as administrative agent and lender.
The Subscription Facility provides for secured borrowings of up to $200 million. The maximum principal amount is subject to availability under the Subscription Facility, which is based on certain of the Company’s unfunded investor equity capital commitments, and restrictions imposed on borrowings under the 1940 Act. The Subscription Facility provides for the issuance of letters of credit on behalf of the Company in an aggregate face amount not to exceed $40 million. Proceeds from the borrowings under the Subscription Facility may be used for general corporate purposes of the Company and its subsidiaries in the ordinary course of business. The Subscription Facility’s maturity date was extended from December 21, 2023 to December 18, 2024 in connection with the December 21, 2023 amendment.
30
As of the amendment on December 21, 2023, advances under the Subscription Facility bear interest at a per annum rate equal to the daily SOFR rate in effect, plus the applicable margin of 2.50% per annum. The Company pays a commitment fee of 0.35% per annum on the average daily unused amount of the financing commitments.
Prior to the amendment on December 31, 2023, advances under the Subscription Facility bore interest at a per annum rate equal to the daily Bloomberg Short-Term Bank Yield Index (“BSBY”) rate in effect, plus the applicable margin of 2.00% per annum. The Company pays a commitment fee of 0.25% per annum on the average daily unused amount of the financing commitments.
As of both March 31, 2024 and December 31, 2023, respectively, the Company was in compliance with all covenants associated with the Subscription Facility.
Repurchase Obligations
In order to finance certain investment transactions, the Company may, from time to time, enter into repurchase agreements with Macquarie Bank Limited (“Macquarie”), whereby the Company sells to Macquarie an investment that it holds and concurrently enters into an agreement to repurchase the same investment at an agreed-upon price at a future date, not to exceed 90-days from the date it was sold (the “Macquarie Transaction”).
In accordance with ASC Topic 860, Transfers and Servicing, these Macquarie Transactions meet the criteria for secured borrowings. Accordingly, the investment financed by the Macquarie Transaction remains on the Company’s Statements of Assets and Liabilities as an asset, and the Company records a liability to reflect its repurchase obligation to Macquarie (the “Repurchase Obligation”). The Repurchase Obligation is secured by the respective investment that is the subject of the repurchase agreement.
As of March 31, 2024, the Company had outstanding Repurchase Obligations of $158.3 million associated with repurchase agreements that were entered into on March 4, March 8, and March 18. Such Repurchase Obligations are collateralized by a portion of the Company’s term loan holdings in Cook & Boardman Group, Alteryx, Inc., and Beacon Mobility Corp. Interest under these Repurchase Obligations is calculated at the inception of each repurchase agreement, as the 3 month SOFR rate in effect, plus the applicable margin of 3.50%. As of March 31, 2024, the remaining contractual maturities of the repurchase agreements were between 63-77 days.
As of December 31, 2023, the Company had outstanding Repurchase Obligations of $50.0 million associated with repurchase agreements that were entered into on November 3, and 14, 2023. Such Repurchase Obligations are collateralized by a portion of the Company’s term loan holdings in Highgate Hotels, L.P. and PetVet Care Centers. Interest under these Repurchase Obligations is calculated at the inception of each repurchase agreement, as the 3 month SOFR rate in effect, plus the applicable margin of 3.50%. As of December 31, 2023, the remaining contractual maturities of the repurchase agreements were between 32-43 days.
2023 Debt Securitization
On November 15, 2023 (the “Closing Date”), the Company completed an approximate $600 million term debt securitization (the “2023 Debt Securitization”). Term debt securitization is also known as a collateralized loan obligation and is a form of secured financing incurred by the Company.
The notes offered in the 2023 Debt Securitization (the “Notes”) were issued by MSD BDC CLO I, LLC (the “Issuer”), a wholly-owned, consolidated subsidiary of the Company pursuant to an Indenture, dated the Closing Date, between the Issuer and U.S. Bank Trust Company, National Association, as trustee (the “Indenture”). The 2023 Notes consist of $336 million of Class A Notes, which bear interest at a rate per annum equal to SOFR in effect, plus an applicable margin of 2.70%; $54 million of Class B Notes, which bear interest at SOFR plus an applicable margin of 3.65%; $36 million of Class C Notes, which bear interest at SOFR plus an applicable margin of 4.00%; and approximately $163.6 million of Preferred Shares, which do not bear interest. The Company directly retained all of the Class C Notes and all of the Preferred Shares of the 2023 Debt Securitization at par in exchange for the Company’s sale and contribution to the Issuer of the initial closing date portfolio. Both the Class C Notes and Preferred Shares are eliminated in consolidation.
The Notes are backed by a diversified portfolio of senior secured and second lien loans (the “Collateral Obligations”). The initial portfolio will consist of Collateral Obligations acquired by the Issuer on the Closing Date from the Company pursuant to a Master Transfer Agreement, dated as of the Closing Date, among the Company, as seller, and the Issuer, as purchaser (the "Master Transfer Agreement"). Certain of the Collateral Obligations transferred to the Issuer pursuant to the Master Transfer Agreement were acquired by the Company from SPV I pursuant to the Master Participation Agreement, dated as of the Closing Date, among the Company, as purchaser and the SPV I Facility, as seller. The Notes mature on October 15, 2035.
The Notes are the secured obligation of the Issuer. The Notes have not been, and will not be, registered under the 1933 Act, or any state “blue sky” laws and may not be offered or sold in the United States absent registration with the SEC or applicable exemption from registration.
The Adviser serves as collateral manager to the Issuer under a collateral management agreement (the “Collateral Management Agreement”). However, for so long as the Company holds any Preferred Shares the Collateral Management Fees, which, for the avoidance of doubt, shall include any Base Management Fee, Subordinated Management Fee, and Incentive Management Fee (as each such term is defined in the Collateral Management Agreement), shall be $0.
Note 8. Commitments and Contingencies
Portfolio Company Commitments
The amounts associated with unfunded commitments to provide funds to portfolio companies are not recorded in the Company’s consolidated statements of assets and liabilities. Since these commitments and the associated amounts may expire without being drawn upon, the total commitment amount does not necessarily represent a future cash requirement. As of March 31, 2024 and December 31, 2023, the Company’s unfunded commitments consisted of the following:
31
March 31, 2024 |
| |||||||||||
Investments—non-controlled/non-affiliated |
| Commitment Type |
| Commitment |
| Unfunded |
|
| Fair |
| ||
First Lien Debt |
|
|
|
|
|
|
|
|
|
| ||
Accession Risk Management |
| Delayed Draw |
| 11/1/2029 |
| $ | 27,761 |
|
| $ | (378 | ) |
Ardonagh Midco 3 PLC |
| Delayed Draw |
| 2/15/2031 |
|
| 4,217 |
|
|
| (32 | ) |
Azurite Intermediate Holdings, Inc. |
| Delayed Draw |
| 3/18/2031 |
|
| 59,375 |
|
|
| (445 | ) |
Azurite Intermediate Holdings, Inc. |
| Revolver |
| 3/18/2031 |
|
| 9,500 |
|
|
| (143 | ) |
Beacon Mobility Corp. |
| Delayed Draw |
| 12/31/2025 |
|
| 247 |
|
|
| (6 | ) |
Boasso Global |
| Delayed Draw |
| 10/3/2024 |
|
| 5,213 |
|
|
| 7 |
|
Boasso Global |
| Revolver |
| 7/1/2026 |
|
| 4,514 |
|
|
| (94 | ) |
Circor International, Inc. |
| Revolver |
| 10/18/2029 |
|
| 7,759 |
|
|
| (146 | ) |
Confluent Holdings LLC |
| Delayed Draw |
| 3/28/2029 |
|
| 14,394 |
|
|
| — |
|
DFS Holding Company |
| Delayed Draw |
| 1/31/2029 |
|
| 3,000 |
|
|
| (22 | ) |
Disa Holdings Corp. |
| Delayed Draw |
| 9/9/2028 |
|
| 12,497 |
|
|
| (94 | ) |
Disa Holdings Corp. |
| Revolver |
| 9/9/2028 |
|
| 4,166 |
|
|
| (62 | ) |
Faraday Buyer, LLC |
| Delayed Draw |
| 10/11/2028 |
|
| 3,514 |
|
|
| (31 | ) |
Foundation Risk Partners |
| Delayed Draw |
| 10/29/2028 |
|
| 31,950 |
|
|
| (277 | ) |
Frontgrade Technologies Inc. |
| Revolver |
| 1/9/2028 |
|
| 7,211 |
|
|
| (86 | ) |
Galway Borrower LLC |
| Delayed Draw |
| 9/30/2028 |
|
| 22,203 |
|
|
| (107 | ) |
Galway Borrower LLC |
| Revolver |
| 9/30/2028 |
|
| 2,345 |
|
|
| (23 | ) |
Highgate Hotels, L.P. |
| Revolver |
| 10/26/2029 |
|
| 12,500 |
|
|
| (236 | ) |
Hotel Equities Group, LLC |
| Revolver |
| 1/22/2029 |
|
| 4,175 |
|
|
| (81 | ) |
K1 Speed Inc. |
| Delayed Draw |
| 1/2/2029 |
|
| 3,036 |
|
|
| (59 | ) |
LJ Perimeter Buyer, Inc |
| Delayed Draw |
| 10/31/2028 |
|
| 3,042 |
|
|
| (23 | ) |
Maxar Technologies Inc. |
| Revolver |
| 5/3/2029 |
|
| 7,125 |
|
|
| (56 | ) |
Momentive Global |
| Revolver |
| 5/31/2029 |
|
| 5,714 |
|
|
| 45 |
|
Natural Partners, Inc. |
| Revolver |
| 11/29/2027 |
|
| 2,813 |
|
|
| (54 | ) |
Neptune Platform Buyer, LLC |
| Delayed Draw |
| 1/19/2031 |
|
| 2,030 |
|
|
| (15 | ) |
PetVet Care Centers |
| Delayed Draw |
| 11/15/2030 |
|
| 6,981 |
|
|
| (63 | ) |
PetVet Care Centers |
| Revolver |
| 11/15/2029 |
|
| 6,981 |
|
|
| (133 | ) |
Sandlot Baseball Borrower Co. |
| Delayed Draw |
| 12/27/2028 |
|
| 33,333 |
|
|
| 33 |
|
Systems Planning and Analysis, Inc. |
| Delayed Draw |
| 8/16/2027 |
|
| 42,286 |
|
|
| (302 | ) |
Systems Planning and Analysis, Inc. |
| Revolver |
| 8/16/2027 |
|
| 3,136 |
|
|
| (46 | ) |
Total Unfunded Commitments |
|
|
|
|
| $ | 353,018 |
|
| $ | (2,929 | ) |
December 31, 2023 |
| |||||||||||
Investments—non-controlled/non-affiliated |
| Commitment Type |
| Commitment |
| Unfunded |
|
| Fair |
| ||
First Lien Debt |
|
|
|
|
|
|
|
|
|
| ||
Accession Risk Management |
| Delayed Draw |
| 11/1/2029 |
| $ | 40,719 |
|
| $ | (578 | ) |
Beacon Mobility Corp. |
| Delayed Draw |
| 12/31/2025 |
|
| 592 |
|
|
| (15 | ) |
Boasso Global |
| Delayed Draw |
| 10/3/2024 |
|
| 1,750 |
|
|
| (19 | ) |
Boasso Global |
| Revolver |
| 7/1/2026 |
|
| 6,250 |
|
|
| (161 | ) |
Chromalloy Holdings LLC |
| Revolver |
| 11/23/2027 |
|
| 4,615 |
|
|
| (152 | ) |
Circor International, Inc. |
| Revolver |
| 10/18/2029 |
|
| 7,759 |
|
|
| (165 | ) |
DFS Holding Company |
| Delayed Draw |
| 1/31/2029 |
|
| 3,000 |
|
|
| (30 | ) |
Faraday Buyer, LLC |
| Delayed Draw |
| 10/11/2028 |
|
| 3,514 |
|
|
| (34 | ) |
Foundation Risk Partners |
| Delayed Draw |
| 10/29/2028 |
|
| 45,000 |
|
|
| (435 | ) |
Frontgrade Technologies Inc. |
| Revolver |
| 1/9/2028 |
|
| 7,211 |
|
|
| (164 | ) |
Highgate Hotels, L.P. |
| Revolver |
| 10/26/2029 |
|
| 12,500 |
|
|
| (247 | ) |
LJ Perimeter Buyer, Inc |
| Delayed Draw |
| 10/31/2028 |
|
| 3,042 |
|
|
| (10 | ) |
Maxar Technologies Inc. |
| Revolver |
| 5/3/2029 |
|
| 8,587 |
|
|
| (233 | ) |
Momentive Global |
| Revolver |
| 5/31/2029 |
|
| 5,714 |
|
|
| (69 | ) |
Natural Partners, Inc. |
| Revolver |
| 11/29/2027 |
|
| 2,813 |
|
|
| (39 | ) |
PetVet Care Centers |
| Delayed Draw |
| 11/15/2030 |
|
| 6,981 |
|
|
| (68 | ) |
PetVet Care Centers |
| Revolver |
| 11/15/2029 |
|
| 6,981 |
|
|
| (138 | ) |
Sandlot Baseball Borrower Co. |
| Delayed Draw |
| 12/27/2028 |
|
| 33,333 |
|
|
| — |
|
Systems Planning and Analysis, Inc. |
| Delayed Draw |
| 8/16/2027 |
|
| 1,165 |
|
|
| (4 | ) |
Systems Planning and Analysis, Inc. |
| Revolver |
| 8/16/2027 |
|
| 3,136 |
|
|
| (34 | ) |
Wood Mackenzie, Inc. |
| Revolver |
| 2/1/2028 |
|
| 2,963 |
|
|
| (29 | ) |
Total Unfunded Commitments |
|
|
|
|
| $ | 207,625 |
|
| $ | (2,624 | ) |
Other Commitments and Contingencies
From time to time, the Company may become a party to certain legal proceedings incidental to the normal course of its business. At both March 31, 2024 and December 31, 2023, management was not aware of any pending or threatened material litigation.
32
Note 9. Net Assets
Subscriptions and Drawdowns
The Company has the authority to issue up to 100 million shares. Through its Private Offerings the Company will from time to time enter into subscription agreements (the “Subscription Agreements”) with investors. Under the terms of the Subscription Agreements, investors are required to fund drawdowns to purchase the Company’s Shares up to the amount of their respective Capital Commitment on an as-needed basis each time the Company delivers a drawdown notice. As of March 31, 2024, the Company had received Capital Commitments totaling $1.9 billion ($837.0 million remaining undrawn).
The following table summarizes the total shares issued and aggregate offering proceeds related to the Company’s capital drawdowns delivered pursuant to the Subscription Agreements as of March 31, 2024:
Share Issuance Date |
| Number of |
|
| Aggregate |
| ||
December 21, 2021 |
|
| 12,000,000 |
|
| $ | 299,988 |
|
June 23, 2022 |
|
| 2,509,410 |
|
| $ | 60,000 |
|
September 21, 2022 |
|
| 2,787,307 |
|
| $ | 65,000 |
|
December 29, 2022 |
|
| 2,991,256 |
|
| $ | 65,000 |
|
March 8, 2023 |
|
| 2,601,909 |
|
| $ | 60,000 |
|
April 21, 2023 |
|
| 4,446,421 |
|
| $ | 100,000 |
|
August 8, 2023 |
|
| 3,225,807 |
|
| $ | 75,000 |
|
December 29, 2023 |
|
| 4,310,345 |
|
| $ | 100,000 |
|
March 27, 2024 |
|
| 9,449,812 |
|
| $ | 225,000 |
|
Total |
|
| 44,322,267 |
|
| $ | 1,049,988 |
|
Distributions
The Company declared the following distributions for the three months ended March 31, 2024 and 2023:
|
|
|
|
|
| Regular |
|
| Special |
|
| Per Share |
|
|
|
| ||||
Date Declared |
| Record Date |
| Payment Date |
| Distribution |
|
| Distribution |
|
| Amount |
|
| Total Amount |
| ||||
For Calendar Year 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
March 6, 2024 |
| March 15, 2024 |
| March 28, 2024 |
| $ | 0.65 |
|
| $ | — |
|
| $ | 0.65 |
|
| $ | 26,182 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 0.65 |
|
| $ | 26,182 |
| ||
For Calendar Year 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
March 13, 2023 |
| March 29, 2023 |
| April 17, 2023 |
| $ | 0.65 |
|
| $ | — |
|
| $ | 0.65 |
|
| $ | 16,073 |
|
|
|
|
|
|
|
|
|
|
|
|
| $ | 0.65 |
|
| $ | 16,073 |
|
Dividend Reinvestment
The Company has adopted a dividend reinvestment plan (“DRP”), pursuant to which it reinvests all cash dividends declared by the Board on behalf of its Shareholders who elected not to receive their dividends in cash. Shareholders who have opted into the Company’s DRP will have their cash distributions automatically reinvested in additional Shares as described below, rather than receiving the cash dividend or other distribution. A participating Shareholder will receive an amount of Shares equal to the amount of the distribution on that participant’s shares divided by the most recent net asset value (“NAV”) per share that is available on the date such distribution was paid. Shareholders who receive distributions in the form of Shares will generally be subject to the same U.S. federal, state and local tax consequences as if they received cash distributions; however, since their cash distributions will be reinvested, those Shareholders will not receive cash with which to pay any applicable taxes. The Company intends to use newly issued Shares to implement the DRP. Shares issued under the DRP will not reduce outstanding Capital Commitments.
The following table summarizes the DRP Shares issued to shareholders who have “opted in” to the DRP as of March 31, 2024 and the value of such Shares as of the payment dates:
Payment Date |
| DRP Shares Value |
|
| DRP Shares Issued |
| ||
April 15, 2022 |
| $ | 7,200 |
|
|
| 286,055 |
|
July 15, 2022 |
| $ | 9,321 |
|
|
| 373,593 |
|
October 17, 2022 |
| $ | 8,646 |
|
|
| 377,076 |
|
December 30, 2022 |
| $ | 18,056 |
|
|
| 801,437 |
|
April 17, 2023 |
| $ | 13,892 |
|
|
| 637,800 |
|
June 28, 2023 |
| $ | 16,789 |
|
|
| 754,571 |
|
September 28, 2023 |
| $ | 18,945 |
|
|
| 828,460 |
|
December 28, 2023 |
| $ | 31,456 |
|
|
| 1,347,765 |
|
March 28, 2024 |
| $ | 20,039 |
|
|
| 861,529 |
|
|
| $ | 144,344 |
|
|
| 6,268,286 |
|
33
Note 10. Earnings Per Share
The following table sets forth the computation of basic and diluted earnings per share during the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
Net increase in net assets resulting from operations | $ | 47,308 |
|
| $ | 24,387 |
|
Weighted average shares outstanding |
| 40,830,247 |
|
|
| 22,812,352 |
|
Earnings per share | $ | 1.16 |
|
| $ | 1.07 |
|
Note 11. Financial Highlights
The following are the financial highlights for the three months ended March 31, 2024 and 2023:
|
| For the Three Months Ended March 31, |
| ||||||
|
| 2024 |
| 2023 |
| ||||
Per Share Data: |
|
|
|
|
|
|
| ||
Net assets, beginning of period |
| $ |
| 23.26 |
| $ |
| 21.78 |
|
Net investment income (1) |
|
|
| 0.82 |
|
|
| 0.76 |
|
Net realized gain (loss) (1) |
|
|
| 0.11 |
|
|
| (0.03 | ) |
Net change in unrealized appreciation (depreciation) (2) |
|
|
| 0.25 |
|
|
| 0.39 |
|
Net increase in net assets resulting from operations |
|
|
| 1.18 |
|
|
| 1.12 |
|
Distributions declared from net investment income (3) |
|
|
| (0.65 | ) |
|
| (0.65 | ) |
Issuance of shares in connection with our DRP program |
|
|
| (0.01 | ) |
|
| — |
|
Total increase (decrease) in net assets |
|
|
| 0.52 |
|
|
| 0.47 |
|
Net assets, end of period |
| $ |
| 23.78 |
| $ |
| 22.25 |
|
Shares outstanding, end of period |
|
|
| 50,590,553 |
|
|
| 24,728,043 |
|
Total return based on NAV (4) |
|
|
| 5.09 | % |
|
| 5.21 | % |
Ratios: |
|
|
|
|
|
|
| ||
Expenses to average net assets (5) |
|
|
| 15.94 | % |
|
| 13.83 | % |
Net investment income to average net assets (5) |
|
|
| 12.12 | % |
|
| 13.14 | % |
Portfolio turnover rate (6) |
|
|
| 6.74 | % |
|
| 3.44 | % |
Supplemental Data: |
|
|
|
|
|
|
| ||
Net assets, end of period |
| $ |
| 1,203,730 |
| $ |
| 550,161 |
|
Total capital commitments, end of period |
| $ |
| 1,886,973 |
| $ |
| 1,052,651 |
|
Ratios of total contributed capital to total committed capital, end of period |
|
|
| 55.64 | % |
|
| 52.25 | % |
Average debt outstanding |
| $ |
| 1,353,025 |
| $ |
| 634,462 |
|
Asset coverage ratio (7) |
|
|
| 179.1 | % |
|
| 180.3 | % |
34
Note 12. Subsequent Events
The Company’s management evaluated subsequent events through the date of May 10, 2024, the date that the consolidated financial statements were issued. There have been no subsequent events, except as disclosed below, that occurred during such period that would require disclosure in this Form 10-Q or would be required to be recognized in the consolidated financial statements as of and for the three months ended March 31, 2024.
Subsequent to March 31, 2024, the Company invested in the senior secured loans of Aviation Institute of Maintenance, and USA Debusk, LLC.
Subsequent to March 31, 2024, the Company received the entirety of the $98.2 million Subscription Receivable balance.
On April 8, 2024, SPV I entered into Amendment No. 4 to the Loan Financing and Servicing Agreement ("LFSA") with the several banks and other financial institutions or entities that are party thereto from time to time, as lenders, DB as facility agent, U.S. Bank Trust Company National Association as collateral agent and U.S. Bank National Association as collateral custodian (the “Amendment”). The Amendment, among other things; (i) increases the Facility Amount (as defined in the LFSA) from $485,000,000 to $550,000,000, (ii) extends the period during which the SPV I Facility may make borrowings under the facility from December 31, 2024 to April 8, 2027 and (iii) extends the scheduled maturity date from December 31, 2026 to April 8, 2029.
On April 18, 2024, MSD BDC SPV II, LLC, a wholly-owned subsidiary of MSD Investment Corp. (the “Company”), entered into Amendment No. 3 to the Loan and Security Agreement (together with the exhibits and schedules thereto, the “Amendment”) with Citizens Bank, N.A. as a required lender, a lender, and administrative agent, the Company as collateral manager, Everbank, N.A. as a lender, Texas Capital Bank as a lender, Western Alliance Bank as a lender, U.S. Bank Trust Company, National Association as collateral agent, and U.S. Bank National Association as account bank and collateral custodian, which amended the Loan and Security Agreement, dated as of August 15, 2023 (the “LSA”). The Amendment, among other things, increases the Facility Amount (as defined in the LSA) from $495,000,000 to $595,000,000.
35
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The information in this management's discussion and analysis of financial condition and results of operations relates to MSD Investment Corp., including its wholly-owned subsidiaries (collectively, "we", "us", "our" or the "Company"). The terms “Adviser” and “MSD” refer to MSD Partners, L.P., a Delaware limited partnership, in its capacity as our investment adviser, and the term “Administrator” refers to MSD Partners, L.P., a Delaware limited partnership, in its capacity as our administrator. The information contained in this section should be read in conjunction with “Item 1. Financial Statements.” The discussion contains forward-looking statements, which relate to future events our future performance or financial condition and involves numerous risks and uncertainties, including, but not limited to, those risks set forth in section entitled “Part I Item 1A Risk Factors” in our most recent Annual Report on Form 10-K filed with the SEC on March 25, 2024.
Overview
We were established as a Delaware limited liability company on February 18, 2021, and converted to MSD Investment, LLC, a Maryland limited liability company, on October 22, 2021. On December 1, 2021, the Company entered into purchase agreements with three affiliated entities (MSD Credit Opportunities Fund, L.P., MSD Credit Opportunities Master Fund, L.P., and SOF Investments II, L.P. (collectively, the “Funds”)) pursuant to which the Company agreed to acquire the initial portfolio of investments (the “Initial Portfolio”) for an aggregate cash purchase price equal to the fair value of such assets, plus accrued but unpaid interest as of the closing date, less any principal payments received between signing of the purchase agreements and the closing of the transactions contemplated thereby. The closing of the purchase of the Initial Portfolio by the Company occurred on December 21, 2021. As consideration for the Initial Portfolio, the Company paid an aggregate purchase price of $656.5 million. On December 28, 2021, the Company filed Articles of Conversion (and related Articles of Incorporation) with the Maryland Department of Assessments and Taxation in order to convert to a Maryland corporation (the “Corporate Conversion”). In accordance with the Articles of Conversion and Maryland law, the Corporate Conversion became effective as of 12:01 a.m. on January 1, 2022 and, as result of the Corporate Conversion, each share representing a portion of the membership interests of the Company prior to the effective time of the Corporate Conversion was automatically converted into one share of common stock, par value $0.001 per share (the “Shares”), of the Company. In connection with the Corporate Conversion the Company changed its name from “MSD Investment, LLC” to “MSD Investment Corp.” On December 29, 2021, the Company filed a Form N-54A to elect to be regulated as a business development company (”BDC”) under the Investment Company Act of 1940, as amended (the “1940 Act”).
We have elected, and intend to qualify annually, to be treated as a regulated investment company (”RIC”) for U.S. federal income tax purposes under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). As a BDC and a RIC, we will be required to comply with certain regulatory requirements.
The Company’s investment objective is to invest in a broad range of portfolio companies, primarily through senior secured loans and notes where we believe the probability of losses are limited and the opportunity to generate attractive risk adjusted returns is maximized. The Adviser expects to execute this strategy by continuing its long history of leveraging its network to source and diligence what it believes to be attractive opportunities across a broad range of industries. The strategy will be executed by a team of experienced investment professionals who have more than a 20-year history of successfully deploying capital in both liquid and illiquid investments.
Financial and Operating Highlights
The following table presents financial and operating highlights (i) as of March 31, 2024 and December 31, 2023 and (ii) for the three months ended March 31, 2024 and 2023:
|
| As of |
| |||||
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Total assets |
| $ | 2,817,312 |
|
| $ | 2,316,063 |
|
Investments in portfolio companies, at fair value |
| $ | 2,549,352 |
|
| $ | 2,197,053 |
|
Borrowings |
| $ | 1,521,331 |
|
| $ | 1,148,025 |
|
Net assets |
| $ | 1,203,730 |
|
| $ | 937,586 |
|
Net asset value per common share |
| $ | 23.78 |
|
| $ | 23.26 |
|
Leverage ratio (borrowings / total assets) |
|
| 54.0 | % |
|
| 49.6 | % |
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
Average net assets | $ | 1,070,658 |
|
| $ | 516,003 |
|
Average borrowings | $ | 1,353,025 |
|
| $ | 634,462 |
|
Cost of investments purchased | $ | 491,415 |
|
| $ | 230,754 |
|
Sales of investments | $ | 11,819 |
|
| $ | 19,687 |
|
Principal repayments | $ | 148,199 |
|
| $ | 17,661 |
|
Net investment income | $ | 33,612 |
|
| $ | 17,263 |
|
Net realized gains (losses) | $ | 4,546 |
|
| $ | (742 | ) |
Net change in unrealized appreciation (depreciation) | $ | 9,150 |
|
| $ | 7,866 |
|
Net increase (decrease) in net assets resulting from operations | $ | 47,308 |
|
| $ | 24,387 |
|
Net investment income per share - basic and diluted | $ | 0.82 |
|
| $ | 0.76 |
|
Earnings per share - basic and diluted | $ | 1.16 |
|
| $ | 1.07 |
|
36
Portfolio and Investment Activity for the Three Months Ended March 31, 2024 and 2023
The following table presents our portfolio company activity for the three months ended March 31, 2024 and 2023:
|
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| |||
Portfolio companies at beginning of period |
|
| 61 |
|
|
| 41 |
|
Number of added portfolio companies |
|
| 11 |
|
|
| 7 |
|
Number of exited portfolio companies |
|
| (5 | ) |
|
| (2 | ) |
Portfolio companies at period end |
|
| 67 |
|
|
| 46 |
|
|
|
|
|
|
| |||
Number of debt investments period end |
|
| 107 |
|
|
| 61 |
|
Number of preferred equity investments at period end |
|
| 3 |
|
|
| 2 |
|
The following tables present a roll-forward of all investment purchase, sale and repayment activity and changes in fair value within our investment portfolio for the three months ended March 31, 2024 and 2023:
| Three Months Ended March 31, 2024 |
| |||||||||||||
| First Lien Debt |
|
| Second Lien Debt |
|
| Preferred Equity |
|
| Total Investments |
| ||||
Fair value, beginning of year | $ | 1,942,841 |
|
| $ | 226,320 |
|
| $ | 27,892 |
|
| $ | 2,197,053 |
|
Purchase of investments |
| 491,416 |
|
|
| — |
|
|
| — |
|
|
| 491,416 |
|
Proceeds from principal repayments and sales of investments |
| (160,017 | ) |
|
| — |
|
|
| — |
|
|
| (160,017 | ) |
Other changes in fair value (1) |
| 17,194 |
|
|
| 3,020 |
|
|
| 685 |
|
|
| 20,899 |
|
Fair value, end of period | $ | 2,291,434 |
|
| $ | 229,340 |
|
| $ | 28,577 |
|
| $ | 2,549,351 |
|
| Three Months Ended March 31, 2023 |
| |||||||||||||
| First Lien Debt |
|
| Second Lien Debt |
|
| Preferred Equity |
|
| Total Investments |
| ||||
Fair value, beginning of year | $ | 748,545 |
|
| $ | 210,926 |
|
| $ | 22,267 |
|
| $ | 981,738 |
|
Purchase of investments |
| 230,253 |
|
|
| — |
|
|
| 501 |
|
|
| 230,754 |
|
Proceeds from principal repayments and sales of investments |
| (37,134 | ) |
|
| — |
|
|
| (214 | ) |
|
| (37,348 | ) |
Other changes in fair value (1) |
| 9,639 |
|
|
| 1,850 |
|
|
| 602 |
|
|
| 12,091 |
|
Fair value, end of period | $ | 951,303 |
|
| $ | 212,776 |
|
| $ | 23,156 |
|
| $ | 1,187,235 |
|
37
The following table presents selected information regarding our investment portfolio as of March 31, 2024 and December 31, 2023:
As of | |||||||||
March 31, 2024 |
| December 31, 2023 | |||||||
Investments: |
|
|
|
|
|
|
| ||
Number of portfolio companies |
| 67 |
|
|
|
| 61 |
|
|
Number of investments |
| 110 |
|
|
|
| 93 |
|
|
Average investment at fair value | $ | 23,176 |
|
|
| $ | 23,624 |
|
|
Average cost of debt investments as a percentage of par (1) |
| 97.60 |
| % |
|
| 97.18 |
| % |
Debt investments on non-accrual status as a percent of amortized cost of total debt investments |
| 0.44 |
| % |
|
| 0.51 |
| % |
Debt investments on non-accrual status as a percent of fair value of total debt investments |
| 0.08 |
| % |
|
| 0.11 |
| % |
Number of debt investments on non-accrual status |
| 1 |
|
|
|
| 1 |
|
|
Weighted Average EBITDA (mm) (2) |
| 245.1 |
|
|
|
| 245.3 |
|
|
Median EBITDA (mm) (2) |
| 174.8 |
|
|
|
| 187.2 |
|
|
Weighted average net debt through tranche (2) | 4.3x |
|
|
| 4.1x |
|
| ||
Weighted average interest rate coverage (2) | 2.4x |
|
|
| 3.1x |
|
| ||
Percentage of sponsored investments |
| 82.24 |
| % |
|
| 83.65 |
| % |
|
|
|
|
|
|
|
| ||
Floating interest rate debt investments: |
|
|
|
|
|
|
| ||
Percent of debt portfolio (3) |
| 96.9 |
| % |
|
| 96.3 |
| % |
Weighted average interest rate floors |
| 0.77 |
| % |
|
| 0.73 |
| % |
Weighted average coupon spread to base interest rate |
| 619 |
| bps |
|
| 626 |
| bps |
Weighted average effective yield on floating rate debt investments at amortized cost (4) |
| 12.34 |
| % |
|
| 12.85 |
| % |
|
|
|
|
|
|
| |||
Fixed interest debt investments: (5) |
|
|
|
|
|
|
| ||
Percent of debt portfolio (3) |
| 3.1 |
| % |
|
| 3.7 |
| % |
Weighted average coupon rate |
| 8.91 |
| % |
|
| 8.94 |
| % |
Weighted average effective yield on fixed rate debt investments at amortized cost (4) |
| 9.79 |
| % |
|
| 9.89 |
| % |
|
|
|
|
|
|
| |||
Other metrics: |
|
|
|
|
|
|
| ||
Weighted average years to maturity on debt investments |
| 4.18 |
| years |
|
| 4.12 |
| years |
Weighted average effective yield on the portfolio at amortized cost (4) (5) |
| 12.26 |
| % |
|
| 12.74 |
| % |
The following table presents the maturity schedule of our funded debt investments based on their principal amount as of:
| March 31, 2024 |
|
|
| December 31, 2023 |
|
| |||||||||||
Maturity Year |
| Principal Amount |
|
| Percentage of Debt Portfolio |
|
|
| Principal Amount |
|
| Percentage of Debt Portfolio |
|
| ||||
2023 |
| $ | 12,853 |
|
|
| 0.5 |
| % |
| $ | 12,853 |
|
|
| 0.6 |
| % |
2024 |
| $ | 8,139 |
|
|
| 0.3 |
|
|
|
| 43,560 |
|
|
| 1.9 |
|
|
2025 |
| $ | 129,969 |
|
|
| 5.0 |
|
|
|
| 196,430 |
|
|
| 8.8 |
|
|
2026 |
| $ | 641,554 |
|
|
| 24.9 |
|
|
|
| 570,903 |
|
|
| 25.5 |
|
|
2027 |
| $ | 157,158 |
|
|
| 6.1 |
|
|
|
| 114,536 |
|
|
| 5.1 |
|
|
2028 |
| $ | 491,677 |
|
|
| 19.1 |
|
|
|
| 491,877 |
|
|
| 22.0 |
|
|
2029 |
| $ | 510,843 |
|
|
| 19.8 |
|
|
|
| 361,356 |
|
|
| 16.1 |
|
|
2030 |
| $ | 545,982 |
|
|
| 21.1 |
|
|
|
| 448,518 |
|
|
| 20.0 |
|
|
2031 |
| $ | 83,878 |
|
|
| 3.2 |
|
|
|
| — |
|
|
| — |
|
|
| $ | 2,582,053 |
|
|
| 100.0 |
| % |
| $ | 2,240,033 |
|
|
| 100.0 |
| % |
We utilize an investment rating system to monitor the credit profile of our underlying portfolio companies. We use a five-level ratings scale to classify individual investments.
38
The following tables show the investment rankings of the debt investments in our portfolio as of March 31, 2024 and December 31, 2023:
| As of March 31, 2024 |
|
| As of December 31, 2023 |
| |||||||||||||||||||
Risk Rating |
| Fair Value |
|
| % of Portfolio |
|
| # of Investments |
|
| Fair Value |
|
| % of Portfolio |
|
| # of Investments |
| ||||||
1 |
| $ | — |
|
|
| 0.0 | % |
|
| — |
|
| $ | — |
|
|
| 0.0 | % |
|
| — |
|
2 |
|
| 119,560 |
|
|
| 4.7 |
|
|
| 4 |
|
|
| 70,386 |
|
|
| 3.2 |
|
|
| 2 |
|
3 |
|
| 2,427,845 |
|
|
| 95.2 |
|
|
| 105 |
|
|
| 2,123,142 |
|
|
| 96.7 |
|
|
| 89 |
|
4 |
|
| — |
|
|
| 0.0 |
|
|
| — |
|
|
| 1,096 |
|
|
| 0.0 |
|
|
| 1 |
|
5 |
|
| 1,946 |
|
|
| 0.1 |
|
|
| 1 |
|
|
| 2,429 |
|
|
| 0.1 |
|
|
| 1 |
|
| $ | 2,549,351 |
|
|
| 100.0 | % |
|
| 110 |
|
| $ | 2,197,053 |
|
|
| 100.0 | % |
|
| 93 |
|
Results of Operations
Revenues
We generate revenues primarily in the form of interest on the debt securities of portfolio companies that we acquire and hold for investment purposes. Our investments in debt securities generally have expected maturities of two to eight years, although we have no lower or upper constraint on maturity, and typically earn interest at floating and fixed interest rates. Interest on our debt securities is generally payable to us monthly, quarterly or semi-annually. The outstanding principal amount of our debt securities and any accrued but unpaid interest will generally become due at the respective maturity dates. In addition, we may generate revenue in the form of dividends from preferred and common equity investments, amortization of original issue discount, prepayment fees, commitment fees, origination fees and fees for providing significant managerial assistance.
Operating Expenses
Our primary operating expenses include a management fee and, depending on our operating results, a performance-based incentive fee, interest expense, administrative services, custodian and accounting services and other third-party professional services fees and expenses. The management and performance-based incentive fees compensate the Adviser for its services in identifying, evaluating, negotiating, closing and monitoring our investments.
Operating results for the three months ended March 31, 2024 and 2023 are presented below:
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
Total investment income | $ | 76,983 |
|
| $ | 35,118 |
|
Total expenses |
| 43,371 |
|
|
| 17,855 |
|
Net investment income |
| 33,612 |
|
|
| 17,263 |
|
Net realized gain (loss) |
| 4,546 |
|
|
| (742 | ) |
Net change in unrealized appreciation (depreciation) |
| 9,150 |
|
|
| 7,866 |
|
Net increase (decrease) in net assets resulting from operations | $ | 47,308 |
|
| $ | 24,387 |
|
Investment Income
Investment income consisted of the following components for the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
Interest income on debt securities |
|
|
|
|
| ||
Cash interest | $ | 65,109 |
|
| $ | 29,640 |
|
PIK interest |
| 3,258 |
|
|
| 2,228 |
|
Net accretion/amortization of discounts/premiums |
| 4,774 |
|
|
| 1,876 |
|
Total interest on debt securities |
| 73,141 |
|
|
| 33,744 |
|
Dividend Income |
| 26 |
|
|
| — |
|
PIK dividend |
| 1,053 |
|
|
| 931 |
|
Total interest and dividend income |
| 74,220 |
|
|
| 34,675 |
|
Other income |
| 2,763 |
|
|
| 443 |
|
Total investment income | $ | 76,983 |
|
| $ | 35,118 |
|
Average investments at cost (1) | $ | 2,380,871 |
|
| $ | 1,129,258 |
|
Income return (2) |
| 3.12 | % |
|
| 3.07 | % |
Operating Expenses
Our operating expenses can be categorized into fixed operating expenses, variable operating expenses and performance-dependent expenses. Fixed operating expenses are generally static period over period. Variable expenses are calculated based on fund metrics such as total assets, net assets or total borrowings. Performance-dependent expenses fluctuate independent of our size.
39
The table below shows a breakdown of our operating expenses for the three months ended March 31, 2024 and 2023:
| For the Three Months Ended March 31, |
| |||||
| 2024 |
|
| 2023 |
| ||
Fixed Operating Expenses |
|
|
|
|
| ||
Professional fees (1) | $ | 443 |
|
| $ | 204 |
|
Board of directors' fees |
| 78 |
|
|
| 77 |
|
General and other expenses |
| 100 |
|
|
| 45 |
|
Organization and offering costs (2) |
| 25 |
|
|
| 18 |
|
Total fixed operating expenses |
| 646 |
|
|
| 344 |
|
|
|
|
|
| |||
Variable operating expenses: |
|
|
|
|
| ||
Interest expense (3) |
| 28,832 |
|
|
| 11,665 |
|
Management fees |
| 4,561 |
|
|
| 2,026 |
|
Administrative expense (4) |
| 1,946 |
|
|
| 677 |
|
Custody expense |
| 179 |
|
|
| 61 |
|
Transfer agency fees |
| 16 |
|
|
| 52 |
|
Total variable operating expenses |
| 35,534 |
|
|
| 14,481 |
|
|
|
|
|
| |||
Performance-dependent expenses: |
|
|
|
|
| ||
Income based incentive fee |
| 6,120 |
|
|
| 3,030 |
|
Capital gains incentive fee |
| 1,071 |
|
|
| — |
|
Total performance-dependent expenses |
| 7,191 |
|
|
| 3,030 |
|
|
|
|
|
| |||
Total expenses | $ | 43,371 |
|
| $ | 17,855 |
|
Net Realized and Unrealized Gains
For the three months ended March 31, 2024 and 2023, our net realized gains (losses) were $4.5 million and ($0.7) million, respectively, and our net change in unrealized appreciation (depreciation) were $9.2 million and $7.9 million, respectively.
Critical Accounting Policies and Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the periods reported. Actual results could materially differ from those estimates. The Company's comprehensive accounting policies are described more fully in Note 2. Significant Accounting Policies in the accompanying consolidated financial statements. We have identified “Basis of Presentation”, “Valuation of Investments”, and “Revenue Recognition” within Note 2 as critical accounting policies.
Valuation of Portfolio Investments and Net Asset Value of Shares
Pursuant to Rule 2a-5 under the 1940 Act, the Company's board of directors (the “Board”) has designated the Adviser as the Company's valuation designee (the “Valuation Designee”) to determine the fair value of the Company's investments that do not have readily available market quotations, which became effective for the fiscal quarter ended September 30, 2023. Pursuant to the Company’s valuation policy approved by the Board, the Valuation Designee will determine the fair value of the Company’s assets on at least a quarterly basis, in accordance with Accounting Standards Codification Topic 820, Fair Value Measurement. The audit committee of the Board (the “Audit Committee”) is comprised of directors who are not “interested persons,” as defined in Section 2(a)(19) of the 1940 Act, of the Company or the Adviser (each an “Independent Director”).
Under procedures established by the Board, the Company intends to value investments for which market quotations are readily available at such market quotations. Assets listed on an exchange will be valued at their last sales prices as reported to the consolidated quotation service at 4:00 p.m. Eastern Time on the date of determination. If no such sales of such securities occurred, such securities will be valued at the bid price as reported by an independent, third-party pricing service on the date of determination. Debt and equity securities that are not publicly traded or whose market prices are not readily available will be valued at fair value. Such determination of fair values may involve subjective judgments and estimates. The Company will also engage independent valuation providers to assist in the valuation of each investment that constitutes a material portion of the Company’s portfolio and that does not have a readily available market quotation at least once annually. With respect to unquoted securities, the Valuation Designee, with the input of independent valuation advisers and the Audit Committee, will determine fair value. Elements that could be used to determine the fair value of an investment include, among other measures, discounted cash flow models, comparisons of financial ratios of peer companies that are public and other factors. The types of factors that may be considered in determining the fair values of investments include, but are not limited to, the nature and realizable value of any collateral, the portfolio company’s ability to make payments and its earnings. The Company may appoint additional or different independent valuation firms in the future.
When an external event such as a purchase transaction, public offering or subsequent equity sale occurs with respect to a fair-valued portfolio company or comparable company, the Valuation Designee will use the pricing indicated by the external event to corroborate and/or assist the Company in the valuation of
40
such portfolio company. Because the Company expects that there will not be readily available market quotations for many of the investments in its portfolio, the Company expects to value many of its investments at fair value as determined in good faith by the Valuation Designee using a documented valuation policy and a consistently applied valuation process, subject to the continued oversight of the Board. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market quotation, the fair value of the Company’s investments may differ significantly from the values that would have been used had readily available market quotations existed for such investments, and the differences could be material.
On a quarterly basis, with respect to investments for which market quotations are not readily available, the Adviser will undertake a multi-step valuation process each quarter, as described below:
All values assigned to securities and other assets by the Valuation Designee will be binding on all Company investors. When pricing of the Company’s Shares is necessary outside of the normal quarterly process, the Adviser will, among other things, review whether, to its knowledge, significant events have occurred since the last quarterly valuation which might affect the fair value of any of the Company’s portfolio securities.
The ranges of unobservable inputs used in the fair value measurement of our investments classified as Level 3 fair valued as of March 31, 2024 and December 31, 2023, respectively, are presented in Note 6. Fair Value Measurements in the accompanying consolidated financial statements.
In addition to impacting the fair value recorded for our investments on our consolidated statement of assets and liabilities, had we used different key unobservable inputs to determine the fair value of our investments, amounts recorded in our consolidated statement of operations, including the net change in unrealized appreciation and depreciation on investments, management and performance-based incentive fees would also be impacted. The table below outlines the impact on our results of a 5% increase in the fair value of our Level 3 investments for the three months ended March 31, 2024 and 2023:
|
| For the Three Months Ended March 31, |
| |||||
|
| 2024 |
|
| 2023 |
| ||
Fair value of level 3 investments at the end of the period |
| $ | 1,690,167 |
|
| $ | 786,479 |
|
Fair value assuming a 5% increase in value |
|
| 1,774,675 |
|
|
| 825,803 |
|
|
|
|
|
|
| |||
Increase in unrealized appreciation |
|
| 84,508 |
|
|
| 39,324 |
|
(Increase) in management fees |
|
| (158 | ) |
|
| (74 | ) |
(Increase) in capital gains incentive fees (1) |
|
| (12,676 | ) |
|
| (5,899 | ) |
Increase in net assets resulting from operations |
| $ | 71,674 |
|
| $ | 33,351 |
|
|
|
|
|
|
| |||
Weighted average shares outstanding |
|
| 40,830,246 |
|
|
| 22,812,353 |
|
Shares outstanding at the end of the period |
|
| 50,590,552 |
|
|
| 24,728,043 |
|
|
|
|
|
|
| |||
Increase in earnings per share |
| $ | 1.76 |
|
| $ | 1.46 |
|
Increase in net assets per share |
| $ | 1.42 |
|
| $ | 1.35 |
|
Determination of Net Asset Value
The Valuation Designee will determine the net asset value (“NAV”) of the Shares at least quarterly. The NAV per share is equal to the value of the Company’s total assets minus its liabilities and the liquidation value of any preferred shares outstanding divided by the total number of shares outstanding. Additionally, in connection with each offering of shares, to the extent the Company does not have Shareholder approval to sell below NAV, the Valuation Designee or an authorized committee thereof will be required to make a good faith determination that the Company is not selling shares at a price below the then current NAV of the shares at the time at which the sale is made.
The value of investments for which recent market quotations are readily available will be the market price. The Valuation Designee will be responsible for determining the fair value of the portfolio investments for which market quotations are not readily available in good faith, and in such other instances where portfolio investments require a fair value determination. Because the Company expects that there typically will not be a readily available market quotation for its target portfolio investments, the Company expects that the value of most of its portfolio investments will be their fair value as determined by the Valuation Designee consistent with a documented valuation policy and consistently applied valuation process. In making these determinations, the Valuation Designee will receive input from an independent valuation firm and the Audit Committee.
41
Hedging
The Company may enter into currency hedging contracts, interest rate hedging agreements such as futures, options, swaps and forward contracts, and credit hedging contracts, such as credit default swaps. As of March 31, 2024 the Company had entered into foreign currency forward contracts in order to hedge its economic exposure to certain foreign currencies in which its investments were denominated (Note.5 Derivative Instruments). However, no assurance can be given that such hedging transactions will be effective.
Financial Condition, Liquidity and Capital Resources
Our primary sources of cash and cash equivalents may include: (i) the sale of our Shares, (ii) borrowings under various financing arrangements, (iii) cash flows from interest, dividends and transaction fees earned from investment in portfolio companies and (iv) principal repayments and sale proceeds from our investments.
Our primary uses of cash will be for (i) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (ii) the cost of operations (including fees payable to MSD in its capacity as the Adviser and the Administrator), (iii) debt service of any borrowings, and (iv) cash distributions to our Shareholders.
Liquidity
The tables below present a summary of our liquidity position as of March 31, 2024 and December 31, 2023:
|
| March 31, 2024 |
|
| December 31, 2023 |
| ||
Cash and cash equivalents |
| $ | 139,687 |
|
| $ | 98,606 |
|
Unused borrowing capacity |
|
| 207,000 |
|
|
| 422,000 |
|
Principal receivable |
|
| 9,259 |
|
|
| — |
|
Unfunded investment commitments (1) |
|
| (353,018 | ) |
|
| (207,625 | ) |
Undrawn capital commitments |
|
| 836,985 |
|
|
| 619,690 |
|
Other net working capital (2) |
|
| 13,599 |
|
|
| (224,415 | ) |
|
| $ | 853,512 |
|
| $ | 708,256 |
|
Capital Resources
We may from time to time enter into additional credit facilities and borrowing arrangements to increase the amount of our borrowings as our called equity capital increases. Accordingly, we cannot predict with certainty what terms any such financing would have or the costs we would incur in connection with any such financing arrangements. We are currently required to maintain a minimum asset coverage ratio (total assets-to-senior securities) of 150% under the 1940 Act if certain conditions are met.
The table below summarizes certain financing obligations that are expected to have an impact on our liquidity and cash flow in specified future interval periods:
|
| Payments Due by Period |
| |||||||||||||||||
|
| Total |
|
| Less than |
|
| 1-3 years |
|
| 3-5 years |
|
| After 5 years |
| |||||
SPV I facility |
| $ | 449,000 |
|
| $ | — |
|
| $ | 449,000 |
|
| $ | — |
|
| $ | — |
|
SPV II facility |
|
| 424,000 |
|
|
| — |
|
|
| — |
|
|
| 424,000 |
|
|
| — |
|
Collateralized loan obligations |
|
| 390,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 390,000 |
|
Subscription facility |
|
| 100,000 |
|
|
| 100,000 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Loan repurchase obligations |
|
| 158,331 |
|
|
| 158,331 |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total Contractual Obligations |
| $ | 1,521,331 |
|
| $ | 258,331 |
|
| $ | 449,000 |
|
| $ | 424,000 |
|
| $ | 390,000 |
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Valuation Risk
We have invested, and plan to continue to invest, primarily in illiquid debt and equity securities of private companies. Most of our investments will not have a readily available market price, and therefore, we will value these investments at fair value as determined in good faith by our Board, based on, among other things, the input of the Adviser, our Audit Committee and independent third-party valuation firm(s) engaged at the direction of the Board, and in accordance with our valuation policy. There is no single standard for determining fair value. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments we make. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we may realize amounts that are different from the amounts presented and such differences could be material.
Interest Rate Risk
We will be subject to financial market risks, including changes in interest rates. As of March 31, 2024, 96.9% of our debt investments (95.8% of our total investments), or $2.44 billion measured at fair value, are subject to floating interest rates. Additionally, all of our Credit Facilities are also subject to floating
42
interest rates. A rise in the general level of interest rates can be expected to lead to (i) higher interest income from our floating rate debt investments, (ii) value declines for fixed interest rate investments we may hold and (iii) higher interest expense in connection with our credit facilities. Since the majority of our investments consist of floating rating investments, an increase in interest rates could also make it more difficult for borrowers to repay their loans, and a rise in interest rates may also make it easier for the Adviser to meet or exceed the quarterly threshold for Income-Based Fee as described in Note 3. Agreements and Related Party Transactions.
Since March 2022, the Federal Reserve has been rapidly raising interest rates. Although the Federal Reserve left its benchmark rates steady in the first quarter of 2024, it has indicated that additional rate increases in the future may be necessary to mitigate inflationary pressures and there can be no assurance that the Federal Reserve will not make upwards adjustments to the federal funds rate in the future. However, there are reports that the Federal Reserve may begin to cut the benchmark rates in 2024. In a rising interest rate environment, our cost of funds would increase, which could reduce our net investment income if there is not a corresponding increase in interest income generated by our investment portfolio. It is possible that the Federal Reserve's tightening cycle could propel the United States into a recession, which would likely decrease interest rates. A prolonged reduction in interest rates will reduce our gross investment income and could result in a decrease in our net investment income if such decreases in base rates, such as SOFR and other alternate rates, are not offset by corresponding increases in the spread over such base rate that we earn on any portfolio investments, a decrease in our operating expenses, or a decrease in the interest rate associated with our borrowings
The following table estimates the potential changes in net cash flow generated from interest income and expenses, should interest rates increase by 100, 200 or 300 basis points, or decrease by 100 or 200 basis points. Interest income is calculated as revenue from interest generated from our portfolio of investments held on March 31, 2024. Interest expense is calculated based on the terms of the Financing Facilities, using the outstanding balances as of March 31, 2024. The base interest rate case assumes the rates on our portfolio investments remain unchanged from the actual effective interest rates as of March 31, 2024. These hypothetical calculations are based on a model of the investments in our portfolio, held as of March 31, 2024, and are only adjusted for assumed changes in the underlying base interest rates. Actual results could differ significantly from those estimated in the table.
Change in Interest Rates |
| Interest |
|
| Interest |
|
| Net |
| |||
Up 300 basis points |
| $ | 74,587 |
|
| $ | (34,487 | ) |
| $ | 40,100 |
|
Up 200 basis points |
|
| 49,733 |
|
|
| (23,006 | ) |
|
| 26,727 |
|
Up 100 basis points |
|
| 24,880 |
|
|
| (11,526 | ) |
|
| 13,354 |
|
Down 100 basis points |
|
| (24,820 | ) |
|
| 11,434 |
|
|
| (13,386 | ) |
Down 200 basis points |
|
| (49,669 | ) |
|
| 22,915 |
|
|
| (26,754 | ) |
Currency Risk
From time to time, we may make investments that are denominated in a foreign currency. These investments are translated into U.S. dollars at each balance sheet date, exposing us to movements in foreign exchange rates. We have employed and may continue to employ hedging techniques to minimize these risks, but we cannot assure you that such strategies will be effective or without risk to us. We may seek to utilize instruments such as, but not limited to, forward contracts to seek to hedge against fluctuations in the relative values of our portfolio positions from changes in currency exchange rates. We also have the ability to borrow in certain foreign currencies under our credit facilities. Instead of entering into a foreign currency forward contract in connection with loans or other investments we have made that are denominated in a foreign currency, we may borrow in that currency to establish a natural hedge against our loan or investment. To the extent the loan or investment is based on a floating rate other than a rate under which we can borrow under our credit facilities, we may seek to utilize interest rate derivatives to hedge our exposure to changes in the associated rate.
Item 4. Controls and Procedures.
In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective as of the end of the period covered by the Quarterly Report on Form 10-Q.
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Neither we nor the Adviser are currently subject to any material legal proceedings, nor, to our knowledge, are any material legal proceedings threatened against us or them. From time to time, we and/or the Adviser may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our portfolio companies. Our business is also subject to extensive regulation, which may result in regulatory proceedings against us. While the outcome of these legal or regulatory 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.
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Item 1A. Risk Factors.
In addition to the other information set forth in this report, you should carefully consider the risk factors in our most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the SEC on March 25, 2024 (See “Part I Item 1A. Risk Factors”), which is accessible on the SEC’s website at sec.gov. These factors could materially affect our business, financial condition and/or operating results. There have been no material changes during the three months ended March 31, 2024 to the risk factors discussed in Part I Item 1A. Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Except as previously reported by us on our Current Reports on Form 8-K, we did not sell any securities during the period covered by this Quarterly Report on Form 10-Q that were not registered under the Securities Act of 1933, as amended.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
On May 8, 2024, the board of directors of the Company declared a regular distribution to common stockholders in the amount of $0.65 per share and a special distribution to common stockholders in the amount of $0.08 per share. The distributions will be payable on June 27, 2024 to common stockholders of record as of June 14, 2024.
The Company has adopted insider trading policies and procedures governing the purchase, sale, and disposition of the Company’s securities by officers and directors of the Company that are reasonably designed to promote compliance with insider trading laws, rules and regulations.
44
Item 6. Exhibits.
Exhibit |
| Description of Exhibits |
3.1 |
| |
3.2 |
| |
3.3 |
| |
4.1 |
| |
10.1 |
| |
10.2 |
| |
10.3 |
| |
10.4 |
| |
10.5 |
| |
10.6 |
| |
10.7 |
| |
10.8 |
| |
10.9 |
| |
10.10 |
| |
10.11 |
| |
10.12 |
| |
10.13 |
| |
10.14 |
| |
10.15 |
| |
10.16 |
| |
10.17 |
| |
10.18 |
| |
10.19 |
| |
10.20
|
|
45
10.21 |
| |
31.1 |
| |
31.2 |
| |
32.1 |
| |
32.2 |
| |
101.INS |
| Inline XBRL Instance Document |
101.SCH |
| Inline XBRL Taxonomy Extension Schema |
101.CAL |
| Inline XBRL Taxonomy Extension Calculation Linkbase |
101.DEF |
| Inline XBRL Taxonomy Extension Definition Linkbase |
101.LAB |
| Inline XBRL Taxonomy Extension Label Linkbase |
101.PRE |
| Inline XBRL Taxonomy Extension Presentation Linkbase |
104 |
| Cover page formatted as Inline XBRL and contained in Exhibit 101 |
* Filed herewith.
46
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
| MSD Investment Corp. |
|
|
|
|
Date: | May 10, 2024 |
| /s/ Robert Platek |
|
|
| Robert Platek |
|
|
| Chief Executive Officer |
|
|
|
|
Date: | May 10, 2024 |
| /s/ Brian S. Williams |
|
|
| Brian S. Williams |
|
|
| Chief Financial Officer & Treasurer |
47