Brightwood Capital Corp I 10Q 2023 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023 OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 814-01563

BRIGHTWOOD CAPITAL CORPORATION I

(Exact Name of Registrant as Specified in its Charter)


Maryland	88-1977273
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)


810 Seventh Avenue, 26^th Floor
New York, NY	10019
(Address of Principal Executive Office)	(Zip Code)

(646) 957-9525

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
None	N/A	N/A

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, a smaller reporting company, or an emerging growth company. See the definitions 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 Exchange Act). Yes ☐ No ☒

As of November 9, 2023 the registrant had 30,978,861 shares of common stock outstanding.

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Brightwood Capital Corporation I

Quarterly Report on Form 10-Q

TABLE OF CONTENTS

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PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Brightwood Capital Corporation I

CONSOLIDATED STATEMENTS OF ASSETS AND LIABILITIES

(dollars in thousands, except share and per share data)


	September 30, 2023		December 31, 2022 ⁽¹⁾
	(Unaudited)
Assets
Investments,
Non-controlled,non-affiliate company investments, at fair value (amortized cost of $376,381 and $221,657, respectively)	$	380,839	$	222,800
Cash and cash equivalents		63,344		83,904
Interest and paydown receivable		3,571		1,955
Deferred financing costs		1,431		712
Total assets	$	449,185	$	309,371
Liabilities
Line of credit payable	$	170,000	$	100,000
Loans payable		—		53,803
Interest payable on line of credit		2,918		173
Interest payable on loans		—		500
Due to affiliates		168		125
Management fees payable (See Note 3)		870		421
Distributions payable		—		1,212
Directors’ fees payable (See Note 3)		165		120
Accounts payable and accrued expenses		674		523
Total liabilities	$	174,795	$	156,877
Commitments and contingencies (See Note 7)
Net Assets (See Note 8)
Common stock, par value $0.01 per share, 100,000,000 shares authorized, 26,123,092 and 15,150,000 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	$	261	$	152
Paid-in-capital in excess of par value		262,644		151,274
Total distributable earnings (loss)		11,485		1,068
Total net assets	$	274,390	$	152,494
Total liabilities and net assets	$	449,185	$	309,371
Net asset value per share (See Note 9)	$	10.50	$	10.07

(1)	The Company was formed on November 15, 2021. There were no material activities before the initial funding was received on September 26, 2022.

The accompanying notes are an integral part of these financial statements.

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Brightwood Capital Corporation I

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(dollars in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022 ⁽¹⁾		2023		2022 ⁽¹⁾
Investment Income:
Non-controlled/non-affiliate company investments:
Interest income	$	11,695	$	69	$	28,397	$	69
Dividend income		3		—		5		—
Other Income		141		—		141		—
Total investment income	$	11,839	$	69	$	28,543	$	69
Expenses:
Interest expense on line of credit	$	3,216	$	—	$	6,804	$	—
Management fees		870		11		2,397		11
Organizational expenses		—		154		—		399
Overhead expenses		168		—		624		—
Professional fees		159		265		590		265
Other general and administrative expenses		177		267		461		267
Amortization of deferred financing costs		146		—		380		—
Administration fees		50		46		235		46
Directors' fees		75		30		225		30
Interest expense on loans		—		—		378		—
Custody fees		11		—		81		—
Total expenses		4,872		773		12,175		1,018
Net investment income (loss)		6,967		(704)		16,368		(949)
Realized and unrealized gain (loss) on investments:
Net change in unrealized appreciation (depreciation) on non-controlled/non-affiliate company investments		642		—		3,316		—
Total net realized and unrealized gain (loss) on investments		642		—		3,316		—
Net increase (decrease) in net assets resulting from operations	$	7,609	$	(704)	$	19,684	$	(949)
Per share data:
Net investment income (loss) per share	$	0.30	$	(0.07)	$	0.80	$	(0.09)
Net increase (decrease) in net assets resulting from operations per share	$	0.32	$	(0.07)	$	0.96	$	(0.09)
Weighted average common shares outstanding (See Note 9)		23,455,350		10,100,000		20,608,534		10,100,000

(1)	The Company was formed on November 15, 2021. There were no material activities before the initial funding was received on September 26, 2022.

The accompanying notes are an integral part of these financial statements.

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Brightwood Capital Corporation I

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)

(dollars in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022 ⁽¹⁾		2023		2022 ⁽¹⁾
Increase (decrease) in net assets resulting from operations:
Net investment income (loss)	$	6,967	$	(704)	$	16,368	$	(949)
Net change in unrealized appreciation (depreciation) on investments		642		—		3,316		—
Net increase (decrease) in net assets resulting from operations		7,609		(704)		19,684		(949)
Shareholder distributions:
Distributions of investment income		(4,989)		—		(9,267)		—
Net increase (decrease) in net assets resulting from shareholder distributions		(4,989)		—		(9,267)		—
Capital share transactions:
Issuance of common shares, net		50,500		100,990		101,000		101,000
Reinvestments of stockholder distributions		4,989		—		10,479		—
Offering cost		—		(74)		—		(74)
Net increase in net assets resulting from capital share transactions		55,489		100,916		111,479		100,926
Total increase in net assets		58,109		100,212		121,896		99,977
Net assets, at beginning of period		216,281		(235)		152,494		—
Net assets, at end of period	$	274,390	$	99,977	$	274,390	$	99,977

(1)	The Company was formed on November 15, 2021. There were no material activities before the initial funding was received on September 26, 2022.

The accompanying notes are an integral part of these financial statements.

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Brightwood Capital Corporation I

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(dollars in thousands, except share and per share data)


	Nine Months Ended September 30,
	2023		2022 ⁽¹⁾
Cash flows from operating activities:
Net increase (decrease) in net assets resulting from operations	$	19,684	$	(949)
Adjustments to reconcile net increase (decrease) in net assets resulting from operations to net cash provided by (used in) operating activities
Purchase of investments and drawdowns		(179,211)		(54,000)
Proceeds from principal repayments of investments and sales of investments and paydowns		25,788		337
Amortization of premium/accretion of discount, net		(1,296)		(8)
Interest income paid in kind		(4)		—
Net change in unrealized (appreciation) depreciation on investments		(3,316)		—
Amortization of deferred financing costs		380		—
Changes in operating assets and liabilities:
(Increase) decrease in interest and paydown receivable		(1,616)		(348)
Increase (decrease) in payable to affiliates		43		240
Increase (decrease) in accrued organizational expenses		—		363
Increase (decrease) in interest payable on line of credit		2,745		—
Increase (decrease) in interest payable on loans		(500)		—
Increase (decrease) in management fees payable		449		11
Increase (decrease) in directors' fees payable		45		30
Increase (decrease) in accounts payable and accrued expenses		151		311
Net cash provided by (used in) operating activities		(136,658)		(54,013)
Cash flows from financing activities:
Proceeds from issuance of common shares		101,000		101,000
Proceeds from line of credit payable		253,000		—
Repayments on line of credit payable		(183,000)		—
Proceeds from loans payable		18,525		—
Repayments on loans payable		(72,328)		—
Deferred financing costs paid		(1,099)		—
Offering cost		—		(74)
Net cash provided by (used in) financing activities		116,098		100,926
Net increase (decrease) in cash and cash equivalents		(20,560)		46,913
Cash and cash equivalents, beginning of period		83,904		—
Cash and cash equivalents, end of period	$	63,344	$	46,913
Supplemental disclosure of cash flow information:
Cash paid during the period for interest expense on line of credit	$	4,059	$	—
Cash paid during the period for interest on loans	$	878	$	—
Supplemental disclosure of non-cash financing activities:
Issuance of common shares pursuant to dividend reinvestment plan	$	10,479	$	—

(1)	The Company was formed on November 15, 2021. There were no material activities before the initial funding was received on September 26, 2022.

The accompanying notes are an integral part of these financial statements.

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Brightwood Capital Corporation I

CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED)

September 30, 2023

(dollars in thousands)


			Spread Above
Portfolio Company ^(1)(2)(3)	Footnotes	Investment	Reference Rate ⁽⁴⁾			Interest Rate ⁽⁴⁾				Maturity Date	Par Amount		Amortized Cost		Fair Value		% of Net Assets ⁽⁵⁾
Investments
Debt Investments
Business Services
Athlete Buyer, LLC	(6)	Senior Secured First Lien Term Loan	S +	6.00	%			11.49	%	4/26/2029	$	6,983	$	6,821	$	6,983	2.5	%
Athlete Buyer, LLC	(6)	Delayed Draw Term Loan	S +	6.00	%	11.47	% -	11.50	%	4/26/2029		6,738		6,476		6,738	2.5	%
Athlete Buyer, LLC	(6)(7)(8)	Revolver	S +	6.00	%			6.00	%	4/26/2029		—		(38)		—	0.0	%
B2B Industrial Products, LLC	(6)(9)	Senior Secured Term Loan	S +	6.75	%			12.27	%	10/7/2026		8,893		8,543		8,893	3.2	%
B2B Industrial Products, LLC	(6)(9)	Senior Secured Term Loan	P +	5.75	%			14.25	%	10/7/2026		5,987		5,759		5,987	2.2	%
Elevator Intermediate Holdings, Inc.	(6)	Senior Secured First Lien Term Loan	S +	6.50	%			12.04	%	8/25/2028		22,000		21,515		21,515	7.8	%
Elevator Intermediate Holdings, Inc.	(6)(7)(8)	Delayed Draw Term Loan	S +	6.50	%			6.50	%	8/25/2028		—		(11)		(11)	0.0	%
Elevator Intermediate Holdings, Inc.	(6)(7)(8)	Revolver	S +	6.50	%			6.50	%	8/25/2028		—		(20)		(20)	0.0	%
Javelin Acquisition Vehicle, LLC	(6)(9)	Senior Secured Term Loan	S +	7.37	%	12.69	% -	12.72	%	11/3/2026		22,245		21,766		22,245	8.1	%
KKSP Precision Machining LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	6.50	%			12.05	%	6/23/2027		4,938		4,857		4,938	1.8	%
Veradata Holdings, LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	6.75	%			12.18	%	11/1/2028		18,609		18,331		18,609	6.8	%
Veradata Holdings, LLC	(6)	Delayed Draw Term Loan	S +	6.75	%			12.17	%	11/1/2028		750		736		750	0.3	%
Veradata Holdings, LLC	(6)(7)(8)	Revolver	S +	6.75	%			6.75	%	11/1/2028		—		(4)		—	0.0	%
VHL Logistics, Inc.	(6)(9)	Senior Secured First Lien Term Loan	S +	6.25	%			11.62	%	12/13/2028		17,388		17,006		17,388	6.3	%
VHL Logistics, Inc.	(6)(7)(8)	Revolver	S +	6.25	%			6.25	%	12/13/2028		—		(11)		—	0.0	%
Total Business Services														111,726		114,015	41.5	%
Franchising
CDM Fitness Holdings, LLC	(6)(9)(10)	Senior Secured First Lien Term Loan	S +	6.50	%			12.04	%	6/17/2026		24,939		24,495		24,578	9.0	%
ESN Venture Holdings, LLC	(6)	Senior Secured First Lien Term Loan	S +	6.00	%			11.39	%	10/7/2028		13,670		13,383		13,670	5.0	%
ESN Venture Holdings, LLC	(6)	Delayed Draw Term Loan	S +	6.00	%	11.02	% -	11.43	%	10/7/2028		434		345		434	0.2	%
ESN Venture Holdings, LLC	(6)	Revolver	S +	6.00	%			11.39	%	10/7/2028		67		56		67	0.0	%
John C. Cassidy Air Conditioning, Inc.	(6)(9)	Senior Secured Term Loan	S +	6.00	%			11.64	%	12/23/2026		5,062		5,032		5,062	1.8	%
North Haven USHC Acquisition, Inc.	(6)(9)	Senior Secured First Lien Term Loan	S +	6.25	%			11.44	%	10/30/2025		16,090		15,851		16,090	5.9	%
North Haven USHC Acquisition, Inc.	(6)(7)(8)	Delayed Draw Term Loan	S +	6.25	%			6.25	%	10/30/2025		��		(46)		—	0.0	%
North Haven USHC Acquisition, Inc.	(6)	Revolver	S +	6.50	%	11.41	% -	12.00	%	10/30/2025		1,101		1,085		1,101	0.4	%
Firebirds Buyer, LLC	(6)	Senior Secured First Lien Term Loan	S +	6.25	%			11.79	%	3/22/2028		13,311		13,073		13,311	4.9	%
Firebirds Buyer, LLC	(6)(7)(8)	Delayed Draw Term Loan	S +	6.25	%			6.25	%	3/22/2028		—		(9)		—	0.0	%
Firebirds Buyer, LLC	(6)	Revolver	S +	6.25	%			11.79	%	3/22/2028		162		148		162	0.1	%
Total Franchising														73,413		74,475	27.3	%

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Brightwood Capital Corporation I

CONSOLIDATED SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)

As of September 30, 2023

(dollars in thousands)


			Spread Above
Portfolio Company ^{(1) (2) (3)}	Footnotes	Investment	Reference Rate ⁽⁴⁾			Interest Rate ⁽⁴⁾				Maturity Date	Par Amount		Amortized Cost		Fair Value		% of Net Assets ⁽⁵⁾
Healthcare
Medical Management Holdings, LLC	(6)	Senior Secured First Lien Term Loan	S +	7.25	%	12.82	% -	12.89	%	2/23/2028	$	20,774	$	20,309	$	20,774	7.6	%
Medical Management Holdings, LLC	(6)	Delayed Draw Term Loan	S +	7.25	%	12.88	% -	12.89	%	2/23/2028		497		486		497	0.2	%
OPCO Borrower LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	6.50	%			11.99	%	8/19/2027		21,200		21,112		21,200	7.7	%
OPCO Borrower LLC	(6)(7)(8)	Revolver	S +	6.50	%			6.50	%	8/19/2027		—		(10)		—	0.0	%
Sandlot Buyer, LLC	(6)	Senior Secured Term Loan	S +	6.00	%			11.52	%	9/19/2028		25,000		24,269		24,269	8.8	%
YNWA Finco LLC	(6)(9)	Senior Secured Term Loan	S +	6.25	%			11.68	%	8/18/2027		9,750		9,750		9,438	3.4	%
Zavation Medical Products, LLC	(6)	Senior Secured First Lien Term Loan	S +	6.50	%			12.01	%	6/30/2028		9,975		9,787		9,975	3.6	%
Zavation Medical Products, LLC	(6)	Revolver	S +	6.50	%	11.99	% -	12.01	%	6/30/2028		70		61		70	0.0	%
Total Healthcare														85,764		86,223	31.3	%
Technology & Telecommunications
Essence Communications Inc.	(6)(9)	Senior Secured First Lien Term Loan	S +	6.75	%			12.17	%	11/25/2027		11,385		11,196		11,385	4.1	%
Essence Communications Inc.	(6)	Revolver	S +	6.75	%	12.18	% -	12.29	%	11/25/2024		2,885		2,770		2,885	1.1	%
North Acquisition LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	6.75	%			12.37	%	7/27/2027		24,250		23,943		23,942	8.7	%
Shiftkey, LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	5.75	%			11.40	%	6/21/2027		9,875		9,797		9,875	3.6	%
Voice Comm, LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	6.75	%			12.17	%	7/13/2027		18,750		18,454		18,604	6.8	%
Total Technology &Telecommunications														66,160		66,691	24.3	%
Transportation & Logistics
IAM Acquisition LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	5.50	%			11.17	%	6/10/2027		9,900		9,900		9,900	3.6	%
Vehicle Management Services LLC	(6)(9)	Senior Secured First Lien Term Loan	S +	6.25	%			11.86	%	7/26/2027		24,747		24,668		24,747	9.0	%
Total Transportation & Logistics														34,568		34,647	12.6	%
Total Debt Investments														371,631		376,051	137.0	%
Equity Investment
Business Services
BCVD Holdings, LLC	(6)(11)	Class A Units										250		250		288	0.1	%
																	0.0	%
Healthcare																	0.0	%
Derm Holdings LLC	(6)(11)	Class A Preferred Units										527		3,500		3,500	1.3	%
Zavation Medical Products, LLC	(6)(11)	Class A Membership Units										7		1,000		1,000	0.4	%
Total Equity Investment														4,750		4,788	1.8	%
Total Investments													$	376,381	$	380,839	138.8	%
Cash Equivalents
First American Government Obligations Fund, Class X	(12)	Money Market Fund						5.26	%			1,027		1,027		1,027	0.4	%
Total Cash Equivalents														1,027		1,027	0.4	%
Total Investments and cash equivalents													$	377,408	$	381,866	139.2	%
Liabilities in Excess of Other Assets																(107,476)	(39.2)	%
Net Assets															$	274,390	100.0	%

(1)

All investments are qualifying assets as defined under Section 55(a) of the Investment Company Act of 1940, as amended (the “1940 Act”). All investments are non-controlled/non-affiliated investments as defined by the 1940 Act. The 1940 Act classifies investments based on the level of control that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally presumed to be “non-controlled” when the Company owns 25% or less of the portfolio company’s voting securities and “controlled” when the Company owns more than 25% of the portfolio company’s voting securities. The 1940 Act also classifies investments further based on the level of ownership that the Company maintains in a particular portfolio company. As defined in the 1940 Act, a company is generally deemed as “non-affiliated” when the Company owns less than 5% of a portfolio company’s voting securities and “affiliated” when the Company owns 5% or more of a portfolio company’s voting securities.

(2)	The issuers of debt and equity held by the Company are domiciled in the United States.

(3)	Denominated in U.S. Dollars unless otherwise noted.

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(4)

All of the investments bear interest at rates that may be determined by reference to Prime Rate (“P”), as well as Secured Overnight Financing Rate (“SOFR” or “S”), which reset monthly or quarterly. For each such investment, the Company has provided the spread over P and SOFR and the current contractual interest rate in effect at September 30, 2023. As of September 30, 2023, the P was 8.50%. As of September 30, 2023, the effective rates for 1M S and 3M S are 5.32%, and 5.27%, respectively. For portfolio companies with multiple interest rate contracts, the interest rate shown is a weighted average current interest rate in effect as of September 30, 2023. For fixed rate loans, a spread above a reference rate is not applicable.

(5)	Percentage is based on net assets of $274,390 as of September 30, 2023.

(6)	Investment valued using unobservable inputs (Level 3), see Note 5 “Fair Value of Financial Instruments”.

(7)	The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value is the result of the capitalized discount on the loan. See Note 7 "Commitments and Contingencies".

(8)	Security is a fully unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(9)	Investment or portion of the investment are held by the Company indirectly through BCCI SPV-1, LLC and pledged as collateral for the credit facility held through SPV-1.

(10)	Cost includes accrual of interest income paid in-kind ("PIK"). See Note 2 “Summary of Significant Accounting Policies.

(11)	Non-income producing.

(12)	Cash equivalents balance represents amounts held in an interest-bearing money market fund issued by U.S. Bank National Association.

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Brightwood Capital Corporation I

SCHEDULE OF INVESTMENTS

As of December 31, 2022

(dollars in thousands)


			Spread
			Above
			Reference			Interest				Maturity	Par		Amortized				% of Net
Portfolio Company ^{(1) (2) (3)}	Footnotes	Investment	Rate ⁽⁴⁾			Rate ⁽⁴⁾				Date	Amount		Cost		Fair Value		Assets ⁽⁵⁾
Investments
Debt Investments
Business Services
B2B Industrial Products, LLC	(6)	Senior Secured Term Loan	S +	6.75	%			11.41	%	10/7/2026	$	8,960	$	8,520	$	8,520	5.6	%
B2B Industrial Products, LLC	(6)	Senior Secured Term Loan	S +	5.75	%			13.25	%	10/7/2026		5,540		5,265		5,265	3.4	%
John C. Cassidy Air Conditioning, Inc.	(6)	Senior Secured Term Loan	S +	6.00	%			10.53	%	12/23/2026		5,100		5,063		5,100	3.3	%
KKSP Precision Machining LLC	(6)	Senior Secured First Lien Term Loan	S +	6.50	%			11.29	%	6/23/2027		4,975		4,877		4,976	3.3	%
Javelin Acquisition Vehicle, LLC	(6)	Senior Secured Term Loan	S +	7.12	%			11.45	%	11/3/2026		19,950		19,462		19,462	12.8	%
IAM Acquisition LLC	(6)	Senior Secured First Lien Term Loan	S +	5.50	%			10.25	%	6/10/2027		9,975		9,975		9,975	6.5	%
Voice Comm, LLC	(6)	Senior Secured First Lien Term Loan	S +	6.75	%			11.17	%	7/13/2027		19,500		19,132		19,501	12.8	%
Vehicle Management Services LLC	(6)	Senior Secured First Lien Term Loan	S +	6.25	%			10.56	%	7/26/2027		14,950		14,856		14,950	9.8	%
Veradata Holdings, LLC	(6)(7)	Senior Secured First Lien Term Loan	S +	6.75	%			10.99	%	11/1/2028		18,750		18,385		18,385	12.1	%
Veradata Holdings, LLC	(6)(8)(9)	Delayed Draw Term Loan	S +	6.75	%			6.75	%	11/1/2028		—		(7)		(7)	(0.0)	%
Veradata Holdings, LLC	(6)(8)(9)	Revolver	S +	6.75	%			6.75	%	11/1/2028		—		(5)		(5)	(0.0)	%
VHL Logistics, Inc.	(6)(7)	Senior Secured First Lien Term Loan	S +	6.25	%			11.07	%	12/13/2028		22,500		21,942		21,942	14.4	%
VHL Logistics, Inc.	(6)(8)(9)	Revolver	S +	6.25	%			6.25	%	12/13/2028		—		(12)		(12)	(0.0)	%
YNWA Finco LLC	(6)	Senior Secured Term Loan	S +	6.25	%			10.69	%	8/18/2027		9,938		9,938		9,938	6.5	%
Total Business Services														137,391		137,990	90.5	%
Franchising
ESN Venture Holdings, LLC	(6)	Senior Secured First Lien Term Loan	S +	6.50	%			11.08	%	10/7/2028		13,774		13,441		13,441	8.8	%
ESN Venture Holdings, LLC	(6)(8)(9)	Delayed Draw Term Loan	S +	6.50	%			6.50	%	10/7/2028		—		(114)		(114)	(0.1)	%
ESN Venture Holdings, LLC	(6)	Revolver	S +	6.50	%	11.05	%-	11.08	%	10/7/2028		67		55		55	(0.0)	%
North Haven USHC Acquisition, Inc.	(6)(7)	Senior Secured First Lien Term Loan	S +	6.25	%			10.31	%	10/30/2025		16,212		15,903		15,903	10.4	%
North Haven USHC Acquisition, Inc.	(6)(8)(9)	Delayed Draw Term Loan	S +	6.25	%			6.25	%	10/30/2025		—		(63)		(63)	(0.0)	%
North Haven USHC Acquisition, Inc.	(6)	Revolver	S +	6.50	%	10.56	%-	11.13	%	10/30/2025		495		474		474	0.3	%
Total Franchising														29,696		29,696	19.4	%
Healthcare
Shiftkey, LLC	(6)	Senior Secured First Lien Term Loan	S +	5.75	%			10.59	%	6/21/2027		9,950		9,856		9,950	6.5	%
OPCO Borrower LLC	(6)	Senior Secured First Lien Term Loan	S +	6.50	%			11.18	%	8/19/2027		13,664		13,597		13,664	9.0	%
OPCO Borrower LLC	(6)	Revolver	S +	6.50	%			10.87	%	8/19/2027		250		244		250	0.1	%
Total Healthcare														23,697		23,864	15.6	%
Technology & Telecommunications
North Acquisition LLC	(6)	Senior Secured First Lien Term Loan	S +	6.75	%			11.06	%	7/27/2027		19,950		19,573		19,950	13.1	%
Essence Communications Inc.	(6)	Senior Secured First Lien Term Loan	S +	6.75	%			11.37	%	11/25/2027		11,471		11,246		11,246	7.4	%
Essence Communications Inc.	(6)(8)(9)	Revolver	S +	6.75	%			6.75	%	11/25/2027		—		(196)		(196)	(0.1)	%
Total Technology & Telecommunications														30,623		31,000	20.4	%
Total Debt Investments														221,407		222,550	145.9	%
Equity Investments
Business Services
BCVD Holdings, LLC	(6)(10)	Class A Units										250		250		250	0.2	%
Total Equity Investments														250		250	0.2	%
Total Investments													$	221,657	$	222,800	146.1	%
Cash Equivalents
First American Government Obligations Fund, Class X	(11)	Money Market						4.08	%			4,164		4,164		4,164	2.7	%
Total Cash Equivalents														4,164		4,164	2.7	%
Total investments and cash equivalents													$	225,821	$	226,964	148.8	%
Liabilities in Excess of Other Assets																(74,470)	(48.8)	%
Net Assets															$	152,494	100.0	%

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(1)

(2)

The issuers of debt and equity held by the Company is domiciled in the United States.

(3)

Denominated in U.S. Dollars unless otherwise noted.

(4)

All of the investments bear interest at rates that may be determined by reference to Secured Overnight Financing Rate (“SOFR” or “S”), which reset monthly or quarterly. For each such investment, the Company has provided the spread over SOFR and the current contractual interest rate in effect at December 31, 2022. As of December 31, 2022, the effective rates for 1M S and 3M S are 4.36%, and 4.59%, respectively. For portfolio companies with multiple interest rate contracts, the interest rate shown is a weighted average current interest rate in effect as of December 31, 2022. For fixed rate loans, a spread above a reference rate is not applicable.

(5)

Percentage is based on net assets of $152,494 as of December 31, 2022.

(6)

Investment valued using unobservable inputs (Level 3), see Note 5 “Fair Value of Financial Instruments”.

(7)

Investment or portion of the investment that are pledged against the Company’s loan. See Note 6 “Borrowings”.

(8)

The negative cost is the result of the capitalized discount being greater than the principal amount outstanding on the loan. The negative fair value is the result of the capitalized discount on the loan. See Note 7 “Commitments and Contingencies”.

(9)

Security is a fully unfunded commitment. The stated rate reflects the spread disclosed at the time of commitment and may not indicate the actual rate received upon funding.

(10)

Non-income producing.

(11)

Cash equivalents balance represents amounts held in an interest-bearing money market fund issued by U.S. Bank National Association.

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Brightwood Capital Corporation I

Notes to Consolidated Financial Statements (Unaudited)

(in thousands, except share and per share information)

1.Principal Business and Organization

Brightwood Capital Corporation I (the “Company”) was formed as a Maryland corporation on November 15, 2021. The Company is an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a business development company (“BDC”) under the Investment Company Act of 1940 Act, as amended (the “1940 Act”). In addition, for US federal income tax purposes, the Company has elected to be treated, and to comply with the requirements to qualify annually, as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended. BCCI SPV-1, LLC (“SPV-1”) is a Delaware limited liability company that was formed on March 15, 2023. The Company has 100% ownership of SPV-1 and consolidates the results of SPV-1 in its consolidated financial statements.

The Company is managed by Brightwood Capital Advisors, LLC (the “Investment Adviser”), an investment adviser that is registered with the U.S. Securities and Exchange Commission (the “SEC”) under the Investment Advisers Act of 1940, as amended. The Investment Adviser provides portfolio management services to the Company, pursuant to an investment advisory agreement, including investigating, analyzing, structuring, and negotiating potential investments, monitoring the performance of portfolio companies and determining when to dispose of the Company’s investments. A team of the Investment Adviser’s investment committee servicing the Company (the “Investment Committee”) will evaluate and approve all of the Company’s investments, subject to the oversight of the Board of Directors (the “Board”). The Board consists of five directors, three of whom are independent.

The Company’s investment objective is to achieve risk-adjusted returns via current income and, to a lesser extent, capital appreciation. The Company will focus on lending to middle market companies and will primarily invest in portfolio companies in the form of first lien senior secured loans (including any related warrants or other equity securities of such portfolio companies). These senior secured loans typically provide for cash interest and amortization payments throughout the life of the loan. Brightwood generally obtains security interests in the assets of its portfolio companies that serve as collateral in support of the repayment of these loans.

The Company conducts private offerings of its common stock, par value $0.01 per share (“Common Stock”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended. Under the terms of the subscription agreements, investors are required to fund drawdowns to purchase shares of Common Stock up to the amount of their respective capital commitment on an as-needed basis each time the Company delivers a drawdown notice to its investors.

2.Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The Company is an investment company and follows the accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services—Investment Companies. The Company evaluates subsequent events through the date that the unaudited financial statements are issued.

As permitted under Regulation S-X and ASC Topic 946, the Company will generally not consolidate its investment in a portfolio company other than an investment company subsidiary or a controlled operating company whose business consists of providing all or substantially all of its services to the Company. Accordingly, the Company consolidated the results of the Company’s wholly-owned subsidiary, SPV-1, which is a special purpose vehicle used to finance certain investments in its consolidated financial statements. The effects of all material intercompany balances and transactions have been eliminated in consolidation.

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Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Many of the amounts have been rounded, and all amounts are in thousands, except share and per share amounts.

Cash and cash equivalents

Cash and cash equivalents consists of demand deposits held at U.S. Bank National Association, headquartered in Minneapolis, MN and City National Bank, headquartered in Los Angeles, CA. Some of these deposits invest in short-term investments, which consist of commercial paper, money market instruments and/or other short-term debt obligations. These balances are insured by the Federal Deposit Insurance Corporation up to $250. At times, these balances may exceed federally insured limits and this potentially subjects the Company to a concentration of credit risk. The Company has not experienced any losses in such accounts. The Company believes it is not exposed to any significant risk on its cash and cash equivalents. All cash and cash equivalents balances are maintained with high credit quality financial institutions.

Investment Valuation

The Company’s investments will be valued at fair value. The Investment Adviser, designated by the Board as a valuation designee, will determine the fair value of the assets on at least a quarterly basis in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC 820. In accordance with Rule 2a-5 of the 1940 Act, the Company’s Board has designated the Investment Adviser as the Company’s “valuation designee”. The Company’s Board and the audit committee of the Board, which is comprised solely of independent directors, oversees the activities, methodology and processes of the valuation designee.

The Company defines fair value as 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 and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

Level 1: Quoted prices are available in active markets for identical investments as of the reporting date. The types of investments in Level 1 include listed equities and listed derivatives. The Company does not adjust the quoted price for these investments, even in situations where the Company may hold a large position and a sale could reasonably impact the quoted price.

Level 2: Pricing inputs are other than quoted prices in active markets of comparable instruments, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments in this category generally include corporate bonds and loans, less liquid and restricted equity securities and certain over-the-counter derivatives.

Level 3: Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value are based upon the best information in the circumstances and may require significant management judgment or estimation. Investments in this category generally include equity and debt positions in private companies.

In certain cases, the inputs used to measure fair value may fall into 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. The Investment Adviser’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

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The Investment Adviser assesses the levels of the investments at each measurement date in accordance with the Company’s accounting policy. Transfers between levels, if any, are recognized at the beginning of the period in which the transfer occurs. There were no transfers among Level 1, 2 and 3 of the fair value hierarchy for investments for the three and nine months ended September 30, 2023.

Investments for which prices are not observable are generally private investments in the equity and debt securities of operating companies. Fair value of private investments is based on Level 3 inputs and determined by reference to public market or private transactions or valuations for comparable companies or assets in the relevant asset class when such amounts are available. Enterprise values of the underlying portfolio companies are completed to compute the fair value for each class of security owned by the Company. Generally, these enterprise valuations are derived by multiplying a key performance metric of the investee company’s asset (e.g., EBITDA) by the relevant valuation multiple observed for comparable companies or transactions, adjusted by management for differences between the investment and the referenced comparable. If the enterprise value of private investments held cannot be valued by reference to observable valuation measures for comparable companies, then the primary analytical method used to estimate the fair value of such private investments is the discounted cash flow method. A sensitivity analysis is applied to the estimated future cash flows using various factors depending on investment, including assumed growth rate (in cash flows), capitalization rates (for determining terminal values) and appropriate discount rates to determine a range of reasonable values. The valuation based on the inputs determined to be the most probable is used as the fair value of the investment.

The fair value of the Company’s investments in debt securities is further estimated using recently executed transactions, market price quotations and traded yields of corporate transactions (all when observable). When observable data is not available, fair value is estimated based on analysis of the collateral, cash flow models with yield curve analysis, seniority of the debt, enterprise value relative to debt levels, projected financial condition and operating results, payment history and ability to generate sufficient cash flows to make payments when due, and prepayment penalties.

Investments in the equity and debt securities of portfolio companies may also be valued at cost for a period of time after acquisition as the best indicator of fair value.

The determination of fair value using these methodologies takes into account a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the investment. These valuation methodologies involve a significant degree of judgment by the Investment Adviser.

Since the Company is under no compulsion to dispose of its investments, which are made with a view to a holding period of two years or more, the estimated values, as determined above, may not reflect amounts that could be realized upon immediate sale nor amounts that ultimately may be realized. As a result of the inherent uncertainty of the valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.

Organization and Offering Costs

The Company has agreed to repay the Investment Adviser for initial organization costs and offering costs incurred prior to the commencement of its operations. Organization costs include costs relating to the formation and organization of the Company. These costs are expensed as incurred in the Consolidated Statements of Operations. Costs associated with the Company’s private offering of shares are charged to paid-in-capital upon the sale of such shares.

Revenue Recognition

Security transactions are accounted for on the trade date. The Company records interest income on an accrual basis to the extent that it expects to collect such amounts. The Company does not accrue as a receivable interest on loans and securities if it has reason to doubt its ability to collect such income. The Company’s policy is to place investments on non-accrual status when there is reasonable doubt that interest income will be collected. The Company considers many factors relevant to an investment when placing it on or removing it from non-accrual status including, but not limited to, the delinquency status of the investment, economic and business conditions, the overall financial condition of the underlying investment, the value of the underlying collateral, bankruptcy status, if any, and any other facts or circumstances relevant to the investment. If there is reasonable doubt that the Company will receive any previously accrued interest, then the accrued interest will be written-off. Payments received on non-accrual investments may be recognized as income or applied to principal depending upon the collectability of the remaining principal and interest. Non-accrual investments may be restored

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to accrual status when principal and interest become current and are likely to remain current based on the Company’s judgment. As of September 30, 2023, no loans have been placed on non-accrual status by the Company.

Loan origination fees, original issue discount and market discount are capitalized and the Company amortizes such amounts as interest income over the respective term of the loan or security. Upon the prepayment of a loan or security, any unamortized loan origination fees and original issue discount are recorded as interest income. Structuring, amendment and other non-recurring upfront fees are recorded as other fee income when earned. The Company records prepayment premiums on loans and securities as other fee income when it earns such amounts. For the three and nine months ended September 30, 2023, $41 amendment fee income and $100 prepayment premiums have been recorded, all of which are included in other income in the consolidated statements of operations. For the three and nine months ended September 30, 2022, the Company did not recognize any structuring, amendment, other non-recurring upfront fee revenue or prepayment premiums.

Certain investments have contractual payment-in-kind (“PIK”) interest. PIK represents accrued interest that are added to the loan principal of the investment on the respective interest payment dates rather than being paid in cash and generally becomes due at maturity or upon being called by the issuer. PIK is recorded as interest income, as applicable. 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. Accrued PIK interest is generally reversed through interest income, respectively, when an investment is placed on non-accrual status. For the three and nine months ended September 30, 2023, zero and $4 PIK, respectively, has been recorded. For the three and nine months ended September 30, 2022, no PIK interest has been recorded.

Net Realized Gains or Losses and Net Change in Unrealized Appreciation or Depreciation

Gains or losses on the sale of investments are calculated by using the specific identification method. The Company measures realized gains or losses by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment, without regard to unrealized appreciation or depreciation previously recognized, but considering unamortized upfront fees. Net change in unrealized appreciation or depreciation reflects the change in portfolio investment values during the reporting period, including any reversal of previously recorded unrealized gains or losses when gains or losses are realized.

Expenses

The Company is responsible for base management fees, investment expenses, legal expenses, auditing fees and other expenses related to the Company’s operations. The Company will pay Brightwood Capital Advisors, LLC (the “Administrator”) the Company’s allocable portion of certain expenses incurred by the Administrator in performing its obligations under the administration agreement between the Company and the Administrator (the “Administration Agreement”), including the Company’s allocable portion of the cost of its Chief Financial Officer and Chief Compliance Officer and their respective staffs. The Administrator will be reimbursed for certain expenses it incurs on the Company’s behalf.

Deferred Financing Costs

Deferred financing costs represent fees and other direct incremental costs incurred in connection with the Company’s line of credit. These costs are deferred and amortized over the life of the related debt instrument and are included in amortization of deferred financing costs on the Consolidated Statements of Operations. Unamortized deferred financing costs are presented on the Consolidated Statements of Assets and Liabilities as an asset.

Income Taxes

Following its election to be regulated as a BDC under the 1940 Act, the Company elected to be treated as a RIC and will file its tax return for the year ending December 31, 2022, as a RIC. So long as the Company maintains its status as a RIC, it generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that it distributes at least annually to its shareholders as distributions. Rather, any tax liability related to income distributed by the Company represents obligations of the Company’s shareholders and will not be reflected on the Consolidated Statements of Assets and Liabilities of the Company.

To qualify 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 its

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“investment company taxable income” for that year, which is generally its ordinary income plus the excess of its realized net short-term capital gains over its realized net long-term capital losses. In order for the Company not to be subject to U.S. federal excise taxes, it must distribute annually an amount at least equal to the sum of (i) 98% of its net ordinary income (taking into account certain deferrals and elections) for the current year, (ii) 98.2% of its capital gains in excess of capital losses for the current year and (iii) any net ordinary income and capital gains in excess of capital losses for preceding years that were not distributed during such years. The Company, at its discretion, may carry forward taxable income in excess of calendar year dividends and pay a 4% nondeductible U.S. federal excise tax on this income. If the Company chooses to do so, this generally would increase expenses and reduce the amount available to be distributed to stockholders. The Company accrues excise tax on estimated undistributed taxable income as required on a quarterly basis.

A RIC is limited in its ability to deduct expenses in excess of its “investment company taxable income” (which is, generally, ordinary income plus the excess of realized net short-term capital gains over realized net long-term capital losses). If our expenses in a given year exceed our investment company taxable income, we would experience a net operating loss for that year. However, a RIC is not permitted to carry forward net operating losses to subsequent years and such net operating losses do not pass through to its stockholders. In addition, expenses can be used only to offset investment company taxable income, not net capital gain. A RIC may not use any net capital losses (that is, realized capital losses in excess of realized capital gains) to offset the RIC’s investment company taxable income, but may carry forward such losses, and use them to offset capital gains, indefinitely. Due to these limits on the deductibility of expenses and net capital losses, we may for tax purposes have aggregate taxable income for several years that we are required to distribute and that is taxable to its stockholders even if such income is greater than the aggregate net income we actually earned during those years.

The Company evaluates 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 accounts for income taxes in conformity with ASC 740 — Income Taxes (“ASC 740”). ASC 740 provides guidelines for how uncertain tax positions should be recognized, measured, presented and disclosed in consolidated financial statements. There were no material uncertain tax positions for the year ended December 31, 2022. The 2022 tax year remain subject to examination by U.S. federal and state tax authorities.

Dividends and Distributions

Dividends and distributions to common stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Board each quarter and is generally based upon the earnings estimated by the Investment Adviser. Net realized capital gains, if any, are distributed at least annually, although the Company may decide to retain such capital gains for investment.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of any distributions the Company declares in cash on behalf of the Company’s stockholders, unless a stockholder elects to receive cash. As a result, if the Company’s Board authorizes, and the Company declares, a cash distribution, then the Company’s stockholders who have not “opted out” of the Company’s dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution.

Recent Accounting Pronouncements

In June 2022, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2022-03, “Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (Topic 820),” which clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security’s unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the equity security’s fair value. In addition, ASU No. 2022-03 prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. ASU No. 2022-03’s amendments are effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2023, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU No. 2022-03 on its consolidated financial statements.

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3.Agreements and Related Party Transactions

Administration Agreement

The Company entered into an administration agreement (the “Administration Agreement”) with the Administrator on July 26, 2022. Pursuant to the Administration Agreement, the Company intends to reimburse the Administrator for certain expenses and the Company’s allocable portion of certain expenses incurred by the Administrator in performing its obligations under the Administration Agreement. Reimbursements under the Administration Agreement are expected to be made quarterly in arrears. For the three and nine months ended September 30, 2023, the Company incurred expenses of $168 and $624, respectively, in overhead expenses, which are included in the consolidated statements of operations, for costs and expenses reimbursable to the Investment Adviser under the terms of the Administration Agreement. In addition to overhead expenses, the payable balances may include other operating expenses paid by the Administrator on behalf of the Company. As of September 30, 2023 and December 31, 2022, $168 and $125, respectively, was payable to the Administrator. For the three and nine months ended September 30, 2022, the Company incurred expenses of $329 and $603, respectively, for costs and expenses reimbursable to the Investment Adviser under the terms of the Administration Agreement.

Investment Advisory Agreement

The Company entered into an investment advisory agreement (the “Investment Advisory Agreement”) with the Investment Adviser on July 26, 2022. Pursuant to the Investment Advisory Agreement, the Company agrees to pay as compensation for the investment advisory and management services provided by the Investment Adviser a base management fee (“Base Management Fee”). The Base Management Fee is calculated as follows: (a) if the aggregate capital commitment of investors is less than or equal to $350,000, an annual rate equal to 0.80% of the fair value of the average gross assets of the Company associated with such capital commitment and (b) if the aggregate Investors’ capital commitment is greater than $350,000, an annual rate equal to 0.70% of the fair value of the average gross assets of the Company associated with such capital commitment in excess of $350,000. The Base Management Fee shall be payable quarterly in arrears. The Base Management Fee shall be calculated based on the fair value of the average value of the gross assets of the Company at the end of the two most recently completed calendar quarters. Such amount shall be appropriately adjusted (based on the actual number of days elapsed relative to the total number of days in such calendar quarter) for any share issuances or repurchases during a calendar quarter. The Base Management Fee for any partial month or quarter shall be appropriately pro-rated (based on the number of days actually elapsed at the end of such partial month or quarter relative to the total number of days in such month or quarter). For the three and nine months ended September 30, 2023, the Investment Adviser earned a base management fee of $870 and $2,397, respectively. For the three and nine months ended September 30, 2022, the Investment Adviser earned a base management fee of $11. As of September 30, 2023 and December 31, 2022, base management fees of $870 and $421, respectively, were payable.

Further pursuant to the Investment Advisory Agreement, the Company intends to reimburse the Investment Adviser for the third party costs the Investment Adviser incurs on the Company’s behalf in connection with the formation and the initial closing of the private offering of the Company’s Common Stock.

On June 30, 2022, Sengal Selassie, the Chief Executive Officer and Chairman of the Board purchased 1,000 shares of Common Stock, for an aggregate purchase price of $10. On September 30, 2022, the Investment Adviser purchased 99,000 shares of Common Stock for an aggregate offering price of $990, pursuant to a capital drawdown notice. On November 10, 2022, the Investment Adviser purchased 50,000 shares of Common Stock for an aggregate offering price of $500, pursuant to a capital drawdown notice. On January 30, 2023, the Investment Adviser purchased 50,505 shares of Common Stock for an aggregate offering price of $500, pursuant to a capital drawdown notice. On September 26, 2023, the Investment Adviser purchased 48,077 shares of Common Stock for an aggregate offering price of $500, pursuant to a capital drawdown notice. Sengal Selassie, as an individual, and the Investment Adviser jointly made a capital commitment to the Company equal to one percent (1%) of the total capital commitments.

Directors’ Fees

Each of the Company’s Independent Directors will receive an annual retainer fee of $50, payable once per year. In addition, each of the Independent Directors will receive a fee of $10 for each regularly scheduled quarterly Board meeting in which they participate and $10 for each special Board meeting in which they participate. Independent Directors will also be reimbursed for all reasonable out-of-pocket expenses incurred in connection with participating in each Board meeting.

With respect to each Audit Committee meeting not held concurrently with a Board meeting, Independent Directors will be reimbursed for all reasonable out-of-pocket expenses incurred in connection with participating in such Audit Committee meeting. In addition, the

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chairman of the Audit Committee, the chairman of the Nominating and Corporate Governance Committee, and the chairman of the Valuation Committee will each receive annual retainers of $10.

For the three and nine months ended September 30, 2023, the Company incurred directors’ fees of $75 and $225, respectively. For the three and nine months ended September 30, 2022, the Company incurred directors’ fees of $30. As of September 30, 2023 and December 31, 2022, directors’ fees of $165 and $120, respectively, were payable.

Exemptive Relief

As a BDC, the Company is subject to certain regulatory restrictions in making its investments. For example, BDCs generally are not permitted to co-invest with certain affiliated entities in transactions originated by the BDC or its affiliates in the absence of an exemptive order from the SEC. However, BDCs are permitted to, and may, simultaneously co-invest in transactions where price is the only negotiated term. In an order dated August 22, 2022, the SEC granted exemptive relief permitting the Company, subject to the satisfaction of certain conditions, to co-invest in certain privately negotiated investment transactions with certain affiliates of its Investment Adviser.

The Company is currently investing contemporaneously with other investment vehicles managed by Brightwood (the “Other Investing Funds”). Accordingly, the Company and the Other Investing Funds are allocated investment opportunities in accordance with Brightwood’s Allocation of Investment Opportunities Policy, which requires investment opportunities to be allocated to the funds in a manner that is fair and equitable to all funds over time. Under such policy, Brightwood will generally determine the allocation of an investment opportunity by considering each fund’s purchasing capacity, whether the investment opportunity is eligible for the relevant fund(s), and the target investment size with respect to each fund based on a variety of factors, including, but not limited to, each fund’s EBITDA focus, industry diversification requirements, leverage considerations, and investment ratings of the investment.

Other

For the nine months ended September 30, 2023, Brightwood Loan Services LLC served as administrative agent for the following investments: Elevator Intermediate Holdings, Inc., Essence Communications Inc., IAM Acquisition LLC, Medical Management Holdings, LLC, John C. Cassidy Air Conditioning, Inc., KKSP Precision Machining LLC, North Acquisition LLC, OPCO Borrower LLC, Vehicle Management Services LLC, Veradata Holdings, LLC, VHL Logistics, Inc., Voice Comm, LLC and YNWA Finco LLC.

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4.Investment Portfolio

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of September 30, 2023:


	As of September 30, 2023
	Amortized				Percentage
	Cost ⁽¹⁾		Fair Value		of Portfolio
Senior Secured First Lien Term Loan	$	268,647	$	287,484	75.5	%
Senior Secured Term Loan		90,970		75,894	19.9	%
Delayed Draw Term Loan		7,977		8,408	2.2	%
Revolver		4,037		4,265	1.1	%
Class A Preferred Units		3,500		3,500	0.9	%
Class A Membership Units		1,000		1,000	0.3	%
Class A Units		250		288	0.1	%
	$	376,381	$	380,839	100.0	%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

The following table summarizes the composition of the Company’s investment portfolio at cost and fair value as of December 31, 2022:


	As of December 31, 2022
	Amortized				Percentage
	Cost⁽¹⁾		Fair Value		of Portfolio
Senior Secured First Lien Term Loan	$	172,783	$	173,883	78.0	%
Senior Secured Term Loan		48,248		48,285	21.7	%
Delayed Draw Term Loan(2)		(184)		(184)	(0.1)	%
Revolver		560		566	0.3	%
Class A Units		250		250	0.1	%
Total	$	221,657	$	222,800	100.0	%

(1)

Amortized cost represents the original cost adjusted for the amortization of premiums and/or accretion of discounts, as applicable, on investments.

(2)

The Company does not “control” and is not an “affiliate” of any of its portfolio companies, each as defined in the 1940 Act. In general, under the 1940 Act, the Company would be presumed to “control” a portfolio company if it owned 25% or more of its voting securities and would be an “affiliate” of a portfolio company if it owned 5% or more of its voting securities.

The Company’s investment portfolio may contain loans that are in the form of lines of credit or revolving credit facilities, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying loan agreements.

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The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio investments in such industries as of September 30, 2023:


	As of September 30, 2023
Industry Classification			Percentage
	Fair Value		of Portfolio
Business Services	$	114,303	30.0	%
Healthcare		90,723	23.8	%
Franchising		74,475	19.6	%
Technology & Telecommunications		66,691	17.5	%
Transportation & Logistics		34,647	9.1	%
Total	$	380,839	100.0	%

The table below describes investments by industry classification and enumerates the percentage, by fair value, of the total portfolio investments in such industries as of December 31, 2022:


	As of December 31, 2022
			Percentage
Industry Classification	Fair Value		of Portfolio
Business Services	$	138,240	62.1	%
Technology & Telecommunications		31,000	13.9	%
Franchising		29,696	13.3	%
Healthcare		23,864	10.7	%
Total	$	222,800	100.0	%

5.	Fair Value of Financial Instruments

Under existing accounting guidance, fair value is defined as the price that the Company would receive upon selling an investment or pay to transfer a liability in an orderly transaction to a market participant in the principal or most advantageous market for the investment. This accounting guidance emphasizes valuation techniques that maximize the use of observable market inputs and minimize the use of unobservable inputs. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances. The Investment Adviser classifies the inputs used to measure these fair values into the following hierarchy as defined by current accounting guidance:

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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As of September 30, 2023, the Company’s investments were categorized as follows in the fair value hierarchy:


	As of September 30, 2023
	Fair Value		Level 1		Level 2		Level 3
Senior Secured First Lien Term Loan	$	287,484	$	—	$	—	$	287,484
Senior Secured Term Loan		75,894		—		—		75,894
Delayed Draw Term Loan		8,408		—		—		8,408
Revolver		4,265		—		—		4,265
Class A Preferred Units		3,500		—		—		3,500
Class A Units		288		—		—		288
Class A Membership Units		1,000		—		—		1,000
Total Investments		380,839		—		—		380,839
Cash Equivalents		1,027		1,027		—		—
Total Investments and cash equivalents	$	381,866	$	1,027	$	—	$	380,839

On September 30, 2023, the Investment Adviser valued some of the Company’s investments by using the acquisition price of those investments.

As of December 31, 2022, the Company’s investments were categorized as follows in the fair value hierarchy:


	As of December 31, 2022
Description	Fair Value		Level 1		Level 2		Level 3
Senior Secured First Lien Term Loan	$	173,883	$	—	$	—	$	173,883
Senior Secured Term Loan		48,285		—		—		48,285
Delayed Draw Term Loan⁽¹⁾		(184)		—		—		(184)
Revolver		566		—		—		566
Class A Units		250		—		—		250
Total investments		222,800		—		—		222,800
Cash equivalents		4,164		4,164		—		—
Total investments and cash equivalents	$	226,964	$	4,164	$	—	$	222,800

(1)

On December 31, 2022, the Investment Adviser valued some of the Company’s investments by using the acquisition price of those investments.

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The following is a reconciliation for the nine months ended September 30, 2023, of investments for which significant unobservable inputs (Level 3) were used in determining fair value:


	For the nine months ended September 30, 2023
	Senior
	Secured		Senior
	First		Secured		Delayed						Class A		Class A
	Lien Term		Term		Draw				Class A		Preferred		Membership
	Loan		Loan		Term Loan		Revolver		Units		Units		Units		Total
Fair value at beginning of period	$	173,883	$	48,285	$	(184)	$	566	$	250	$	—	$	—	$	222,800
Purchases		127,019		30,506		8,109		9,077		—		3,500		1,000		179,211
Accretion of discount (amortization of premium)		773		344		71		108		—		—		—		1,296
Sales and repayments		(16,079)		(3,980)		(20)		(5,709)		—		—		—		(25,788)
Unrealized gain (loss)		1,884		739		432		223		38		—		—		3,316
Paid in-kind interest		4		—		—		—		—		—		—		4
Net transfers in or out of Level 3		—		—		—		—		—		—		—		—
Fair value at end of period	$	287,484	$	75,894	$	8,408	$	4,265	$	288	$	3,500	$	1,000	$	380,839
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	1,884	$	739	$	432	$	223	$	38	$	—	$	—	$	3,316

There were no transfers of investments into or out of Level 1, 2, or 3 in the fair value hierarchy during the three and nine months ended September 30, 2023.

The following is a reconciliation for the nine months ended September 30, 2022, of investment for which significant unobservable inputs (Level 3) were used in determining fair value :


	Nine Months Ended
	September 30, 2022
	Senior Secured Loans-First Lien
Fair value at beginning of Period	$	—
Purchases		54,000
Accretion of discount (amortization of premium)		8
Sales and repayments		(337)
Net transfer in or out of Level 3		—
Fair value at end of period	$	53,671
The amount of total gains or losses for the period included in changes in net assets attributable to the change in unrealized gains or losses relating to investments still held at the reporting date	$	—

There were no transfers of investments into or out of Level 1, 2, or 3 in the fair value hierarchy during the three and nine months ended September 30, 2022.

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The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements as of September 30, 2023, were as follows:

Type of Investment

Fair Value

Valuation Technique

Unobservable Inputs *

Low

High

Debt investments

376,051

Discounted Cash Flows

Discount Rate

7.77

14.06

Recent Acquisitions

N/A

Equity investments

4,788

Enterprise Value

EBITDA Multiple

9.25x

15.00x

Recent Acquisitions

N/A

Total investments

380,839

In determining certain of these inputs, the Company evaluates a variety of factors including economic conditions, industry and market developments, market valuations of comparable companies and company-specific developments including exit strategies and realization opportunities. The Company has determined that market participants would take these inputs into account when valuing the investments. EBITDA means Earnings Before Interest, Taxes, Depreciation and Amortization.

The valuation techniques and significant unobservable inputs used in Level 3 fair value measurements as of December 31, 2022, were as follows:

Type of Investment

Fair Value

Valuation Technique

Unobservable Inputs *

Low

High

Debt investments

222,550

Discounted Cash Flows

Discount Rate

9.32

11.99

Recent Acquisitions

N/A

Equity investments

250

Recent Acquisitions

N/A

Total investments

222,800

6.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%. As of September 30, 2023 and December 31, 2022, the Company’s asset coverage was 261% and 252%, respectively. As of September 30, 2023 and December 31, 2022, the Company was in compliance with the terms and covenants of its borrowings.

CNB Revolving Credit Facility: On December 23, 2022, the Company entered into a capital call facility revolving credit agreement with City National Bank, as the administrative agent, lender, letter of credit issuer, lead arranger and book manager. The maximum principal amount of the facility is $100,000, subject to availability under the borrowing base. Borrowings under the facility bear interest at SOFR plus 2.5% per annum, subject to certain provisions in the revolving credit agreement. Any amounts borrowed under the facility, and all accrued and unpaid interest, will be due and payable, on December 23, 2024 with additional annual extensions upon mutual agreement of the Bank and the Company. As of September 30, 2023 and December 31, 2022, the Company was in compliance with debt covenants.

Costs incurred in connection with obtaining the CNB Revolving Credit Facility have been recorded as deferred financing costs and are being amortized over the life of the facility. As of September 30, 2023 and December 31, 2022, the unamortized deferred financing costs related to the facility was $443 and $712, respectively, and was showing as an asset on the Consolidated Statements of Assets and Liabilities.

As of September 30, 2023 and December 31, 2022, there was $30,000 and $0 undrawn portion, respectively, on the line of credit provided by City National Bank. As of September 30, 2023 and December 31, 2022, the total outstanding balance under the credit agreement was $70,000 and $100,000, respectively and this carrying value approximates fair value.

BCCI SPV-1 Credit Facility: On March 30, 2023, SPV-1, entered into a credit agreement, with the Investment Adviser as the Servicer, SPV-1 as the borrower, the financial institutions from time to time party hereto as lenders, KeyBank National Association as the

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administrative agent and syndication agent, U.S. Bank National Association as the collateral custodian and U.S. Bank Trust Company, National Association as the paying agent. SPV-1 is consolidated into the Company’s financial statements and no gain or loss is recognized from transfer of assets to and from SPV-1. This credit facility is secured by collateral consisting primarily of loans in the Company’s investment portfolio.

Initial facility amount committed is $100,000 and may be increased up to a total maximum facility amount of $350,000 until Commitment Terminal Date upon request, subject to availability under the borrowing base. The maturity date is 24 months after the last day of the Revolving Period. Revolving Period means the period commencing on the effective date and ending on Commitment Termination Date. Commitment Termination Date is the earliest of (a) March 30, 2026, (b) the end of the Investment Period of the Company and (c) the occurrence of an event of default (unless otherwise waived in writing by the administrative agent).

Costs incurred in connection with obtaining the BCCI SPV-1 Credit Facility have been recorded as deferred financing costs and are being amortized over the life of the facility. As of September 30, 2023, the unamortized deferred financing costs related to the facility was $988, and was showing as an asset on the Consolidated Statements of Assets and Liabilities.

As of September 30, 2023, there was no undrawn portion on the line of credit provided under this credit facility. As of September 30, 2023, the total outstanding balance under the credit agreement was $100,000, and this carrying value approximates fair value.

As of September 30, 2023 and December 31, 2022, the interest payable on line of credit related to CNB Revolving Credit Facility and BCCI SPV-1 Credit Facility was $2,918 and $173, respectively.

The following table shows the expenses incurred by the Company related to CNB Revolving Credit Facility and BCCI SPV-1 Credit Facility for the three months and nine months ended September 30, 2023.


	Three Months Ended
	September 30, 2023
Interest expense on line of credit	$	3,216
Amortization of deferred financing costs	$	146
Weighted average interest rate		7.90	%

	Nine Months Ended
	September 30, 2023
Interest expense on line of credit	$	6,804
Amortization of deferred financing costs	$	380
Weighted average interest rate		7.55	%

Loans Payable: The Company entered into an agreement with Macquarie US Trading LLC (“Macquarie”) to govern the purchase and sale of certain loans. On a loan settlement date (“purchase date”), the Company borrows money from Macquarie and grants its beneficial interest in certain loans to Macquarie for an agreed upon purchase price. The Company retains title and assumes all risk related to that loan for the benefit of Macquarie until the trigger date, known as the settlement period. On the trigger date, the Company will repay the money borrowed from Macquarie relating to a particular loan at the agreed upon purchase price. Under the agreement, the Company retains the right to receive interest on the loan between the settlement date and the trigger date, as long as a default has not occurred. In the event of a default, the Company will remit to Macquarie all interest received on the loan.

The Company agrees to pay Macquarie a fee, which equals to (a) the product of the funded amount of the loan and (b) the product of (i) the number of days the loan is outstanding (subject to number of minimum days per the agreement) and (ii) daily fee rate. For the three and nine months ended September 30, 2023, the Company incurred fees of $0 and $378, respectively, which are shown as interest expense on loans on the Consolidated Statements of Operations. As of September 30, 2023 and December 31, 2022, zero and $500, respectively, was payable to Macquarie. Principal payments due to Macquarie are recognized within the loan payable balance on the Consolidated Statements of Assets and Liabilities. As of September, 2023 and December 31, 2022, the Company had a loan payable balance of zero and $53,803, respectively, to Macquarie.

No loans were held as collateral against the loan payable to Macquarie as of September 30, 2023.

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The following table shows the loans held as collateral against the loan payable to Macquarie as of December 31, 2022, as well as the applicable trigger date and fee rate:


									Fees to
									Macquarie
							Settlement		accrued as
	Par		Purchase	Trigger	Purchase		Period (# of	Daily Fee	of
Investment Name	Amount		Date	Date	Price		Days)	(BPS)	12.31.22
Veradata Holdings, LLC - Senior Secured First Lien Term Loan	$	18,750	1-Nov-22	10-Jan-23	98.0	%	70	0.00021257	$	238
North Haven USHC Acquisition, Inc. - Senior Secured First Lien Term Loan	$	16,253	10-Nov-22	10-Jan-23	98.0	%	61	0.00021665	$	179
VHL Logistics, Inc. - Senior Secured First Lien Term Loan	$	20,000	13-Dec-22	10-Jan-23	97.5	%	45 (Min days used)	0.00022317	$	83

7.Commitments and Contingencies

In the normal course of business, the Company may enter into contracts that provide a variety of general indemnifications. Any exposure to the Company under these arrangements could involve future claims that may be made against the Company. Currently, no such claims exist, and accordingly, the Company has not accrued any liability in connection with such indemnifications.

The Company’s investment portfolio may contain investments that are in the form of lines of credit or unfunded commitments, which require the Company to provide funding when requested by portfolio companies in accordance with the terms of the underlying agreements. Unfunded commitments to provide funds to portfolio companies are not reflected on the Company’s Consolidated Statements of Assets and Liabilities. Since these commitments may expire without being drawn upon, unfunded commitments do not necessarily represent future cash requirements or future earning assets for the Company. The Company generally sets aside sufficient liquid assets to cover its unfunded commitments, if any. The Company intends to use cash on hand, short term investments, proceeds from borrowings, and other liquid assets to fund these commitments should the need arise. For information on the companies to which the Company is committed to fund additional amounts as of September 30, 2023 and December 31, 2022, refer to the table below and the Consolidated Schedules of Investments.

The following table details the Company’s unfunded commitments as of September 30, 2023:


Investments	Asset Classification	Unfunded Commitment
Athlete Buyer, LLC	Delayed Draw Term Loan	$	3,345
Athlete Buyer, LLC	Delayed Draw Term Loan		6,248
Athlete Buyer, LLC	Revolver		1,652
Elevator Intermediate Holdings, Inc.	Delayed Draw Term Loan		1,000
Elevator Intermediate Holdings, Inc.	Revolver		1,000
ESN Venture Holdings, LLC	Delayed Draw Term Loan		4,290
ESN Venture Holdings, LLC	Revolver		433
Essence Communications Inc.	Revolver		7,115
Firebirds Buyer, LLC	Delayed Draw Term Loan		811
Firebirds Buyer, LLC	Revolver		649
North Haven USHC Acquisition, Inc.	Delayed Draw Term Loan		6,606
OPCO Borrower LLC	Revolver		2,500
Veradata Holdings, LLC	Revolver		250
VHL Logistics, Inc.	Revolver		500
Zavation Medical Products, LLC	Revolver		430
Total Unfunded Commitments		$	36,829

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The following table details the Company’s unfunded commitments as of December 31, 2022:


Investments	Asset Classification	Unfunded Commitment
ESN Venture Holdings, LLC	Delayed Draw Term Loan	$	4,726
ESN Venture Holdings, LLC	Revolver		433
Essence Communications Inc.	Revolver		10,000
North Haven USHC Acquisition, Inc.	Delayed Draw Term Loan		6,606
North Haven USHC Acquisition, Inc.	Revolver		606
OPCO Borrower LLC	Revolver		1,000
Veradata Holdings, LLC	Delayed Draw Term Loan		750
Veradata Holdings, LLC	Revolver		250
VHL Logistics, Inc.	Revolver		500
Total Unfunded Commitments		$	24,871

8.Net Assets

In connection with its formation, the Company has the authority to issue 100,000,000 shares of common stock, $0.01 par value per share (“Common Stock”).

On June 30, 2022, Sengal Selassie purchased 1,000 shares of Common Stock, for an aggregate purchase price of $10.

On September 16, 2022, the Company entered into subscription agreements with investors providing for the private placement of the Company’s Common Stock. Under the terms of the subscription agreements, the investors made a capital commitment in an aggregate amount equal to $353,500, $3,500 of which was from the Investment Adviser. The investors are required to fund drawdowns to purchase the Company’s Common Stock up to the amount of their respective capital commitment on an as-needed basis each time the Company delivers a drawdown notice to its investors.

On September 26, 2022, the Company issued and sold 10,000,000 shares of Common Stock for an aggregate offering price of $100,000, pursuant to a capital drawdown notice to its investors. On September 30, 2022, the Investment Adviser purchased 99,000 shares of Common Stock for an aggregate offering price of $990, pursuant to a capital drawdown notice. On November 10, 2022, the Company issued and sold 5,050,000 shares of Common Stock for an aggregate offering price of $50,500, pursuant to a capital drawdown notice to its investors, $500 of which was from the Investment Adviser. On January 30, 2023, the Company issued and sold 5,101,010 shares of Common Stock for an aggregate offering price of $50,500, pursuant to a capital drawdown notice to its investors, $500 of which was from the Investment Adviser. On September 26, 2023, the Company issued and sold 4,855,769 shares of Common Stock for an aggregate offering price of $50,500, pursuant to a capital drawdown notice to its investors, $500 of which was from the Investment Adviser. As of September 30, 2023 and December 31, 2022, the unfunded capital commitment from the investors was $101,000 and $202,000, of which $1,000 and $2,000, respectively, was from the Investment Adviser.

The following table summarizes the distributions declared on shares of the Company’s common stock since the initial funding on September 26, 2022. Stockholders of record as of each respective record date were entitled to receive the distribution:


Date Declared	Record Date	Payment Date	Amount per Share
12/30/2022	12/30/2022	1/27/2023	$	0.08
5/23/2023	5/26/2023	6/9/2023	$	0.21
8/28/2023	8/31/2023	9/14/2023	$	0.24

On all payment dates above, all of the Company’s stockholders had their cash distributions automatically reinvested in additional shares of the Company’s common stock, rather than receiving the cash distribution.

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9.Net Change in Net Assets Resulting from Operations per Share

In accordance with the provisions of ASC Topic 260 — Earnings per Share (“ASC 260”), basic earnings per share is computed by dividing earnings available to common shareholders by the weighted average number of shares outstanding during the period. Other potentially dilutive common shares, and the related impact to earnings, are considered when calculating earnings per share on a diluted basis.

The following table sets forth the computation of the weighted average basic and diluted loss per common share from operations for the following period:


	Three months ended September 30,						Nine months ended September 30,
	2023			2022			2023			2022
Net increase (decrease) in net assets resulting from operations	$	7,609		$	(704)		$	19,684		$	(949)
Weighted average shares of common stock outstanding—basic and diluted		23,455,350	⁽¹⁾		10,100,000	⁽²⁾		20,608,534	⁽³⁾		10,100,000	⁽²⁾
Net change in net assets resulting from operations per share—basic and diluted	$	0.32		$	(0.07)		$	0.96		$	(0.09)

(1)

The weighted average shares outstanding for the three months ended September 30, 2023, are based on the average of outstanding shares as of June 30, 2023 and September 30, 2023.

(2)

The weighted average shares outstanding for the three and nine months ended September 30, 2022, are based on the assumption that the number of shares issued in the Formation Transactions and Offering in June and September 2022 (10,100,000 shares of Common Stock) had been issued on January 1, 2022.

(3)

The weighted average shares outstanding for the nine months ended September 30, 2023, are based on the average of outstanding shares as of December 31, 2022, March 31, 2023, June 30, 2023 and September 30, 2023.

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10.Income Taxes

The Company elected to be treated as a RIC under Subchapter M of the Code. As a RIC, the Company will not be taxed on any investment company taxable income or capital gains which it distributes to stockholders. The Company intends to distribute all of its investment company taxable income and capital gains annually. Accordingly, no provision for federal income tax has been made in the consolidated financial statements.

Dividends from net investment income and distributions from net realized capital gains are determined in accordance with U.S. federal tax regulations, which may differ from amounts in accordance with U.S. GAAP and those differences could be material. These book-to-tax differences are either temporary or permanent in nature. Reclassifications due to permanent book-to-tax differences have no impact on net assets.

The tax character of distributions for the year ended December 31, 2022 was as follows:


	For the Year Ended
	December 31, 2022
Distributions paid from:
Ordinary income	$	1,137
Long term capital gain		—
2023 deferred income		75
Total distributions paid	$	1,212

The components of accumulated earnings (losses) on a tax basis for the year ended December 31, 2022 were as follows:


	For the Year Ended
	December 31, 2022
Undistributed net investment income (loss)	$	(75)
Accumulated net realized gain (loss)		—
Net Unrealized Investment Appreciation (Depreciation)		1,143
Total accumulated earnings	$	1,068

The Company’s aggregate unrealized appreciation and depreciation on investments based on cost for U.S. federal income tax purposes as of December 31, 2022 were as follows:


	As of
	December 31, 2022
Tax Cost of Investments	$	221,657
Gross unrealized appreciation	$	1,143
Gross unrealized depreciation		—
Net Unrealized Investment Appreciation (Depreciation)	$	1,143

The following reconciles net increase in net assets resulting from operations to taxable income:


	For the Year Ended
	December 31, 2022
Net increase in net assets resulting from operations	$	2,280
Net change in unrealized (appreciation) depreciation on investments		(1,143)
Permanent book income and tax income differences		—
Temporary book income and tax income differences		—
Taxable income	$	1,137

Note, taxable income is an estimate and is not fully determined until the Company’s tax return is filed.

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Taxable income generally differs from net increase (decrease) in net assets resulting from operations due to temporary and permanent differences in the recognition of income and expenses, and generally excludes net unrealized gains or losses, as unrealized gains or losses are generally not included in taxable income until they are realized.

ASC Topic 740, “Accounting for Uncertainty in Income Taxes” (“ASC 740”) provides guidance on the accounting for and disclosure of uncertainty in tax position. ASC 740 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Company’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Based on its analysis of its tax position for all open tax years (the current and prior years, as applicable), the Company has concluded that it does not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740. The 2022 tax year remains subject to examination and adjustment by tax authorities.

11.Financial Highlights

The following is a schedule of financial highlights of the Company for the nine months ended September 30, 2023 and September 30, 2022:


	Nine Months Ended September 30,
	2023			2022 ⁽⁸⁾
Per share data: ⁽¹⁾
Net asset value, beginning of period	$	10.07		$	10.00
Results of operations ⁽²⁾
Net investment income (loss)		0.80			(0.09)
Net change in unrealized appreciation (depreciation)		0.16			—
Net increase (decrease) in net assets resulting from operations ⁽²⁾		0.96			(0.09)
Stockholder distributions from income		(0.45)			—
Capital share transactions		—			—
Issuance of common shares ⁽³⁾		(0.07)			—
Reinvestment of stockholder distributions		(0.01)			—
Offering cost		—			(0.01)
Net increase (decrease) in net assets resulting from capital share transactions		(0.08)			(0.01)
Net asset value, end of period	$	10.50		$	9.90
Shares outstanding, end of period		26,123,092			10,100,000
Total return ⁽⁴⁾		4.27	%		(1.00)	%
Ratio/Supplemental data:
Net assets, end of period	$	274,390		$	99,977
Ratio of net investment income to average net assets ⁽⁵⁾		9.46	%		(1.13)	%
Ratio of operating expenses to average net assets ⁽⁵⁾		6.88	%		(1.23)	%
Portfolio turnover ⁽⁶⁾		7.74	%		0.63	%
Asset coverage ratio ⁽⁷⁾		261	%		N/A

(1)

Per share data may be rounded in order to recompute the ending net asset value per share.

(2)

The per share data was derived by using the weighted average shares outstanding during the period.

(3)

The issuance of Common Stock on a per share basis reflects the incremental net asset value changes as a result of the issuance of Common Stock in the Company’s continuous offering. The issuance of Common Stock at a price that is lower than the net asset value per share results in an decrease in net asset value per share.

(4)

The total return for the nine months ended September 30, 2023 was calculated by taking the increase of net asset value per share from December 31, 2022 to September 30, 2023, adding the cash distributions per share which were declared during the period and dividing the total by the net asset value per share on December 31, 2022.

(5)

Weighted average net assets are used for this calculation. Ratios for the period are annualized except for organization expenses.

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(6)

Portfolio turnover for the period is not annualized.

(7)

Asset coverage ratio is equal to (i) the sum of (A) net assets at the end of the period and (B) debt outstanding at the end of the period, divided by (ii) total debt outstanding at the end of the period.

(8)

For the period from September 26, 2022 (Commencement of Operations) through September 30, 2022.

12.Share Transactions

The following table summarizes the total shares issued for the three months and nine months ended September 30, 2023.


	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at beginning of period	20,787,609	$	207,490	1,000	$	10	15,150,000	$	151,500	—	$	—
Issuance of common shares	4,855,769		50,500	10,099,000		100,990	9,956,779		101,000	10,100,000		101,000
Reinvestments of stockholder distributions	479,714		4,989	—		—	1,016,313		10,479	—		—
Balance at end of period	26,123,092	$	262,979	10,100,000	$	101,000	26,123,092	$	262,979	10,100,000	$	101,000

13.Subsequent Events

On October 4, 2023, SPV-1, entered into a first amendment to credit agreement and joinder agreement, with the Investment Adviser as the servicer, SPV-1 as the borrower, the financial institutions from time to time party hereto as lenders, KeyBank National Association as the administrative agent and syndication agent, U.S. Bank National Association as the collateral custodian and U.S. Bank Trust Company, National Association as the paying agent. The facility amount committed increased to $155,000 which is reallocated among KeyBank National Association, Live Oak Bank, First Foundation Bank and First-Citizens Bank & Trust Company.

On October 24, 2023, the Company delivered capital call notices to the investors to issue and sell 4,855,769 shares of Common Stock for an aggregate offering price of $50,500. This capital call was received on November 7, 2023.

On October 31, 2023, SPV-1, entered into a joinder agreement, with the Investment Adviser as the servicer, SPV-1 as the borrower, the financial institutions from time to time party hereto as lenders, KeyBank National Association as the administrative agent and syndication agent, U.S. Bank National Association as the collateral custodian and U.S. Bank Trust Company, National Association as the paying agent. The commitment with respect to the new lender, Optum Bank, Inc., is $20,000. This increased the facility amount committed to $175,000.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

(dollars in thousands, except share and per share data)

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto included elsewhere in this quarterly report on Form 10-Q. Unless indicated otherwise, the “Company,” “we,” “us,” and “our” refer to Brightwood Capital Corporation I, and the “Investment Adviser” refers to Brightwood Capital Advisers, LLC, (together with the Investment Adviser and their other affiliates, collectively, “Brightwood”).

Forward-Looking Statements

Some of the statements in this quarterly report on Form 10-Q (including those relating to current and future market conditions and trends in respect thereof) that are not historical facts are based on current expectations, estimates, projections, opinions and/or beliefs of Brightwood. These forward-looking statements are not historical facts, but rather are based on current expectations, estimates and projections about us, our current and prospective portfolio investments, our industry, our beliefs, and our assumptions. Words such as “anticipate”, “believe”, “continue”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “potential”, “project”, “seek”, “should”, “target”, “will”, “would” or variations of these words and similar expressions are intended to identify forward-looking statements. The forward-looking statements contained in this report involve risks and uncertainties.

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. Important assumptions include our ability to originate new loans and investments, certain margins and levels of profitability and the availability of additional capital. 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. You should not place undue reliance on these forward-looking statements, which 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 following factors are among those that may cause actual results to differ materially from the Company’s forward-looking statements:

●	the Company’s future operating results;

●

changes in political, economic or industry conditions, the interest rate environment or conditions affecting the financial and capital markets, including with respect to changes from the impact of the COVID-19 pandemic; the length and duration of the COVID-19 outbreak in the United States as well as worldwide and the magnitude of the economic impact of that outbreak;

●	lack of sufficient investment opportunities;

●	volatility of leveraged loan markets;

●	risk of borrower default;

●	the restricted nature of investment positions;

●	the illiquid nature of our portfolio;

●	interest rate volatility, including volatility associated with the decommissioning of LIBOR and the transition to new reference rates;

●	the effect of the COVID-19 pandemic on the Company’s business prospects and the prospects of the Company’s portfolio companies, including the Company’s and the portfolio companies’ ability to achieve their respective objectives;

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●	the effect of the disruption caused by the COVID-19 pandemic on the Company’s ability to effectively manage the Company’s business and on the availability of equity and debt capital and the Company’s use of borrowed money to finance a portion of the Company’s investments;

●	the Company’s business prospects and the prospects of the Company’s prospective portfolio companies;

●	the impact of increased competition;

●	the Company’s contractual arrangements and relationships with third parties;

●	the dependence of the Company’s future success on the general economy and its impact on the industries in which the Company invests;

●	the ability of the Company’s prospective portfolio companies to achieve their objectives;

●	the relative and absolute performance of the Investment Adviser;

●	the ability of the Investment Adviser and its affiliates to retain talented professionals;

●	the Company’s expected financings and investments;

●	the Company’s ability to pay dividends or make distributions;

●	the adequacy of the Company’s cash resources;

●	risks associated with possible disruptions due to terrorism in the Company’s operations or the economy generally;

●	the impact of future acquisitions and divestitures;

●	the Company’s regulatory structure and tax status as a business development company (“BDC”) and a regulated investment company (“RIC”); and

●	future changes in laws or regulations and conditions in the Company’s operating areas.

Overview

We were formed as a Maryland corporation on November 15, 2021. We are an externally managed, non-diversified, closed-end management investment company that has elected to be regulated as a BDC under the Investment Company Act of 1940 Act, as amended (the “1940 Act”). In addition, for US federal income tax purposes, we have elected to be treated, and to comply with the requirements to qualify annually, as a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended.

We are managed by Brightwood Capital Advisors, LLC, an investment adviser (the “Investment Adviser”) that is registered with the Securities and Exchange Commission (“SEC”) under the Investment Advisers Act of 1940, as amended. The Investment Adviser will provide portfolio management services to us pursuant to an investment advisory agreement (the “Investment Advisory Agreement”), including investigating, analyzing, structuring, and negotiating potential investments, monitoring the performance of portfolio companies, and determining when to dispose of our investments. Our investment committee will evaluate and approve all of our investments, subject to the oversight of our Board of Directors (the “Board”). The Board consists of five directors, three of whom are independent.

Our investment objective is to achieve risk-adjusted returns via current income and, to a lesser extent, capital appreciation. We will focus on lending to middle market companies and will primarily invest in portfolio companies in the form of first lien senior secured loans (including any related warrants or other equity securities of such portfolio companies). These senior secured loans typically provide for cash interest and amortization payments throughout the life of the loan. We generally obtain security interests in the assets of the

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portfolio companies in which we invest that serve as collateral in support of the repayment of these loans. The Investment Adviser also serves as our administrator (in such capacity, the “Administrator”) pursuant to the terms of an administration agreement (the “Administration Agreement”). We conducted a private offering of our common stock, par value $0.01 per share (“Common Stock”) to investors in reliance on exemptions from the registration requirements of the U.S. Securities Act of 1933, as amended. Under the terms of the subscription agreements, investors are required to fund drawdowns to purchase shares of Common Stock up to the amount of their respective capital commitments on an as-needed basis each time we deliver a drawdown notice to them.

Revenues

We generate revenues in the form of interest income from the debt securities we hold and dividends and capital appreciation on either direct equity investments or equity interests obtained in connection with originating loans, such as options, warrants or conversion rights. The debt we invest in is typically not rated by any rating agency, but if it were, it is likely that such debt would be below investment grade. In addition, we (but, for the avoidance of doubt, not our Investment Adviser or Administrator) may also generate revenue in the form of commitment, loan origination, structuring or diligence fees, fees for providing managerial assistance to our portfolio companies, and possibly consulting fees. Certain of these fees may be capitalized and amortized as additional interest income over the life of the related loan. It is not expected that our Investment Adviser will generate revenue from our participation in such activities. Our Investment Adviser, however, may generate revenue in respect of arrangements with other clients, if any.

Expenses

We currently do not have any employees and do not expect to have any employees. Services necessary for our business will be provided through the Administration Agreement and the Investment Advisory Agreement.

All investment professionals of the Investment Adviser and their respective staffs, when, and to the extent engaged in providing investment advisory and management services under the Investment Advisory Agreement, and the compensation and routine overhead expenses of such personnel allocable to such services, are provided and paid for by the Investment Adviser and not by us, other than as outlined below. We will pay Brightwood Capital Advisors, LLC (the“Administrator”) our allocable portion of certain expenses incurred by the Administrator in performing its obligations under the administration agreement, including our allocable portion of the cost of its Chief Financial Officer and Chief Compliance Officer and their respective staffs. The Administrator will be reimbursed for certain expenses it incurs on our behalf.

We bear our own legal and other expenses incurred in connection with our formation and organization and the offering of our Common Stock, including external legal and accounting expenses, printing costs, travel and out-of-pocket expenses related to marketing efforts (other than any placement fees, which will be borne by the Investment Adviser directly or pursuant to waivers of the base management fee (the “Management Fee)).

In addition to Management Fees, except as noted above, we bear all other costs and expenses that are directly and specifically related to our operations, including without limitation:

(i)

all costs and expenses with respect to the actual or proposed acquisition, financing, holding, monitoring or disposition of our investments, whether such investments are ultimately consummated or not, including, origination fees, syndication fees, due diligence costs, broken deal expenses, bank service fees, fees and expenses of custodians, transfer agents, consultants, experts, travel expenses incurred for investment-related purposes, outside legal counsel, consultants and accountants, administrator’s fees of third party administrators (subject to clause (xxiii) below) and financing costs (including interest expenses);

(ii)

expenses for liability insurance, including officers and independent directors liability insurance, cyber insurance and other insurance (but excluding the cost of liability insurance covering the Investment Adviser and its officers to the extent that bearing such expenses would be prohibited by ERISA);

(iii)

extraordinary expenses incurred by the Company (including litigation);

(iv)

indemnification and contribution expenses provided, that we will not bear such fees, costs or expenses to the extent that the relevant conduct is not indemnifiable under applicable law, including ERISA, if applicable;

(v)

taxes and other governmental fees and charges;

(vi)

administering and servicing and special servicing fees paid to third parties for our benefit;

(vii)

the cost of Company-related operational and accounting software and related expenses;

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(viii)

cost of software (including the fees of third-party software developers) used by the Investment Adviser and its affiliates to track and monitor our investments (specifically, cost of software related to data warehousing, portfolio administration/reconciliation, loan pricing and trade settlement attributable to the Company);

(ix)

expenses related to the valuation or appraisal of our investments;

(x)

risk, research and market data-related expenses (including software) incurred for our investments;

(xi)

fees, costs and expenses (including legal fees and expenses) incurred to comply with any applicable law, rule or regulation (including regulatory filings such as financial statement filings, ownership filings (Section 16 or Section 13 filings), blue sky filings and registration statement filings, as applicable) to which we are subject or incurred in connection with any governmental inquiry, investigation or proceeding involving us; provided that we will not bear such fees, costs or expenses to the extent that the relevant conduct is not indemnifiable under applicable law, including ERISA, if applicable;

(xii)

costs associated with the wind-up, liquidation, dissolution and termination of the Company;

(xiii)

other legal, operating, accounting, tax return preparation and consulting, auditing and administrative expenses in accordance with the Investment Advisory Agreement and the Administration Agreement and fees for outside services provided to us or on our behalf; provided that we will not bear such fees, costs or expenses to the extent that the relevant conduct is not indemnifiable under applicable law, including ERISA, if applicable;

(xiv)

expenses of the Board (including the reasonable costs of legal counsel, accountants, financial advisors and/or such other advisors and consultants engaged by the Board, as well as travel and out-of-pocket expenses related to the attendance by directors at Board meetings), to the extent permitted under applicable law, including ERISA, if applicable;

(xv)

annual or special meetings of the Company’s stockholders;

(xvi)

the costs and expenses associated with preparing, filing and delivering to Stockholders periodic and other reports and filings required under federal securities laws as a result of our status as a BDC;

(xvii)

ongoing Company offering expenses;

(xviii)

federal and state registration fees pertaining to the Company;

(xix)

costs of Company-related proxy statements, stockholders’ reports and notices;

(xx)

costs associated with obtaining fidelity bonds as required by the 1940 Act;

(xxi)

printing, mailing and all other similar direct expenses relating to us.

(xxii)

expenses incurred in preparation for, or in connection with, (or otherwise relating to) any initial public offering or other debt or equity offering conducted by us, including but not limited to external legal and accounting expenses, printing costs, travel and out-of-pocket expenses related to marketing efforts; and

(xxiii)

only to the extent (i) Benefit Plan Investors hold less than 25% of our Shares, or (ii) we operate the Company as a “venture capital operating company”, our allocable portion of overhead, including office equipment and supplies, rent and our allocable portion of the compensation paid to accounting, compliance and administrative staff employed by the Investment Adviser or its affiliates who provide services to us necessary for our operation, including related taxes, health insurance and other benefits.

Investment-related expenses with respect to investments in which we invest together with one or more parallel funds (or co-investment vehicles) will generally be allocated among all such entities on the basis of capital invested by each such entity into the relevant investment; provided that if the Investment Adviser reasonably believes that such allocation method would produce an inequitable result to any such entity, the Investment Adviser may allocate such expenses among such entities in any other manner that the Investment Adviser believes in good faith to be fair and equitable.

If our assets are treated as “plan assets” for purposes of ERISA, the Investment Adviser will bear responsibility for the fidelity bond required under Section 412 of ERISA.

We are permitted to enter into credit facilities. In connection with borrowings, our lenders may require us to pledge assets, capital commitments and/or the right to draw down on capital commitments. In this regard, the subscription agreement contractually obligates each of our investors to fund their respective capital commitments in order to pay amounts that may become due under any borrowings or other financings or similar obligations.

Financial Condition, Liquidity and Capital Resources

In connection with our formation, we have the authority to issue 100,000,000 shares of common stock, $0.01 par value per share.

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On June 30, 2022, Sengal Selassie, our Chief Executive Officer and Chairman of the Board purchased 1,000 shares of Common Stock, for an aggregate purchase price of $10. On September 16, 2022, we entered into subscription agreements with investors to purchase shares of our Common Stock in a private placement. Under the terms of the subscription agreements, investors are required to fund drawdowns to purchase our Common Stock up to the amount of their respective capital commitment on an as-needed basis each time we deliver a drawdown notice. On September 26, 2022, we issued and sold 10,000,000 shares of Common Stock for an aggregate offering price of $100,000, pursuant to a capital drawdown notice to our investors. On September 30, 2022, the Investment Adviser purchased 99,000 shares of Common Stock for an aggregate offering price of $990, pursuant to a capital drawdown notice. On November 10, 2022, the Investment Adviser purchased 50,000 shares of Common Stock for an aggregate offering price of $500, pursuant to a capital drawdown notice. On January 30, 2023, the Investment Adviser purchased 50,505 shares of Common Stock for an aggregate offering price of $500, pursuant to a capital drawdown notice. On September 26, 2023, the Investment Adviser purchased 48,077 shares of Common Stock for an aggregate offering price of $500, pursuant to a capital drawdown notice. Sengal Selassie is the 100% indirect beneficial owner of the Investment Adviser.

We expect to generate cash from (1) drawing down capital in respect of shares of our Common Stock, (2) cash flows from investments and operations and (3) borrowings from banks or other lenders. We will seek to enter into any bank debt, credit facility or other financing arrangements on at least customary market terms; however, we cannot assure you we will be able to do so.

Our primary use of cash will be for (1) investments in portfolio companies and other investments to comply with certain portfolio diversification requirements, (2) the cost of operations (including expenses, the Management Fee and, to the extent permitted under ERISA, if applicable, and the 1940 Act, any indemnification obligations), (3) debt service of any borrowings and (4) cash distributions to our stockholders.

Portfolio and Investment Activity

As of September 30, 2023, we had investments in 23 portfolio companies with an aggregate fair value of $380,839. As of December 31, 2022, we had investments in 16 portfolio companies with an aggregate fair value of $222,800.

The following tables present certain selected information regarding our portfolio investment activity for the three and nine months ended September 30, 2023 and September 30, 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
Net Investment Activity	2023		2022		2023		2022
Purchases	$	62,768	$	54,000	$	179,211	$	54,000
Sales and Repayments		(11,964)		(337)		(25,788)		(337)
Net Portfolio Activity	$	50,804	$	53,663	$	153,423	$	53,663


	Three Months Ended September 30,
	2023				2022
Investment Activity by Asset Class	Purchases		Percentage		Purchases		Percentage
Senior Secured First Lien Term Loan	$	25,751	41.0	%	$	54,000	100	%
Senior Secured Term Loan		30,026	47.9	%		—	—	%
Delayed Draw Term Loan		5,835	9.3	%		—	—	%
Revolver		1,156	1.8	%		—	—	%
Class A Units		—	0.0	%		—	—	%
Class A Preferred Units		—	0.0	%		—	—	%
Class A Membership Units		—	0.0	%		—	—	%

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	Nine Months Ended September 30,
	2023				2022
Investment Activity by Asset Class	Purchases		Percentage		Purchases		Percentage
Senior Secured First Lien Term Loan	$	127,018	70.9	%	$	54,000	100	%
Senior Secured Term Loan		30,506	17.0	%		—	—	%
Delayed Draw Term Loan		8,110	4.5	%		—	—	%
Revolver		9,077	5.1	%		—	—	%
Class A Units		—	0.0	%		—	—	%
Class A Preferred Units		3,500	1.9	%		—	—	%
Class A Membership Units		1,000	0.6	%		—	—	%

As of September 30, 2023, our investments consisted of the following:


	September 30, 2023
	Amortized Cost		Fair Value
Senior Secured First Lien Term Loan	$	268,647	$	287,484
Senior Secured Term Loan		90,970		75,894
Delayed Draw Term Loan		7,977		8,408
Revolver		4,037		4,265
Class A Preferred Units		3,500		3,500
Class A Membership Units		1,000		1,000
Class A Units		250		288
Total	$	376,381	$	380,839

As of December 31, 2022, our investments consisted of the following:


	December 31, 2022
	Amortized Cost			Fair Value
Senior Secured First Lien Term Loan	$	172,783		$	173,883
Senior Secured Term Loan		48,248			48,285
Delayed Draw Term Loan		(184)	⁽¹⁾		(184)	⁽¹⁾
Revolver		560			566
Class A Units		250			250
Total	$	221,657		$	222,800

(1)

The table below describes investments by industry composition based on fair value as of September 30, 2023:


	September 30, 2023
			Percentage
Industry Classification	Fair Value		of Portfolio
Business Services	$	114,303	30.0	%
Healthcare		90,723	23.8	%
Franchising		74,475	19.6	%
Technology & Telecommunications		66,691	17.5	%
Transportation & Logistics		34,647	9.1	%
Total	$	380,839	100.0	%

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The table below describes investments by industry composition based on fair value as of December 31, 2022:


	December 31, 2022
			Percentage
Industry Classification	Fair Value		of Portfolio
Business Services	$	138,240	62.1	%
Technology & Telecommunications		31,000	13.9	%
Franchising		29,696	13.3	%
Healthcare		23,864	10.7	%
Total	$	222,800	100.0	%

Asset Quality

The Investment Adviser monitors our portfolio companies on an ongoing basis. The Investment Adviser monitors the financial trends of each portfolio company to determine if it is meeting its business plans and to assess the appropriate course of action for each company. The Investment Adviser has a number of methods of evaluating and monitoring the performance and fair value of our investments, which may include the following:

●

assessment of success of the portfolio company in adhering to its business plan and compliance with covenants;

●

review of monthly and quarterly financial statements and financial projections for portfolio companies;

●

contact with portfolio company management and, if appropriate, the financial or strategic sponsor, to discuss financial position, requirements and accomplishments;

●

comparisons to other companies in the industry; and

●

attendance and participation in board meetings.

As part of the monitoring process, the Investment Adviser regularly assesses the risk profile of each of our investments and, on a quarterly basis, grades each investment on a risk scale of 1 to 10. Risk assessment is not standardized in our industry and our risk assessment may not be comparable to the ones used by our competitors. Our assessment is based on the following categories:

Performing - Superior: Borrower is performing significantly above Management Case.

Performing - High: Borrower is performing at or near the Management Case (i.e., in a range slightly below to slightly above).

Performing - Low Risk: Borrower is operating well ahead of the Brightwood Base Case to slightly below the Management Case.

Performing - Stable Risk: Borrower is operating at or near the Brightwood Base Case (i.e., in a range slightly below to slightly above). This is the initial rating assigned to all new borrowers.

Performing - Management Notice: Borrower is operating below the Brightwood Base Case. Adverse trends in business conditions and/or industry outlook are viewed as temporary. There is no immediate risk of payment default and only a low to moderate risk of covenant default.

Performing - Low Maintenance: Borrower is operating below the Brightwood Base Case, with declining margin of protection. Adverse trends in business conditions and/or industry outlook are viewed as lasting for more than a year. Payment default is still considered unlikely, but there is a moderate to high risk of covenant default.

Watch List - Medium Maintenance: Borrower is operating well below the Brightwood Base Case, but has adequate liquidity. Adverse trends are more pronounced than in Internal Risk Rating of 6 and above. There is a high risk of covenant default, or it

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may have already occurred. Payments are current, although subject to greater uncertainty, and there is a moderate to high risk of payment default.

Watch List - High Maintenance: Borrower is operating well below the Brightwood Base Case. Liquidity may be strained. Covenant default is imminent or it may have already occurred. Payments are current, but there is high risk of payment default. Negotiations to restructure or refinance debt on normal terms may have begun. Further significant deterioration appears unlikely and no loss of principal is currently anticipated.

Watch List - Possible Loss: At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Liquidity is strained. Payment default is very likely in the short term unless creditors grant some relief. Loss of principal is possible.

10.

Watch List - Probable Loss: At the current level of operations and financial condition, the borrower does not have the ability to service and ultimately repay or refinance all outstanding debt on current terms. Liquidity is extremely limited. The prospects for improvement in the borrower’s situation are sufficiently negative, that loss of some or all principal is probable.

The following table shows the composition of our portfolio on the 1 to 10 investment performance rating scale. Investment performance ratings are accurate only as of those dates and may change due to subsequent developments relating to a portfolio company’s business or financial condition, market conditions or developments, and other factors.


	As of					As of
	September 30, 2023					December 31, 2022
			Percentage		Number			Percentage		Number
Investment Performance Rating	Fair Value		of Portfolio		of Investments	Fair Value		of Portfolio		of Investments
2	$	21,200	5.6	%	1	$	—	—		—
3		9,900	2.6	%	1		—	—		—
4		286,843	75.3	%	17		217,824	97.8	%	15
5		53,458	14.0	%	3		4,976	2.2	%	1
6		9,438	2.5	%	1		—	—		—
Total	$	380,839	100.0	%	23	$	222,800	200.0	%	16

Results of Operations

The following table represents the operating results for the three and nine months ended September 30, 2023 and September 30, 2022:


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Total investment income	$	11,839	$	69	$	28,543	$	69
Less: total expenses		(4,872)		(773)		(12,175)		(1,018)
Net investment income (loss)		6,967		(704)		16,368		(949)
Net change in unrealized gain (loss)		642		—		3,316		—
Net increase (decrease) in net assets resulting from operations	$	7,609	$	(704)	$	19,684	$	(949)

Investment Income

Investment income for the three and nine months ended September 30, 2023 and September 30, 2022, were as follows:


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Interest income	$	11,695	$	69	$	28,397	$	69
Dividend income		3		—		5		—
Other Income		141		—		141		—
Total investment income	$	11,839	$	69	$	28,543	$	69

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For the three and nine months ended September 30, 2023, we generated investment income of $11,839 and $28,543, respectively, consisting primarily of interest income on investments in senior secured first lien term loan, senior secured term loan, delayed draw term loan, revolver and common stocks of 23 portfolio companies held during the period. For the three and nine months ended September 30, 2022, we generated investment income of $69, consisting primarily of interest income on investments in senior secured first lien term loan of 4 portfolio companies held during the period. Note that there were no material activities before the initial funding was received on September 26, 2022. The increase in investment income was primarily due to the increased number of portfolio holdings as well as higher SOFR and LIBOR rates during the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022.

Expenses

Operating expenses for the three and nine months ended September 30, 2023 and September 30, 2022, were as follows:


	Three months ended September 30,				Nine months ended September 30,
	2023		2022		2023		2022
Interest expense on line of credit	$	3,216	$	—	$	6,804	$	—
Management fees		870		11		2,397		11
Organizational expenses		—		154		—		399
Overhead expenses		168		—		624		—
Professional fees		159		265		590		265
Other general and administrative expenses		177		267		461		267
Amortization of deferred financing costs		146		—		380		—
Administration fees		50		46		235		46
Directors' fees		75		30		225		30
Interest expense on loans		—		—		378		—
Custody fees		11		—		81		—
Total expenses	$	4,872	$	773	$	12,175	$	1,018

The increase in interest expense during the three and nine months ended September 30, 2023 compared to the three and nine months ended September 30, 2022 was primarily the result of the new borrowings under the credit agreement with CNB revolving credit facility on December 23, 2022 and the credit agreement with SPV-1 credit facility on March 30, 2023.

For the three and nine months ended September 30, 2023, we incurred management fees of $870 and $2,397, respectively. For the three and nine months ended September 30, 2022, we incurred management fees of $11. The increase in management fees was driven by growing gross assets under management.

Note that there were no material activities before the initial funding was received on September 26, 2022.

RIC Tax Treatment and Distributions

Following our election to be regulated as a BDC under the 1940 Act, we elected to be treated as a RIC and will file our tax return for the year ending December 31, 2022, as a RIC. So long as we maintain our status as a RIC, we generally will not pay corporate-level U.S. federal income taxes on any ordinary income or capital gains that we distribute at least annually to our shareholders as distributions. Rather, any tax liability related to income distributed by us represents obligations of our shareholders and will not be reflected on our Consolidated Statements of Assets and Liabilities.

Dividends and distributions to stockholders are recorded on the record date. The amount to be paid out as a dividend is determined by the Board each quarter and is generally based upon the earnings estimated by the Investment Adviser. Net realized capital gains, if any, are distributed at least annually, although we may decide to retain such capital gains for investment.

We have adopted a dividend reinvestment plan that provides for reinvestment of any distributions we declare in cash on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if our Board authorizes, and we declare, a cash distribution, then our stockholders who have not “opted out” of the dividend reinvestment plan will have their cash distributions automatically reinvested in additional shares of the common stock, rather than receiving the cash distribution.

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Critical Accounting Policies and Estimates

Our financial statements are prepared in conformity with U.S. GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Management has utilized available information, including our past history, industry standards and the current economic environment, among other factors, in forming the estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. Understanding our accounting policies and the extent to which we use management judgment and estimates in applying these policies is integral to understanding our financial statements. We describe our most significant accounting policies in Note 2 to our unaudited consolidated financial statements included herein. Critical accounting policies are those that require the application of management’s most difficult, subjective, or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as necessary based on changing conditions. We have identified one of our accounting policies, valuation of portfolio investments, as critical because it involves significant judgments and assumptions about highly complex and inherently uncertain matters, and the use of reasonably different estimates and assumptions could have a material impact on our reported results of operations or financial condition. As we execute our operating plans, we will describe additional critical accounting policies in the notes to our future financial statements in addition to those discussed below.

Investment Valuation

Our investments will be valued at fair value. The Investment Adviser, designated by the Board as a valuation designee, will determine the fair value of the assets on at least a quarterly basis in accordance with Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure, or ASC 820. In accordance with Rule 2a-5 of the 1940 Act, the Company’s Board has designated the Investment Adviser as the Company’s “valuation designee.” The Company’s Board and the audit committee of the Board, which is comprised solely of independent directors, oversees the activities, methodology and processes of the valuation designee.

We define fair value as 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 and sets out a fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). Inputs are broadly defined as assumptions market participants would use in pricing an asset or liability.

Investments measured and reported at fair value are classified and disclosed in one of the following categories:

In certain cases, the inputs used to measure fair value may fall into 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. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the investment.

The Company assesses the levels of the investments at each measurement date in accordance with the Company’s accounting policy.

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Investments in the equity and debt securities of portfolio companies may also be valued at cost for a period of time after acquisition as the best indicator of fair value.

The determination of fair value using these methodologies takes into account consideration of a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. These valuation methodologies involve a significant degree of judgment by the Board.

Because the Company is under no compulsion to dispose of its investments, which are made with a view to a holding period of two years or more, the estimated values, as determined above, may not reflect amounts that could be realized upon immediate sale nor amounts that ultimately may be realized. Because of the inherent uncertainty of the valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are subject to financial market risks, including changes in interest rates. We have invested, and plan to continue to invest primarily in illiquid debt securities of private companies. As of September 30, 2023, our debt portfolio consisted of 100% variable-rate investments. The variable-rate loans are usually based on a Secured Overnight Financing Rate (“SOFR”) (or an alternative risk-free floating interest rate index) rate and typically have durations of three months, after which they reset to current market interest rates. Variable-rate investments subject to a floor generally reset by reference to the current market index after one to nine months only if the index exceeds the floor. In regard to variable-rate instruments with a floor, we do not benefit from increases in interest rates until such rates exceed the floor and thereafter benefit from market rates above any such floor. In contrast, our cost of funds, to the extent it is not fixed, will fluctuate with changes in interest rates since it has no floor.

Assuming that the most recent Consolidated Statements of Assets and Liabilities was to remain constant, and no actions were taken to alter the existing interest rate sensitivity, the following table shows the annualized impact of hypothetical base rate changes in interest rates:


	Interest	Interest
Basis Point Change	Income	Expense	Net Income
-25 Basis Points	(9)	(2)	(7)
Base Interest Rate	—	—	—
+100 Basis Points	37	8	29
+200 Basis Points	74	16	58
+300 Basis Points	111	25	86

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Most of our investments will not have a readily available market price, and we (or through an unaffiliated third-party firm, to the extent that our assets are treated as “plan assets” for purposes of ERISA) will value these investments at fair value as determined in good faith by the Board in accordance with our valuation policy. There is no single standard for determining fair value in good faith. 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. See footnote 2 to our consolidated financial statements for more details on estimates and judgments made by us in connection with the valuation of our investments.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the 1934 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). Based on that evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, concluded that, at the end of the period covered by this report, our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s periodic reports.

Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the nine months ended September 30, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II–OTHER INFORMATION

Item 1. Legal Proceedings

Neither we nor the Investment Adviser are currently subject to any material legal proceedings as of September 30, 2023. From time to time, we may be a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with our portfolio companies. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our business, financial condition or results of operations.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Item 1A.–Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 21, 2023 which could materially affect our business, financial condition and/or operating results. The risks described in the Annual Report are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially and adversely affect our business, financial condition and/or operating results. There have been no material changes during the nine months ended September 30, 2023 to the risk factors discussed in Item 1A.–Risk Factors in the Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Previously disclosed by the Company on its current reports on Form 8-K.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits

The following exhibits are filed as part of this report, or hereby incorporated by reference to exhibits previously filed with the SEC (and are numbered in accordance with Item 601 of Regulation S-K).


Exhibit Number		Description of Document
3.1		Amended and Restated Certificate of Incorporation¹
3.2		By-Laws²
31.1*		Certification of the Chief Executive Officer pursuant to Rule 13a-14 (a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*		Certification of the Chief Financial Officer pursuant to Rule 13a-14 (a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*		Certification of the Chief Executive Officer pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.
32.2*		Certification of the Chief Financial Officer pursuant to 18 U.S. C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
101.INS		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (Embedded within the Inline XBRL document and included in Exhibit)

*	Filed herewith.

¹ Previously filed as Exhibit 3.1 to the Company’s Form 10 Registration Statement (File No. 000-56452) filed on July 29, 2022.

² Previously filed as Exhibit 3.2 to the Company’s Form 10 Registration Statement (File No. 000-56452) filed on July 29, 2022.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Brightwood Capital Corporation I

Date: November 9, 2023	By:	/s/ Sengal Selassie
	Name:	Sengal Selassie
	Title:	Chief Executive Officer


	Brightwood Capital Corporation I

Date: November 9, 2023	By:	/s/ Russell Zomback
	Name:	Russell Zomback
	Title:	Chief Financial Officer

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Brightwood Capital Corp I 10-Q2023 Q3 Quarterly report

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