PENNANTPARK INVESTMENT CORP

Previous wording

Our investment activities are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. PennantPark Investment, through the Investment Adviser, provides similar services to SBIC II under its investment management agreement. SBIC II’s investment management agreement does not affect the management and incentive fees on a consolidated basis. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs. PennantPark Investment, through the Administrator, provides similar services to SBIC II under its administration agreement with us. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our day-to-day activities.

Current wording

Our investment activities are managed by the Investment Adviser. Under our Investment Management Agreement, we have agreed to pay our Investment Adviser an annual base management fee based on our average adjusted gross assets as well as an incentive fee based on our investment performance. PennantPark Investment, through the Investment Adviser, provided similar services to SBIC II under its investment management agreement. SBIC II’s investment management agreement does not affect the management and incentive fees on a consolidated basis. We have also entered into an Administration Agreement with the Administrator. Under our Administration Agreement, we have agreed to reimburse the Administrator for our allocable portion of overhead and other expenses incurred by the Administrator in performing its obligations under our Administration Agreement, including rent and our allocable portion of the costs of compensation and related expenses of our Chief Financial Officer, Chief Compliance Officer, Corporate Counsel and their respective staffs. PennantPark Investment, through the Administrator, provided similar services to SBIC II under its administration agreement with us. Our board of directors, a majority of whom are independent of us, provides overall supervision of our activities, and the Investment Adviser supervises our day-to-day activities.

Previous wording

As noted in the Annual Report on Form 10-K for the year ended September 30, 2023, during the preparation of the financial statements as of and for the year ended September 30, 2023, Management identified an error in the classification and presentation of cash pertaining to the Company’s affiliates – PSLF and PTSF II in the September 30, 2022 financial statements. The Company recorded cash activity and due to affiliates pertaining to their investments as a reduction of the cash account instead of presenting the related cash and cash equivalents as an asset and a due to affiliates as a liability. This misclassification also existed at December 31, 2022, and the impact of the error correction is reflected on the consolidated statement of cash flows for the three months ended December 31, 2022 as an increase to cash and cash equivalents, beginning of period totaling $2.1 million, an increase to cash and cash equivalents, end of period totaling $2.2 million, and increase in due to affiliates of $0.04 million.

Current wording

As noted in the Annual Report on Form 10-K for the year ended September 30, 2023, during the preparation of the financial statements as of and for the year ended September 30, 2023, Management identified an error in the classification and presentation of cash pertaining to the Company’s affiliates – PSLF and PTSF II in the September 30, 2022 financial statements. The Company recorded cash activity and due to affiliates pertaining to their investments as a reduction of the cash account instead of presenting the related cash and cash equivalents as an asset and a due to affiliates as a liability. This misclassification also existed at March 31, 2023, and the impact of the error correction is reflected on the consolidated statement of cash flows for the six months ended March 31, 2023 as an increase to cash and cash equivalents, beginning of period totaling $2.1 million, an increase to cash and cash equivalents, end of period totaling $3.3 million, and increase in due to affiliates of $1.2 million.

Previous wording

There was no impact from the error correction to total net assets and net asset value per share as reported on the consolidated statement of assets and liabilities as of December 31, 2022. In addition, there was no impact from the error correction on net investment income or net increase (decrease) in net assets resulting from operations in total or on a per common share basis as reported on the consolidated statements of operations for the three months ended December 31, 2022. The corrections related to the prior year comparative cash flow statement amounts were reported in the quarter ended December 31, 2023.

Current wording

There was no impact from the error correction to total net assets and net asset value per share as reported on the consolidated statement of assets and liabilities as of March 31, 2023. In addition, there was no impact from the error correction on net investment income or net increase (decrease) in net assets resulting from operations in total or on a per common share basis as reported on the consolidated statements of operations for the six months ended March 31, 2023. The corrections related to the prior year comparative cash flow statement amounts were reported in the quarter ended March 31, 2024.

Previous wording

As of December 31, 2023, our portfolio totaled $1,210.8 million and consisted of $677.7 million or 56% of first lien secured debt, $49.8 million or 4% of U.S. Government Securities, $78.4 million or 7% of second lien secured debt, $151.1 million or12% of subordinated debt (including $102.3 million or 8% in PSLF) and $253.7 million or 21% of preferred and common equity (including $62.8 million or 5% in PSLF). Our interest bearing debt portfolio consisted of 96% variable-rate investments and 4% fixed-rate investments. As of December 31, 2023, we had one portfolio company on non-accrual, representing 1.0% and zero percent of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized depreciation of $(21.3) million as of December 31, 2023. Our overall portfolio consisted of 139 companies with an average investment size of $8.4 million, had a weighted average yield on interest bearing debt investments of 12.6%.

Current wording

As of March 31, 2024, our portfolio totaled $1,238.2 million and consisted of $678.6 million or 55% of first lien secured debt, $59.7 million or 5% of U.S. Government Securities, $63.7 million or 5% of second lien secured debt, $165.1 million or13% of subordinated debt (including $115.9 million or 9% in PSLF) and $271.1 million or 22% of preferred and common equity (including $72.6 million or 6% in PSLF). Our interest bearing debt portfolio consisted of 97% variable-rate investments and 3% fixed-rate investments. As of March 31, 2024, we had two portfolio companies on non-accrual, representing 3.7% and 3.0% percent of our overall portfolio on a cost and fair value basis, respectively. Overall, the portfolio had net unrealized appreciation of $12.0 million as of March 31, 2024. Our overall portfolio consisted of 138 companies with an average investment size of $8.5 million, had a weighted average yield on interest bearing debt investments of 12.5%.

Previous wording

For the three months ended December 31, 2023, we invested $231.1 million in 12 new and 32 existing portfolio companies with a weighted average yield on debt investments of 11.9% (excluding U.S. Government Securities). For the three months ended December 31, 2023, sales and repayments of investments totaled $71.0 million (excluding U.S. Government Securities).

Current wording

For the three months ended March 31, 2024, we invested $188.5 million in six new and 43 existing portfolio companies with a weighted average yield on debt investments of 11.7% (excluding U.S. Government Securities). For the three months ended March 31, 2024, sales and repayments of investments totaled $176.2 million (excluding U.S. Government Securities). For the six months ended March 31, 2024, we invested $419.6 million in 18 new and 60 existing portfolio companies with a weighted average yield on debt investments of 11.8% (excluding U.S. Government Securities). For the six months ended March 31, 2024, sales and repayment of investments totaled $247.2 million (excluding U.S. Government Securities).

Previous wording

For the three months ended December 31, 2022, we invested $86.2 million in six new and 29 existing portfolio companies with a weighted average yield on debt investments of 11.2%. For the three months ended December 31, 2022, sales and repayments of investments totaled $30.6 million

Current wording

For the three months ended March 31, 2023, we invested $58.3 million in six new and 34 existing portfolio companies with a weighted average yield on debt investments of 11.8%. For the three months ended March 31, 2023, sales and repayments of investments totaled $114.2 million. For the six months ended March 31, 2023, we invested $144.8 million in 12 new and 64 existing portfolio companies with a weighted average yield on debt investments of 11.5%. For the six month ended March 31, 2023, sales and repayment of investments totaled $136.8 million.

Previous wording

As of December 31, 2023, PSLF’s portfolio totaled $857.9 million, consisted of 93 companies with an average investment size of $9.2 million and had a weighted average yield interest bearing debt investments of 12.1 %.

Current wording

As of March 31, 2024, PSLF’s portfolio totaled $923.9 million, consisted of 99 companies with an average investment size of $9.3 million and had a weighted average yield interest bearing debt investments of 12.0%.

Previous wording

As of September 30, 2023, PSLF’s portfolio totaled $804.2 million, consisted of 90 companies with an average investment size of $8.9 million and had a weighted average yield interest bearing debt investments of 12.1 %.

Current wording

As of September 30, 2023, PSLF’s portfolio totaled $804.2 million, consisted of 90 companies with an average investment size of $8.9 million and had a weighted average yield interest bearing debt investments of 12.1%.

Previous wording

For the three months ended December 31, 2023, PSLF invested $81.0 million (including $50.8 million were purchased from the Company) in five new and seven existing portfolio companies at weighted average yield interest bearing debt investments of 12.7%. PSLF’s sales and repayments of investments for the same period totaled $29.1 million.

Current wording

For the three months ended March 31, 2024, PSLF invested $113.2 million (including $103.1 million were purchased from the Company) in 11 new and five existing portfolio companies at weighted average yield interest bearing debt investments of 11.8%. PSLF’s sales and repayments of investments for the same period totaled $49.7 million. For the six months ended March 31, 2024, PSLF invested $194.2 (of which $154.0 million was purchased from the Company) in 16 new and 11 existing portfolio companies with a weighted average yield on debt investments of 12.2%. PSLF Sales and repayments of investments for the same period totaled $78.9 million.

Previous wording

For the three months ended December 31, 2022, PSLF invested $16.8 million (of which none was purchased from the Company) in four new and four existing portfolio companies at weighted average yield on interest bearing debt investments of 11.4%. PSLF’s sales and repayments of investments for the same period totaled $9.0 million.

Current wording

For the three months ended March 31, 2023, PSLF invested $38.5 million (of which $18.4 were purchased from the Company) in one new and one existing portfolio companies at weighted average yield on interest bearing debt investments of 11.6%. PSLF’s sales and repayments of investments for the same period totaled $24.9 million. For the six months ended March 31, 2023, PSLF invested $55.3 million (of which $18.4 million was purchased from the Company) in eight new and five existing portfolio companies with a weighted average yield on debt investments of 11.5%. PSLF's sales and repayments of investments for the the same period totaled $33.9 million.

Previous wording

describe our critical accounting policies in the notes to our Consolidated Financial Statements. We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2022 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the nine months from those disclosed in our 2022 Annual Report on Form 10-K.

Current wording

describe our critical accounting policies in the notes to our Consolidated Financial Statements. We discuss our critical accounting estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Annual Report on Form 10-K. There have been no significant changes in our critical accounting estimates during the six months from those disclosed in our 2023 Annual Report on Form 10-K.

Previous wording

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Truist Credit Facility. We elected to use the fair value option for the Truist Credit Facility to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Truist Credit Facility for both the three months ended December 31, 2023. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Truist Credit Facility is reported in our Consolidated Statements of Operations. We elect not to apply ASC 825-10 to any other financial assets or liabilities, including the 2026 Notes, and 2026 Notes-2.

Current wording

Generally, the carrying value of our consolidated financial liabilities approximates fair value. We have adopted the principles under ASC Subtopic 825-10, Financial Instruments, or ASC 825-10, which provides companies with an option to report selected financial assets and liabilities at fair value, and made an irrevocable election to apply ASC 825-10 to our Truist Credit Facility. We elected to use the fair value option for the Truist Credit Facility to align the measurement attributes of both our assets and liabilities while mitigating volatility in earnings from using different measurement attributes. Due to that election and in accordance with GAAP, we did not incur any expenses relating to amendment costs on the Truist Credit Facility for both the three and six months ended March 31, 2024 and 2023. ASC 825-10 establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and to more easily understand the effect on earnings of a company’s choice to use fair value. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the Consolidated Statements of Assets and Liabilities and changes in fair value of the Truist Credit Facility is reported in our Consolidated Statements of Operations. We elect not to apply ASC 825-10 to any other financial assets or liabilities, including the 2026 Notes, and 2026 Notes-2.

Previous wording

For the three months ended December 31, 2023 and 2022, the Truist Credit Facility had a net change in unrealized (appreciation) depreciation of $(2.0) million and $4.4 million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized depreciation on the Truist Credit Facility totaled $3.4 million and $5.5 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Truist Credit Facility in a manner consistent with the valuation process that the board of directors uses to value our investments.

Current wording

For the three and six months ended March 31, 2024, the Truist Credit Facility had a net change in unrealized (appreciation) depreciation of $0.5 million and $(1.6) million, respectively. For the three and six months ended March 31, 2023, the Truist Credit Facility had a net change in unrealized appreciation of $1.5 million and $5.9 million, respectively. As of March 31, 2024 and September 30, 2023, the net unrealized depreciation on the Truist Credit Facility totaled $3.9 million and $5.5 million, respectively. We use a nationally recognized independent valuation service to measure the fair value of our Truist Credit Facility in a manner consistent with the valuation process that the board of directors uses to value our investments.

Previous wording

For the three months ended December 31, 2023 and 2022 we recorded a provision for taxes on net investment income of $0.4 million and $2.0 million respectively, pertaining to federal excise tax.

Current wording

For the three and six months ended March 31, 2024, we recorded a provision for taxes on net investment income of $0.8 million and $1.2 million respectively, pertaining to federal excise tax. For the three and six months ended March 31, 2023, we recorded a provision for taxes on net investment income of $0.5 million and $2.5 million respectively, all of which pertains to U.S. federal excise tax.

Previous wording

For the three months ended December 31, 2023 and 2022, the Company recognized a provision for taxes of zero, respectively, on net realized gain (loss) on investments by the Taxable Subsidiary. For the three months ended December 31, 2023 and 2022, the Company recognized a provision for taxes of $(0.2) million and $(0.9) million, respectively, on net unrealized gain (loss) on investments by the Taxable Subsidiary. The provision for taxes on net realized and unrealized gains on investments is the result of netting (i) the expected tax liability on the gains from the sales of investments which is likely to be realized and unrealized during fiscal year ending September 30, 2024 and (ii) the expected tax benefit resulting from the use of loss carryforwards to offset such gains. As of December 31, 2023 and September 30, 2023, the Company recognized a provision for taxes of $0.2 million and $3.4 million, respectively, on net realized and unrealized gains on investments by the Taxable Subsidiary.

Current wording

For the three months and six months ended March 31, 2024, the Company recognized a provision for taxes of $(0.2) million and $(0.2) million, respectively, on net realized gain (loss) on investments by the Taxable Subsidiary. For the three months and six months ended March 31, 2023, the Company recognized a provision for taxes of $(0.7) million and $(0.7) million, respectively, on net realized gain on investments by the Taxable Subsidiary. For the three months and six months ended March 31, 2024, the Company recognized a provision for taxes of $(0.8) million and $(0.7) million, respectively, on net unrealized gain (loss) on investments by the Taxable Subsidiary. For the three and six months ended March 31, 2023, the Company recognized a provision for taxes of zero and $0.9 million, respectively, on net unrealized gain (loss) on investments by the Taxable Subsidiary. The provision for taxes on net realized and unrealized gains on investments is the result of netting (i) the expected tax liability on the gains from the sales of investments which is likely to be realized and unrealized during fiscal year ending September 30, 2024 and (ii) the expected tax benefit resulting from the use of loss carryforwards to offset such gains. As of March 31, 2024 and September 30, 2023, the Company recognized a provision for taxes of $0.9 million and $3.4 million, respectively, on net realized and unrealized gains on investments by the Taxable Subsidiary.

Previous wording

During the three months ended December 31, 2023 and 2022, the Company paid zero, respectively, in federal taxes on realized gains on the sale of investments held by the Taxable Subsidiary. The state and local tax liability is zero as of December 31, 2023 is included under accrued other expenses in the consolidated statement of assets and liabilities.

Current wording

During the three months and six months ended March 31, 2024, the Company paid zero, respectively, in federal taxes on realized gains on the sale of investments held by the Taxable Subsidiary. The state and local tax liability is $0.4 million as of March 31, 2024 is included under accrued other expenses in the consolidated statement of assets and liabilities.

Previous wording

Set forth below are the results of operations for the three months ended December 31, 2023 and 2022

Current wording

Set forth below are the results of operations for the three and six months ended March 31, 2024 and 2023.

Previous wording

For the three months ended December 31, 2023, investment income was $34.3 million, which was attributable to $25.1 million from first lien secured debt, $2.6 million from second lien secured debt, $1.3 million from subordinated debt and $5.3 million from preferred and common equity, respectively. For the three months ended December 31, 2022, investment income was $30.0 million, which was attributable to $21.8 million from first lien secured debt, $3.8 million from second lien secured debt, $1.1 million from subordinated debt and $3.3 million from preferred and common equity, respectively. The increase in investment income compared to the same period in the prior year was primarily due to the increase in the cost of yield of our debt portfolio.

Current wording

For the three and six months ended March 31, 2024, investment income was $36.0 million and $70.3 million, respectively, which was attributable to $27.8 million and $52.9 million from first lien secured debt, $2.8 million and $5.4 million from second lien secured debt, $0.1 million and $1.4 million from subordinated debt and $5.3 million and $10.6 million from preferred and common equity, respectively. For the three and six months ended March 31, 2023, investment income was $36.3 million and $66.3 million, respectively, which was attributable to $26.8 million and $48.6 million from first lien secured debt, $3.7 million and $7.4 million from second lien secured debt, $1.1 million and $2.2 million from subordinated debt and $4.8 million and $8.1 million from preferred and common equity, respectively. The increase in investment income for the six months ended March 31, 2024 was primarily due to the increase in the cost of yield of our debt portfolio.

Previous wording

For the three months ended December 31, 2023, expenses totaled $18.7 million and were comprised of; $9.6 million of debt related interest and expenses, $4.0 million of base management fees, $3.3 million of performance based $1.4 million of general and administrative expenses and $0.4 million of provision for excise taxes. For the three months ended December 31, 2022, expenses totaled $19.6 million and were comprised of; $9.7 million of debt-related interest and expenses, $4.6 million of base management fees, $2.2 million of performance based, incentive fees, $1.1 million of general and administrative expenses and $2.0 million of provision for excise taxes, respectively. The decrease in net expense was primarily due to the provision for excise taxes compared to the same period in the prior year.

Current wording

For the three and six months ended March 31, 2024, expenses totaled $21.7 million and $40.4 million, respectively and were comprised of; $11.9 million and $21.4 million of debt related interest and expenses, $4.1 million and $8.1 million of base management fees, $3.0 million and $6.3 million of incentive fees, $1.9 million and $3.3 million of general and administrative expenses and $0.8 million and $1.2 million of provision for excise taxes. For the three and six months ended March 31, 2023, expenses totaled $19.7 million and $39.3 million, respectively and were comprised of; $10.6 million and $20.3 million of debt-related interest and expenses, $4.0 million and $8.6 million of base management fees, $3.5 million and $5.7 million of incentive fees, $1.1 million and $2.2 million of general and administrative expenses and $0.5 million and $2.5 million of provision for excise taxes, respectively. The increase in expenses was primarily due an increase in debt related interest and expenses and an increase in general and administrative expenses.

Previous wording

For the three months ended December 31, 2023 and 2022, net realized gains (losses) totaled $1.8 million and $4.1 million, respectively. The change in realized gains (losses) was primarily due to changes in the market conditions of our investments and the values at which they were realized.

Current wording

For the three and six months ended March 31, 2024, net realized gains (losses) totaled $(31.0) million and $(29.2) million, respectively. For the three and six months ended March 31, 2023, net realized gains (losses) totaled $(148.7) million and $(144.7) million, respectively. The change in realized gains (losses) was primarily due to changes in the market conditions of our investments and the values at which they were realized.

Previous wording

For the three months ended December 31, 2023 and 2022, we reported net change in unrealized appreciation (depreciation) on investments of $(5.0) million and $(91.6) million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized appreciation (depreciation) on investments totaled $(21.3) million and $(16.3) million, respectively. The net change in unrealized depreciation on our investments compared to the same period in the prior year was primarily due to changes in the capital market conditions of our investments and the values at which they were realized.

Current wording

For the three and six months ended March 31, 2024, we reported net change in unrealized appreciation (depreciation) on investments of $33.2 million and $28.3 million, respectively. For the three and six months ended March 31, 2023, the net unrealized appreciation (depreciation) on investments totaled $135.4 million and $43.8 million, respectively. As of March 31, 2024 and September 30, 2023, our net unrealized appreciation (depreciation) on investments totaled $12.0 million and $(16.3) million, respectively. The net change in unrealized depreciation on our investments was primarily due to changes in the capital market conditions of our investments and the values at which they were realized.

Previous wording

For the three months ended December 31, 2023 and 2022, the Truist Credit Facility had a net change in unrealized (appreciation) depreciation of $(2.0) million and $4.4 million, respectively. As of December 31, 2023 and September 30, 2023, the net unrealized depreciation on the Truist Credit Facility totaled $3.4 million and $5.5 million, respectively. Net change in unrealized appreciation compared to the same periods in the prior period was primarily due to changes in the capital markets.

Current wording

For the three and six months ended March 31, 2024, the Truist Credit Facility had a net change in unrealized (appreciation) depreciation of $0.5 million and $(1.6) million, respectively. For the three and six months ended March 31, 2023, the Truist Credit Facility had a net change in unrealized (appreciation) depreciation of $1.5 million and $5.9 million, respectively. As of March 31, 2024 and September 30, 2023, the net unrealized depreciation on the Truist Credit Facility totaled $3.9 million and $5.5 million, respectively. Net change in unrealized appreciation was primarily due to changes in the capital markets.

Previous wording

For the three months ended December 31, 2023 and 2022, net increase (decrease) in net assets resulting from operations totaled $10.7 million, or $0.16 per share and $(71.9) million, or $(1.10) per share, respectively. The increase in net assets from operations for the three months ended December 31, 2023 compared to prior year was primarily due to a decrease in the net unrealized depreciation in the portfolio primarily driven by changes in market conditions.

Current wording

For the three and six months ended March 31, 2024, net increase (decrease) in net assets resulting from operations totaled $16.1 million and $26.7 million, or $0.25 per share, and $0.41 per share, respectively. For the three and six months ended March 31, 2023, net increase (decrease) in net assets resulting from operations totaled $4.9 million and $(67.0) million, or $0.07 per share and $(1.03) per share, respectively. The increase in net assets from operations for the three months ended March 31, 2024 was primarily due to a decrease in the net realized and unrealized depreciation in the portfolio primarily driven by changes in market conditions.

Previous wording

As of December 31, 2023 and September 30, 2023, our asset coverage ratio, as computed in accordance with the 1940 Act was 171%% and 195%, respectively.

Current wording

As of March 31, 2024 and September 30, 2023, our asset coverage ratio, as computed in accordance with the 1940 Act was 170% and 195%, respectively.

Previous wording

For the three months ended December 31, 2023 and 2022, the annualized weighted average cost of debt inclusive of the fee on the undrawn commitment and amendment costs on the Truist Credit Facility, and amortized upfront fees on SBA debentures, 2026 Notes and 2026 Notes-2, was 6.4% and 5.5%, respectively.

Current wording

For the six months ended March 31, 2024 and 2023, the annualized weighted average cost of debt inclusive of the fee on the undrawn commitment and amendment costs on the Truist Credit Facility, and amortized upfront fees on SBA debentures, 2026 Notes and 2026 Notes-2, was 6.5% and 5.8%, respectively.

Previous wording

As of December 31, 2023, we had the multi-currency Truist Credit Facility for up to $475.0 million (decreased from $500.0 million in September 2023), which may be further increased up to $750.0 million in borrowings with certain lenders and Truist Bank, acting as administrative agent, Regions Bank, acting as an additional multicurrency lender, and JPMorgan Chase Bank, N.A., acting as syndication agent for the lenders. As of December 31, 2023 and September 30, 2023, we had $388.5 million and $212.4 million, respectively, in outstanding borrowings under the Truist Credit Facility. The Truist Credit Facility had a weighted average interest rate of 7.7% and 7.7%, respectively, exclusive of the fee on undrawn commitment, as of December 31, 2023 and September 30, 2023. The Truist Credit Facility is a revolving facility with a stated maturity date of July 29, 2027 and pricing set at 235 basis points over SOFR (or an alternative risk-free floating interest rate index). As of December 31, 2023 and September 30, 2023, we had $86.5 million and $262.6 million of unused borrowing capacity under the Truist Credit Facility, respectively, subject to leverage and borrowing base restrictions. The Truist Credit Facility is secured by substantially all of our assets. As of December 31, 2023, we were in compliance with the terms of the Truist Credit Facility.

Current wording

As of March 31, 2024, we had the multi-currency Truist Credit Facility for up to $475.0 million (decreased from $500.0 million in September 2023), which may be further increased up to $750.0 million in borrowings with certain lenders and Truist Bank, acting as administrative agent, Regions Bank, acting as an additional multicurrency lender, and JPMorgan Chase Bank, N.A., acting as syndication agent for the lenders. As of March 31, 2024 and September 30, 2023, we had $396.5 million and $212.4 million, respectively, in outstanding borrowings under the Truist Credit Facility. The Truist Credit Facility had a weighted average interest rate of 7.7% and 7.7%, respectively, exclusive of the fee on undrawn commitment, as of March 31, 2024 and September 30, 2023. The Truist Credit Facility is a revolving facility with a stated maturity date of July 29, 2027 and pricing set at 235 basis points over SOFR (or an alternative risk-free floating interest rate index). As of March 31, 2024 and September 30, 2023, we had $78.5 million and $262.6 million of unused borrowing capacity under the Truist Credit Facility, respectively, subject to leverage and borrowing base restrictions. The Truist Credit Facility is secured by substantially all of our assets. As of March 31, 2024, we were in compliance with the terms of the Truist Credit Facility.

Previous wording

We may raise additional equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, by securitizing a portion of our investments, among other sources. Any future additional debt capital we incur, to the extent it is available, may be issued at a higher cost and on less favorable terms and conditions than the Truist Credit Facility, 2026 Notes, 2026 Notes-2 and SBA debentures. Furthermore, the Truist Credit Facility availability depends on various covenants and restrictions. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate or strategic purposes such as a stock repurchase program.

Current wording

We may raise additional equity or debt capital through both registered offerings off our shelf registration statement and private offerings of securities, by securitizing a portion of our investments, among other sources. Any future additional debt capital we incur, to the extent it is available, may be issued at a higher cost and on less favorable terms and conditions than the Truist Credit Facility, 2026 Notes, and 2026 Notes-2. Furthermore, the Truist Credit Facility availability depends on various covenants and restrictions. The primary use of existing funds and any funds raised in the future is expected to be for repayment of indebtedness, investments in portfolio companies, cash distributions to our stockholders or for other general corporate or strategic purposes such as a stock repurchase program.

Previous wording

As of December 31, 2023 and September 30, 2023, we had cash and cash equivalents of $36.9 million and $38.8 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to allows us to effectively operate our business.

Current wording

As of March 31, 2024 and September 30, 2023, we had cash and cash equivalents of $35.4 million and $38.8 million, respectively, available for investing and general corporate purposes. We believe our liquidity and capital resources are sufficient to allows us to effectively operate our business.

Previous wording

For the three months ended December 31, 2023, our operating activities used cash of $155.1 million and our financing activities provided cash of $153.2 million. Our operating activities used cash primarily due to our investment activities and our financing activities provided cash primarily from borrowings under the Truist Credit Facility.

Current wording

For the six months ended March 31, 2024, our operating activities used cash of $150.9 million and our financing activities provided cash of $147.5 million. Our operating activities provided cash primarily due to our investment activities and our financing activities provided cash primarily from borrowings under the Truist Credit Facility.

Previous wording

For the three months ended December 31, 2022, our operating activities used cash of $9.6 million and our financing activities used cash of $14.8 million. Our operating activities used cash primarily due to our investment activities and our financing activities used cash primarily due to repayments under the Truist Credit Facility.

Current wording

For the six months ended March 31, 2023, our operating activities provided cash of $60.5 million and our financing activities used cash of $49.0 million. Our operating activities provided cash primarily due to our investment activities and our financing activities used cash primarily due to repayments under the Truist Credit Facility.

Previous wording

In July 2020, we and Pantheon formed PSLF, an unconsolidated joint venture. PSLF invests primarily in middle-market and other corporate debt securities consistent with its strategy. PSLF was formed as a Delaware limited liability company. As of December 31, 2023 and September 30, 2023, PSLF had total assets of $920.7 million and $872.8 million, respectively and its investment portfolio consisted of debt investments in 93 and 90 portfolio companies, respectively. As of the same dates, we and Pantheon had remaining commitments to fund first lien secured debt of $22.4 million and $22.4 million, respectively, and equity interest of $14.5 million and $14.5 million, respectively, in PSLF. As of December 31, 2023, at fair value, the largest investment in a single portfolio company in PSLF was $21.5 million and the five largest investments totaled $99.7 million. As of September 30, 2023, at fair value, the largest investment in a single portfolio company in PSLF was $19.7 million and the five largest investments totaled $97.5 million. PSLF invests in portfolio companies in the same industries in which we may directly invest.

Current wording

In July 2020, we and Pantheon formed PSLF, an unconsolidated joint venture. PSLF invests primarily in middle-market and other corporate debt securities consistent with its strategy. PSLF was formed as a Delaware limited liability company. As of March 31, 2024 and September 30, 2023, PSLF had total assets of $987.4 million and $872.8 million, respectively and its investment portfolio consisted of debt investments in 99 and 90 portfolio companies, respectively. As of the same dates, we and Pantheon had remaining commitments to fund subordinated debt of zero and $22.4 million, respectively, and equity interest of zero and $14.5 million, respectively, in PSLF. As of March 31, 2024, at fair value, the largest investment in a single portfolio company in PSLF was $21.5 million and the five largest investments totaled $100.1 million. As of September 30, 2023, at fair value, the largest investment in a single portfolio company in PSLF was $19.7 million and the five largest investments totaled $97.5 million. PSLF invests in portfolio companies in the same industries in which we may directly invest.

Previous wording

We provide capital to PSLF in the form of subordinated notes and equity interests. As of December 31, 2023 and September 30, 2023, we and Pantheon owned 60.5% and 39.5%, respectively, of each of the outstanding subordinated notes and equity interests of PSLF. As of December 31, 2023 and September 30, 2023, our investment in PSLF consisted of subordinated notes of $102.3 million and $102.3 million, respectively, and equity interests of $58.6 million and $58.6 million, respectively.

Current wording

We provide capital to PSLF in the form of subordinated notes and equity interests. As of March 31, 2024 and September 30, 2023, we and Pantheon owned 60.5% and 39.5%, respectively, of each of the outstanding subordinated notes and equity interests of PSLF. As of March 31, 2024 and September 30, 2023, our investment in PSLF consisted of subordinated notes of $115.9 million and $102.3 million, respectively, and equity interests of $67.4 million and $58.6 million, respectively.

Previous wording

In March 2022, PSLF completed a $304.0 million debt securitization in the form of a collateralized loan obligation, or the “2034 Asset-Backed Debt”. The 2034 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO IV, LLC., a wholly-owned and consolidated subsidiary of PSLF, consisting primarily of middle market loans and participation interests in middle market loans. The 2034 Asset-Backed Debt is scheduled to mature in April 2034. On the closing date of the transaction, in consideration of PSLF’s transfer to PennantPark CLO IV, LLC. of the initial closing date loan portfolio, which included loans distributed to PSLF by certain of its wholly owned subsidiaries and us, PennantPark CLO IV, LLC. transferred to PSLF 100% of the Preferred Shares of PennantPark CLO IV, LLC. and 100% of the Subordinated Notes issued by PennantPark CLO IV, LLC.

Current wording

In March 2022, PSLF completed a $304.0 million debt securitization in the form of a collateralized loan obligation, or the “2034 Asset-Backed Debt”. The 2034 Asset-Backed Debt is secured by a diversified portfolio of PennantPark CLO IV, LLC., a wholly-owned and consolidated subsidiary of PSLF, consisting primarily of middle market loans and participation interests in middle market loans. The 2034 Asset-Backed Debt is scheduled to mature in April 2034. On the closing date of the transaction, in consideration of PSLF’s transfer to PennantPark CLO IV, LLC of the initial closing date loan portfolio, which included loans distributed to PSLF by certain of its wholly owned subsidiaries and us, PennantPark CLO IV, LLC transferred to PSLF 100% of the Preferred Shares of PennantPark CLO IV, LLC and 100% of the Subordinated Notes issued by PennantPark CLO IV, LLC. As of March 31, 2024 and September 30, 2023, there was $246.0 million of external 2034 Asset-Back Debt.

Previous wording

On July 26, 2023, CLO VII , LLC ("CLO VII") completed a $300 million debt securitization in the form of a collateralized loan obligation (the "2035 Debt Securitization" or "2035 Asset-Backed Debt"). The 2035 Asset-Backed Debt is secured by a diversified portfolio consisting primarily of middle market loans. The 2035 Debt Securitization was executed through a private placement of: (i) $151.0 million Class A-1a Notes maturing 2035, which bear interest at the three-month SOFR plus 2.7%, (ii) $20.0 million Class A-1b Loans 2035, which bear interest at 6.5%, (iii) $12.0 million Class A-2 Senior Secured Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 3.2%, (iv) $21.0 million Class B Senior Secured Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 4.1%, (v) $24.0 million Class C Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 4.7%, (vi) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 7.0%. As of December 31, 2023 there was $246.0 million of external 2035 Asset-Backed Debt.

Current wording

On July 26, 2023, CLO VII , LLC ("CLO VII") completed a $300 million debt securitization in the form of a collateralized loan obligation (the "2035 Debt Securitization" or "2035 Asset-Backed Debt"). The 2035 Asset-Backed Debt is secured by a diversified portfolio consisting primarily of middle market loans. The 2035 Debt Securitization was executed through a private placement of: (i) $151.0 million Class A-1a Notes maturing 2035, which bear interest at the three-month SOFR plus 2.7%, (ii) $20.0 million Class A-1b Loans 2035, which bear interest at 6.5%, (iii) $12.0 million Class A-2 Senior Secured Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 3.2%, (iv) $21.0 million Class B Senior Secured Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 4.1%, (v) $24.0 million Class C Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 4.7%, (vi) $18.0 million Class D Secured Deferrable Floating Rate Notes due 2035, which bear interest at the three-month SOFR plus 7.0%. As of March 31, 2024 and September 30, 2023, there was $246.0 million of external 2035 Asset-Backed Debt.

Previous wording

During the three months ended December 31, 2023, we declared distributions of $0.21 per share, for total distributions of $13.7 million. For the same periods in the prior year, we declared distributions of $0.17 per share, for total distributions of $10.8 million. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.

Current wording

During the three and six months ended March 31, 2024, we declared distributions of $0.21 and $0.42 per share, for total distributions of $13.7 million and $27.4 million. During the three and six months ended March 31, 2023, we declared distributions of $0.185 and $0.35 per share, for total distributions of $12.1 million and $22.8 million, respectively. We monitor available net investment income to determine if a return of capital for tax purposes may occur for the fiscal year. To the extent our taxable earnings fall below the total amount of our distributions for any given fiscal year, stockholders will be notified of the portion of those distributions deemed to be a tax return of capital. Tax characteristics of all distributions will be reported to stockholders subject to information reporting on Form 1099-DIV after the end of each calendar year and in our periodic reports filed with the SEC.

Previous wording

In March 2020, the FASB issued Accounting Standards Update, or ASU, No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through June 30, 2023. The FASB approved an (optional) two year extension to December 31, 2024, for transitioning away from LIBOR. The Company utilized the optional expedients and exceptions provided by ASU 2020-04 during the three months ended December 31, 2023, the effect of which was not material to the consolidated financial statements and the notes thereto.

Current wording

In March 2020, the FASB issued Accounting Standards Update, or ASU, No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The guidance provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for all entities as of March 12, 2020 through June 30, 2023. The FASB approved an (optional) two year extension to December 31, 2024, for transitioning away from LIBOR. The Company utilized the optional expedients and exceptions provided by ASU 2020-04 during the three and six months ended March 31, 2024, the effect of which was not material to the consolidated financial statements and the notes thereto.

Previous wording

On February 9, 2022, we announced a share repurchase program which allows us to repurchase up to $25 million of our outstanding common shares in the open market at prices below our net asset value as reported in our then most recently published consolidated financial statements. During the three months ended December 31, 2022, we did not make any repurchases of our common shares. The program expired on March 31, 2023.

Current wording

On February 9, 2022, we announced a share repurchase program which allows us to repurchase up to $25 million of our outstanding common shares in the open market at prices below our net asset value as reported in our then most recently published consolidated financial statements. During the six months ended March 31, 2023, we did not make any repurchases of our common shares. The program expired on March 31, 2023.