Portman Ridge Finance Corp

Previous wording

Total portfolio investment activity (excluding activity in short-term investments) for the three months ended March 31, 2024 (unaudited) and for the year ended December 31, 2023 was as follows:

Current wording

Total portfolio investment activity (excluding activity in short-term investments) for the six months ended June 30, 2024 (unaudited) and for the year ended December 31, 2023, was as follows:

Previous wording

The following table shows the Company’s portfolio by security type at March 31, 2024, and December 31, 2023:

Current wording

The following table shows the Company’s portfolio by security type as of June 30, 2024, and December 31, 2023:

Previous wording

At March 31, 2024 and December 31, 2023, the weighted average contractual interest rate on our interest earning Debt Securities Portfolio was approximately 12.1% and 12.5%, respectively.

Current wording

At June 30, 2024 and December 31, 2023, the weighted average contractual interest rate on our interest earning Debt Securities Portfolio was approximately 12.4% and 12.5%, respectively.

Previous wording

The investment portfolio (excluding our investments in the CLO Funds, Joint Ventures and short-term investments) at March 31, 2024 was spread across 29 different industries and 103 different entities with an average par balance per entity of approximately $3.1 million. As of March 31, 2024, seven of our investments were on non-accrual status. As of December 31, 2023, seven of our investments were on non-accrual status.

Current wording

The debt investment portfolio (excluding our investments in the CLO Funds and Joint Ventures) at June 30, 2024 was spread across 28 different industries and 75 different portfolio companies with a fair value of approximately $358.9 million and average par balance per entity of approximately $2.6 million. As of June 30, 2024, nine of our investments were on non-accrual status. As of December 31, 2023, seven of our investments were on non-accrual status.

Previous wording

We have made minority investments in the subordinated securities or preferred shares of CLO Funds managed by the Disposed Manager Affiliates and may selectively invest in securities issued by CLO Funds managed by other asset management companies. As of March 31, 2024 and December 31, 2023, the fair value of the CLO Fund Securities was $8.5 million and $9.0 million, respectively.

Current wording

We have made minority investments in the subordinated securities or preferred shares of CLO Funds managed by the Disposed Manager Affiliates and may selectively invest in securities issued by CLO Funds managed by other asset management companies. As of June 30, 2024 and December 31, 2023, the fair value of the CLO Fund Securities was $7.4 million and $9.0 million, respectively.

Previous wording

The fair value of our investment in the Great Lakes II Joint Venture at March 31, 2024, was $39.6 million. The fair value of our investment in the Great Lakes II Joint Venture at December 31, 2023, was $45.0 million. Fair value has been determined utilizing the practical expedient pursuant to ASC 820-10. Pursuant to the terms of the Great Lakes II LLC Agreement, we generally may not effect any direct or indirect sale, transfer, assignment, hypothecation, pledge or other disposition of or encumbrance upon our interests in the Great Lakes II Joint Venture, except that we may sell or otherwise transfer our interests with the consent of the managing members of the Great Lakes II Joint Venture or to an affiliate or a successor to substantially all of our assets.

Current wording

The fair value of our investment in the Great Lakes II Joint Venture as of June 30, 2024 and December 31, 2023, was $40.7 million and $45.0 million, respectively. Fair value has been determined utilizing the practical expedient pursuant to ASC 820-10. Pursuant to the terms of the Great Lakes II LLC Agreement, we generally may not effect any direct or indirect sale, transfer, assignment, hypothecation, pledge or other disposition of or encumbrance upon our interests in the Great Lakes II Joint Venture, except that we may sell or otherwise transfer our interests with the consent of the managing members of the Great Lakes II Joint Venture or to an affiliate or a successor to substantially all of our assets.

Previous wording

As of March 31, 2024, we have a $10.9 million unfunded commitment to the Great Lakes II Joint Venture. As of December 31, 2023, we had a $5.5 million unfunded commitment to the Great Lakes II Joint Venture.

Current wording

As of June 30, 2024, we had a $10.1 million unfunded commitment to the Great Lakes II Joint Venture. As of December 31, 2023, we had a $5.5 million unfunded commitment to the Great Lakes II Joint Venture.

Previous wording

Set forth below is a discussion of our results of operations for the three months ended March 31, 2024 and 2023.

Current wording

Set forth below is a discussion of our results of operations for the three and six months ended June 30, 2024 and 2023.

Previous wording

Revenues consist primarily of investment income from interest and dividends on our investment portfolio and various ancillary fees related to our investment holdings. Investment income for the three months ended March 31, 2024 and 2023 was approximately $16.5 million and 20.3 million, respectively.

Current wording

Revenues consist primarily of investment income from interest and dividends on our investment portfolio and various ancillary fees related to our investment holdings. Investment income for the three months ended June 30, 2024 and 2023 was approximately $16.3 million and $19.6 million, respectively. Investment income for the six months ended June 30, 2024 and 2023 was approximately $32.9 million and $40.0 million, respectively.

Previous wording

The majority of investment income is attributable to interest income on our Debt Securities Portfolio. For the three months ended March 31, 2024 and 2023, approximately $14.2 million and $16.7 million, respectively, of investment income was attributable to interest income on our Debt Securities Portfolio.

Current wording

The majority of investment income is attributable to interest income, inclusive of payment-in-kind income, on our Debt Securities Portfolio. For the three months ended June 30, 2024 and 2023, approximately $13.9 million and $15.5 million, respectively, of investment income was attributable to interest income, inclusive of payment-in-kind income, on our Debt Securities Portfolio. For the six months ended June 30, 2024 and 2023, approximately $28.1 million and $32.3 million, respectively, of investment income was attributable to interest income, inclusive of payment-in-kind income, on our Debt Securities Portfolio.

Previous wording

At March 31, 2024 and December 31, 2023, the weighted average contractual interest rate on our interest earning Debt Securities Portfolio was approximately 12.1% and 12.5%, respectively.

Current wording

At June 30, 2024 and December 31, 2023, the weighted average contractual interest rate on our interest earning Debt Securities Portfolio was approximately 12.4% and 12.5%, respectively.

Previous wording

Core investment income excludes the impact of purchase discount amortization in connection with the GARS and HCAP mergers which is investment income as determined in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), excluding the impact of purchase discount amortization associated with the GARS and HCAP mergers. We believe presenting investment income excluding the impact of the GARS and HCAP merger-related purchase discount amortization and the related per share amount is useful and appropriate supplemental disclosure for analyzing our financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, this measure is a non-U.S. GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, this measure should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to net investment income excluding the impact of purchase accounting is detailed in the table above.

Current wording

Core investment income excludes the impact of purchase discount accretion in connection with the GARS and HCAP mergers which is investment income as determined in accordance with U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), excluding the impact of purchase discount accretion associated with the GARS and HCAP mergers. We believe presenting investment income excluding the impact of the GARS and HCAP merger-related purchase discount amortization and the related per share amount is useful and appropriate supplemental disclosure for analyzing our financial performance due to the unique circumstance giving rise to the purchase accounting adjustment. However, this measure is a non-U.S. GAAP measure and should not be considered as a replacement for net investment income and other earnings measures presented in accordance with U.S. GAAP. Instead, this measure should be reviewed only in connection with such U.S. GAAP measures in analyzing Portman Ridge’s financial performance. A reconciliation of net investment income in accordance with U.S. GAAP to net investment income excluding the impact of purchase accounting is detailed in the table above.

Previous wording

Investment Income on Investments in CLO Fund Securities. For the three months ended March 31, 2024 and 2023, approximately $0.6 million and $0.5 million, respectively, of investment income was attributable to investments in CLO Fund Securities. We generate investment income from our investments in the securities (typically preferred shares or subordinated securities) of CLO Funds. CLO Funds invest primarily in broadly syndicated non-investment grade loans, high-yield bonds and other credit instruments of corporate issuers. The underlying assets in each of the CLO Funds in which we have an investment are generally diversified secured or unsecured corporate debt. Our CLO Fund Securities that are subordinated securities or preferred shares (“junior securities”) are subordinated to senior note holders who typically receive a return on their investment at a fixed spread relative to the SOFR index. The CLO Funds are leveraged funds and any excess cash flow or “excess spread” (interest earned by the underlying securities in the fund less payments made to senior bond holders and less fund expenses and management fees) is paid to the holders of the CLO Fund’s subordinated securities or preferred shares. The level of excess spread from CLO Fund Securities can be impacted by the timing and level of the resetting of the benchmark interest rate for the underlying assets (which reset at various times throughout the quarter) in the CLO Fund and the related CLO Fund note liabilities (which reset at each quarterly distribution date); in periods of short-term and volatile changes in the benchmark interest rate, the levels of excess spread and resulting cash distributions to us can vary significantly.

Current wording

Investment Income on Investments in CLO Fund Securities. For the three months ended June 30, 2024 and 2023, approximately $0.5 million and $0.8 million, respectively, of investment income was attributable to investments in CLO Fund Securities. For the six months ended June 30, 2024 and 2023, approximately $1.1 million and $1.4 million, respectively, of investment income was attributable to investments in CLO Fund Securities. We generate investment income from our investments in the securities (typically preferred shares or subordinated securities) of CLO Funds. CLO Funds invest primarily in broadly syndicated non-investment grade loans, high-yield bonds and other credit instruments of corporate issuers. The underlying assets in each of the CLO Funds in which we have an investment are generally diversified secured or unsecured corporate debt. Our CLO Fund Securities that are subordinated securities or preferred shares (“junior securities”) are subordinated to senior note holders who typically receive a return on their investment at a fixed spread relative to the SOFR index. The CLO Funds are leveraged funds and any excess cash flow or “excess spread” (interest earned by the underlying securities in the fund less payments made to senior bond holders and less fund expenses and management fees) is paid to the holders of the CLO Fund’s subordinated securities or preferred shares. The level of excess spread from CLO Fund Securities can be impacted by the timing and level of the resetting of the benchmark interest rate for the underlying assets (which reset at various times throughout the quarter) in the CLO Fund and the related CLO Fund note liabilities (which reset at each quarterly distribution date); in periods of short-term and volatile changes in the benchmark interest rate, the levels of excess spread and resulting cash distributions to us can vary significantly.

Previous wording

Investments in Joint Ventures. For the three months ended March 31, 2024 and 2023, we recognized $1.7 million and $2.5 million, respectively, in investment income from our investments in Joint Ventures. As of March 31, 2024, and December 31, 2023, the fair value of our investments in Joint Ventures was approximately $53.2 million and $59.3 million, respectively. The final determination of the tax attributes of distributions from Joint Ventures is made on an annual (full calendar year) basis at the end of the year based upon taxable income and distributions for the full year. Therefore, any estimate of tax attributes of distributions made on an interim basis may not be representative of the actual tax attributes of distributions for the full year.

Current wording

Investments in Joint Ventures. For the three months ended June 30, 2024 and 2023, we recognized $1.8 million and $2.3 million, respectively, in investment income from our investments in Joint Ventures. For the six months ended June 30, 2024 and 2023, we recognized $3.5 million and $4.8 million, respectively, in investment income from our investments in Joint Ventures. As of June 30, 2024, and December 31, 2023, the fair value of our investments in Joint Ventures was approximately $54.3 million and $59.3 million, respectively. The final determination of the tax attributes of distributions from Joint Ventures is made on an annual (full calendar year) basis at the end of the year based upon taxable income and distributions for the full year. Therefore, any estimate of tax attributes of distributions made on an interim basis may not be representative of the actual tax attributes of distributions for the full year.

Previous wording

Total expenses for the three months ended March 31, 2024 and 2023 were approximately $10.3 million and $11.8 million, respectively. The decrease in total expenses for the three months ended March 31, 2024, in comparison to the prior year was primarily driven by the decrease in assets under management.

Current wording

Total expenses for the three months ended June 30, 2024 and 2023 were approximately $9.9 million and $11.7 million, respectively. Total expenses for the six months ended June 30, 2024 and 2023 were approximately $20.2 million and $23.5 million, respectively. The decrease in total expenses for the three and six months ended June 30, 2024, in comparison to the prior year, was primarily driven by a decrease in average debt outstanding as well as lower incentive fees.

Previous wording

Management Fees and Incentive Fees. Management fees for the three months ended March 31, 2024 and 2023 were approximately $1.7 million and $2.0 million, respectively. Incentive fees for the three months ended March 31, 2024 and 2023 were approximately $1.2 million and $1.8 million, respectively.

Current wording

Management Fees and Incentive Fees. Management fees for the three months ended June 30, 2024 and 2023 were approximately $1.7 million and $1.9 million, respectively. Management fees for the six months ended June 30, 2024 and 2023 were approximately $3.4 million and $3.8 million, respectively. Incentive fees for the three months ended June 30, 2024 and 2023 were approximately $1.4 million and $1.7 million, respectively. Incentive fees for the six months ended June 30, 2024 and 2023 were approximately $2.6 million and $3.5 million, respectively.

Previous wording

Interest and Amortization of Debt Issuance Costs. Interest expense is dependent on the average outstanding balance on our borrowings and the base index rate for the period. Debt issuance costs represent fees and other direct costs incurred in connection with our borrowings. These amounts are capitalized and amortized over the expected term of the borrowing. For the three months ended March 31, 2024 and 2023, interest expense and amortization on debt issuance costs and discount for the period was approximately $5.7 million and $6.3 million, respectively, on average debt outstanding of $310.5 million and $364.6 million, respectively

Current wording

Interest and Amortization of Debt Issuance Costs. Interest expense is dependent on the average outstanding balance on our borrowings and the base index rate for the period. Debt issuance costs represent fees and other direct costs incurred in connection with our borrowings. These amounts are capitalized and amortized over the expected term of the borrowing. For the three months ended June 30, 2024 and 2023, interest expense and amortization on debt issuance costs and discount for the period was approximately $5.4 million and $6.4 million, respectively, on average debt outstanding of $288.7 million and $360.8 million, respectively. For the six months ended June 30, 2024 and 2023, interest expense and amortization on debt issuance costs and discount for the period was approximately $11.1 million and $12.7 million, respectively, on average debt outstanding of $299.7 million and $368.1 million, respectively.

Previous wording

For the three months ended March 31, 2024 and 2023, professional fees totaled approximately $0.8 million and $0.6 million, respectively.

Current wording

For the three months ended June 30, 2024 and 2023, professional fees totaled approximately $0.6 million and $0.7 million, respectively. For the six months ended June 30, 2024 and 2023, professional fees totaled approximately $1.4 million and $1.3 million, respectively.

Previous wording

For the three months ended March 31, 2024 and 2023, administrative services expense was approximately $0.4 million and $0.7 million, respectively.

Current wording

For the three months ended June 30, 2024 and 2023, administrative services expense was approximately $0.4 million and $0.7 million, respectively. For the six months ended June 30, 2024 and 2023, administrative services expense was approximately $0.7 million and $1.3 million, respectively.

Previous wording

Other general and administrative expenses, which includes insurance, technology and other office and administrative expenses, totaled approximately $0.5 million and $0.4 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

For the three months ended June 30, 2024 and 2023, other general and administrative expenses, which includes insurance, technology and other office and administrative expenses, totaled approximately $0.4 million and $0.4 million, respectively. For the six months ended June 30, 2024 and 2023, other general and administrative expenses, which includes insurance, technology and other office and administrative expenses, totaled approximately $0.9 million and $0.9 million, respectively.

Previous wording

Net investment income and net realized gains (losses) on investments represents the change in net assets before net change in unrealized appreciation or depreciation on investments. For the three months ended March 31, 2024, net investment income and net realized gains (losses) on investments were approximately $4.2 million, or $0.45 per basic and diluted share. For the three months ended March 31, 2023, net investment income and net realized gains (losses) on investments were approximately $5.4 million, or $0.57 per basic and diluted share. Net investment income represents the income earned on our investments less operating and interest expense before net realized gains or losses on investments and change in unrealized appreciation or depreciation on investments.

Current wording

Net investment income and net realized gains (losses) on investments represents the change in net assets before net change in unrealized appreciation or depreciation on investments. For the three months ended June 30, 2024, net investment income and net realized gains (losses) on investments were approximately $(0.4) million, or $(0.05) per basic and diluted share. For the three months ended June 30, 2023, net investment income and net realized gains (losses) on investments were approximately $1.4 million, or $0.15 per basic and diluted share. For the six months ended June 30, 2024, net investment income and net realized gains (losses) on investments were approximately $3.7 million, or $0.40 per basic and diluted share. For the six months ended June 30, 2023, net investment income and net realized gains (losses) on investments were approximately $6.9 million, or $0.72 per basic and diluted share. Net investment income represents the income earned on our investments less operating and interest expense before net realized gains or losses on investments and change in unrealized appreciation or depreciation on investments.

Previous wording

Investments are carried at fair value, with changes in fair value recorded as unrealized appreciation (depreciation) in the statement of operations. When an investment is sold or liquidated, any previously recognized unrealized appreciation/depreciation is reversed and a corresponding amount is recognized as realized gain (loss). For the three months ended March 31, 2024, GAAP-basis net investment income was approximately $6.2 million, or $0.67 per basic and diluted share, while tax-basis distributable income was approximately $6.8 million, or $0.73 per basic and diluted share. For the three months ended March 31, 2023, GAAP-basis net investment income was approximately $8.5 million, or $0.89 per basic and diluted share, while tax-basis distributable income was approximately $7.0 million, or $0.74 per basic and diluted share.

Current wording

For the six months ended June 30, 2024, net investment income was approximately $12.7 million, or $1.36 per basic and diluted share, while tax-basis distributable income was approximately $13.2 million, or $1.42 per basic and diluted share. For the six months ended June 30, 2023, net investment income was approximately $16.4 million, or $1.72 per basic and diluted share, while tax-basis distributable income was approximately $14.9 million, or $1.56 per basic and diluted share.

Previous wording

During the three months ended March 31, 2024, our total investments had net change in unrealized appreciation (depreciation) of approximately $0.1 million. The net change in unrealized appreciation (depreciation) on investments is made up of approximately ($0.1) million on CLO Fund Securities, $0.1 million on equity securities, $0.3 million on our Joint Ventures investments, and ($0.2) million on our debt securities. During the three months ended March 31, 2023, our total investments had net change in unrealized appreciation (depreciation) of approximately ($6.0) million. The net change in unrealized appreciation (depreciation) on investments was made up of approximately $2.6 million on CLO Fund Securities, ($2.1) million on equity securities, ($2.8) million on our Joint Ventures investments, and ($3.7) million on our debt securities.

Current wording

During the three months ended June 30, 2024, our total investments had net change in unrealized appreciation (depreciation) on investments of approximately $(6.0) million . The net change in unrealized appreciation (depreciation) on investments is made up of approximately $(0.9) million on CLO Fund Securities, $3.9 million on equity securities, $0.4 million on our Joint Ventures investments, and $(9.4) million on our debt securities. During the three months ended June 30, 2023, our total investments had net change in unrealized appreciation (depreciation) of approximately $(4.2) million. The net change in unrealized appreciation (depreciation) on investments was made up of approximately $1.0 million on CLO Fund Securities, $0.1 million on equity securities, $0.4 million on our Joint Ventures investments, and $(3.7) million on our debt securities.

Previous wording

The net increase (decrease) in net assets resulting from operations for the three months ended March 31, 2024, was $4.5 million, or $0.48 per basic and diluted share. The net increase (decrease) in net assets resulting from operations for the three months ended March 31, 2023, was $0.1 million, or $0.01 per basic and diluted share.

Current wording

The net increase (decrease) in net assets resulting from operations for the three months ended June 30, 2024, was $(6.4) million, or $(0.69) per basic and diluted share. The net increase (decrease) in net assets resulting from operations for the three months ended June 30, 2023, was $(3.1) million, or $(0.33) per basic and diluted share.The net increase (decrease) in net assets resulting from operations for the six months ended June 30, 2024, was $(1.9) million, or $(0.20) per basic and diluted share. The net increase (decrease) in net assets resulting from operations for the six months ended June 30, 2023, was $(3.1) million, or $(0.32) per basic and diluted share.

Previous wording

We use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our shareholders by reducing our overall cost of capital. As a BDC, we are limited in the amount of leverage we can incur under the 1940 Act. We are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing. As of March 31, 2024, we had approximately $291.7 million of par value of outstanding borrowings and our asset coverage ratio of total assets to total borrowings was 171%, compliant with the minimum asset coverage level of 150% generally required for a BDC by the 1940 Act. We may also borrow amounts of up to 5% of the value of our total assets for temporary purposes.

Current wording

We use borrowed funds, known as “leverage,” to make investments and to attempt to increase returns to our shareholders by reducing our overall cost of capital. As a BDC, we are limited in the amount of leverage we can incur under the 1940 Act. We are only allowed to borrow amounts such that our asset coverage, as defined in the 1940 Act, equals at least 150% after such borrowing. As of June 30, 2024, we had approximately $285.1 million of par value of outstanding borrowings and our asset coverage ratio of total assets to total borrowings was 169%, compliant with the minimum asset coverage level of 150% generally required for a BDC by the 1940 Act. We may also borrow amounts of up to 5% of the value of our total assets for temporary purposes.

Previous wording

During the three months ended March 31, 2024, the Company redeemed approximately $34.0 million of the par value of 2018-2 Secured Notes. In connection therewith, the Company recognized a realized loss on extinguishment of approximately $0.2 million.

Current wording

During the six months ended June 30, 2024, the Company redeemed approximately $40.6 million of the par value of 2018-2 Secured Notes. In connection therewith, the Company recognized a realized loss on extinguishment of approximately $0.3 million.

Previous wording

During the three months ended March 31, 2024, the Company repurchased 51,015 shares under the Renewed Stock Repurchase program at an aggregate cost of approximately $1.0 million. During the three months ended March 31, 2023, the Company repurchased 35,613 shares under the Stock Repurchase program at an aggregate cost of approximately $0.8 million.

Current wording

During the three months ended June 30, 2024, the Company repurchased 79,722 shares under the Renewed Stock Repurchase Program at an aggregate cost of approximately $1.6 million. During the three months ended June 30, 2023, the Company repurchased 27,081 shares under the Stock Repurchase Program at an aggregate cost of approximately $0.6 million. During the six months ended June 30, 2024, the Company repurchased 130,737 shares under the Renewed Stock Repurchase Program at an aggregate cost of approximately $2.6 million. During the six months ended June 30, 2023, the Company repurchased 62,694 shares under the Stock Repurchase Program at an aggregate cost of approximately $1.3 million.

Previous wording

From time-to-time we are a party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the needs of our investment in portfolio companies. Such instruments include commitments to extend credit and may involve, in varying degrees, elements of credit risk in excess of amounts recognized on our balance sheet. Prior to extending such credit, we attempt to limit our credit risk by conducting extensive due diligence, obtaining collateral where necessary and negotiating appropriate financial covenants. As of March 31, 2024, and December 31, 2023, we had approximately $33.3 million and $28.6 million commitments to fund investments, respectively. We may also enter into derivative contracts with off-balance sheet risk in connection with its investing activities.

Current wording

From time-to-time we are a party to financial instruments with off-balance sheet risk in the normal course of business in order to meet the needs of our investment in portfolio companies. Such instruments include commitments to extend credit and may involve, in varying degrees, elements of credit risk in excess of amounts recognized on our balance sheet. Prior to extending such credit, we attempt to limit our credit risk by conducting extensive due diligence, obtaining collateral where necessary and negotiating appropriate financial covenants. As of June 30, 2024, and December 31, 2023, we had approximately $32.7 million and $28.6 million commitments to fund investments, respectively. We may also enter into derivative contracts with off-balance sheet risk in connection with its investing activities.

Previous wording

We have made an aggregate commitment to the Great Lakes II Joint Venture of $50 million, subject to certain limitations (including that we are not obligated to fund capital calls if such funding would cause us to be out of compliance with certain provisions of the 1940 Act). As of March 31, 2024, we had a $10.9 million unfunded commitment to the Great Lakes II Joint Venture. As of December 31, 2023, the Company had a $5.5 million unfunded commitment to the Great Lakes II Joint Venture.

Current wording

We have made an aggregate commitment to the Great Lakes II Joint Venture of $50 million, subject to certain limitations (including that we are not obligated to fund capital calls if such funding would cause us to be out of compliance with certain provisions of the 1940 Act). As of June 30, 2024, we had a $10.1 million unfunded commitment to the Great Lakes II Joint Venture. As of December 31, 2023, the Company had a $5.5 million unfunded commitment to the Great Lakes II Joint Venture.

Previous wording

Interest income, including amortization of premium and accretion of discount and accrual payment-in-kind (“PIK”) interest, is recorded on the accrual basis to the extent that such amounts are expected to be collected. We generally place a loan on non-accrual status and cease recognizing interest income on such loan or security when a loan or security becomes 90 days or more past due or if we otherwise do not expect the debtor to be able to service its debt obligations. For investments with PIK interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible (i.e. via a partial or full non-accrual). Loans which are on partial or full non-accrual remain in such status until the borrower has demonstrated the ability and intent to pay contractual amounts due or such loans become current. As of March 31, 2024, seven of our investments were on non-accrual status.

Current wording

Interest income, including amortization of premium and accretion of discount and accrual payment-in-kind (“PIK”) interest, is recorded on the accrual basis to the extent that such amounts are expected to be collected. We generally place a loan on non-accrual status and cease recognizing interest income on such loan or security when a loan or security becomes 90 days or more past due or if we otherwise do not expect the debtor to be able to service its debt obligations. For investments with PIK interest, which represents contractual interest accrued and added to the principal balance that generally becomes due at maturity, we will not accrue PIK interest if the portfolio company valuation indicates that the PIK interest is not collectible (i.e. via a partial or full non-accrual). Loans which are on partial or full non-accrual remain in such status until the borrower has demonstrated the ability and intent to pay contractual amounts due or such loans become current. As of June 30, 2024, nine of our investments were on non-accrual status.

Previous wording

Fee income includes fees, if any, for due diligence, structuring, commitment and facility fees, and fees, if any, for transaction services and management services rendered by us to portfolio companies and other third parties. Commitment and facility fees are generally recognized as income over the life of the underlying loan, whereas due diligence, structuring, transaction service and management service fees are generally recognized as income when the services are rendered.

Current wording

Origination fees (to the extent services are performed to earn such income upon closing), amendment fees, consent fees, and other fees associated with investments in portfolio companies are recognized as income when they are earned. Prepayment penalties received by the Company for debt instruments repaid prior to maturity date are recorded as income upon receipt. Commitment and facility fees are generally recognized as income over the life of the underlying loan, whereas due diligence, structuring, transaction service and management service fees are generally recognized as income when the services are rendered.