PennantPark Floating Rate Capital Ltd.

In this annual report on Form 10-K, or the Report, except where the context suggests otherwise, the terms “Company,” “we,” “our” or “us” refer to PennantPark Floating Rate Capital Ltd. and its wholly-owned consolidated subsidiaries; “1940 Act” refers to the Investment Company Act of 1940, as amended; “2023 Notes” refers to our 4.3% Series A notes due 2023; “2026 Notes” refers to our 4.25% Notes due 2026; “2031 Asset-Backed Debt” refers to (i) the issuance of the Class A-1 Senior Secured Floating Rate Notes due 2031, the Class A-2 Senior Secured Fixed Rate Notes due 2031, the Class B-1 Senior Secured Floating Rate Notes due 2031, the Class B-2 Senior Secured Fixed Rate Notes due 2031, the Class C-1 Secured Deferrable Floating Rate Notes due 2031, the Class C-2 Notes Secured Deferrable Fixed Rate Notes due 2031, and the Class D Secured Deferrable Floating Notes due 2031 and (ii) the borrowing of the Class A‑1 Senior Secured Floating Rate Notes due 2031 by the Securitization Issuers in connection with the Debt Securitization; "2036 Asset-Backed Debt" refers to the issuance of the AAA(sf) Class A-1 Notes, AAA(sf) Class A-2 Notes, AA(sf) Class B Notes, A(sf) Class C Notes, BBB-(sf) Class D Notes, and the borrowing issuance of AAA(sf) Class A-1 floating rate loans, or the "Class A-1 Loans" with the 2036-Secured Notes; “2036-R Asset-Backed Debt” refers to the issuance by the 2036-R Securitization Issuers of the following classes of notes pursuant the 2036-R Indenture (i) $203 million of A-1-R Notes, which bear interest at the three-month secured overnight financing rate (“SOFR”) plus 1.75%, (ii) $10.5 million of A-2-R Notes, which bear interest at three-month SOFR plus 1.90%, (iii) $12 million of Class B-R Notes, which bear interest at three-month SOFR plus 2.05%, (iv) $28 million of C-R Notes, which bear interest at three-month SOFR plus 2.75% and (v) $21 million of D-R Notes, which bear interest at three-month SOFR plus 4.30% (collectively, the “Secured Notes”), (B) the issuance by a 2036-R Securitization Issuer of $64 million of subordinated notes pursuant to the 2036-R Indenture (the “Subordinated Notes”) and (C) the borrowing by the Securitization Issuer of $12.5 million of Class B-R Loans, which bear interest at three-month SOFR plus 2.05% (the “Class B-R Loans”; 2036 Debt Securitization" refers to the $350.6 million term debt securitization completed by the "2036 Securitization Issuers"; "2037 Debt Securitization" refers to the $474.6 million term debt securitization completed by 2037 Securitization Issuer, "2037 Credit Agreement" refers to the certain credit agreement, dated February 20, 2025 by and between 2037 Securitization Issuer and Western Alliance Trust Company, National Association; "2037 Asset-Backed Debt' refers to (A) the issuance by 2037 Securitization Issuer of the following classes of notes pursuant to the 2037 Indenture: (i) $220.5 million of AAA(sf) Class A-1 Notes, which bear interest at three-month SOFR plus 1.49%, (ii) $19.0 million of AAA(sf) Class A-2 Notes, which bear interest at three-month SOFR plus 1.60%, (iii) $28.5 million of AA(sf) Class B Notes, which bear interest at three-month SOFR plus 1.75%, (iv) $38.0 million of A(sf) Class C Notes, which bear interest at three-month SOFR plus 2.20%, (v) $28.5 million of BBB-(sf) Class D Notes (the “2037 Class D Notes”), which bear interest at three-month SOFR plus 3.60%, (collectively, the “2037 Secured Notes”), and (vi) $85.1 million of subordinated notes (“2037 Subordinated Notes” and, together with the 2037 Secured Notes, the “2037 Notes”) and (B) the borrowing by the Issuers of $10.0 million under AAA(sf) Class A-1LA floating rate loans and $45.0 million under AAA(sf) Class A-1L-B floating rate loans (together, the “2037 Asset-Backed Loans”), which bear interest at three-month SOFR plus 1.49%. References to our portfolio, our investments, our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility, and our business include investments we make through our subsidiaries. “2036 Indenture” refers to that certain indenture, dated as of February 22, 2024, by and 2036 Securitization Issuer and Wilmington Trust, National Association, as trustee and as collateral agent; “2036-R Indenture” refers to that certain Second Supplemental Indenture, dated July 25, 2024, by and between the Securitization Issuer, PennantPark CLO I, LLC and U.S. Bank Trust Company, National Association;“2036 Financing Subsidiary” refers to PennantParkFloating Rate Funding I, LLC, a wholly-owned subsidiary of the Company; "PennantParkFloating Rate Funding II” refers to PennantParkFloating Rate Funding II, LLC, a wholly-owned subsidiary of the Company; "2036 Securitization Issuer" refers to PennantPark CLO VIII, LLC; “2036-R Securitization” refers to the $351.0 million term debt securitization completed by the 2036-R Securitization Issuers; “2036-R Securitization Issuers” refer to PennantPark CLO I, Ltd., our wholly-owned and consolidated subsidiary, and PennantPark CLO I LLC, a wholly-owned subsidiary of PennantPark CLO I LLC;“CLO III” refers to PennantPark CLO III, Ltd., our wholly-owned and consolidated subsidiary, and PennantPark CLO III LLC, a wholly-owned subsidiary of PennantPark CLO III LLC; “BDC” refers to a business development company under the 1940 Act; “Code” refers to the Internal Revenue Code of 1986, as amended; “Credit Facility” refers to our multi-currency senior secured revolving credit facility, as amended from time to time, with Truist Bank and other lenders, or the “Lenders,” entered into on August 12, 2021; “Depositor” refers to PennantPark CLO I Depositor, LLC;“Depositor III” refers to PennantPark CLO III Depositor, Ltd.; “Debt Securitization” refers to the $301.4 million term debt securitization completed by the Securitization Issuers; “Funding I” refers to PennantPark Floating Rate Funding I, LLC; “PSSL” refers to PennantPark Senior Secured Loan Fund I LLC, an unconsolidated joint venture; “PTSF” refers to PennantPark-TSO Senior Loan Fund, LP, a consolidated limited partnership;“PTSF's GP” refers to PennantPark-TSO Senior Loan Fund GP, LLC, a wholly-owned subsidiary; “PennantPark Investment Administration” or “Administrator” refers to PennantPark Investment Administration, LLC; "2037 Securitization Issuer" refers to PennantPark CLO 11, LLC, a consolidated Delaware limited liability company, “PennantPark Investment Advisers” or “Investment Adviser” refer to PennantPark Investment Advisers, LLC; “Prior Credit Facility” refers to our multi-currency senior secured revolving credit facility, as amended and restated, with Truist Bank (formerly SunTrust Bank) and other lenders, originally entered into on June 23, 2011 and terminated on August 12, 2021; “RIC” refers to a regulated investment company under the Code; “SBCAA” refers to the Small Business Credit Availability Act; “Securitization Issuer” refers to PennantPark CLO I, Ltd.; “Securitization Issuers” refers to the Securitization Issuer and PennantPark CLO I, LLC; “Taxable Subsidiary” refers, collectively, to our consolidated subsidiaries PFLT Investment Holdings II, LLC and PFLT Investment Holdings, LLC. “PSSL II” refers to PennantPark Senior Secured Loan Fund II LLC, an unconsolidated joint venture; References to our portfolio, our investments, our multi-currency, senior secured revolving credit facility, as amended and restated, or the Credit Facility, and our business include investments we make through our subsidiaries. Some of the statements in this annual report constitute forward-looking statements, which apply to us and relate to future events, future performance or future financial condition. The forward-looking statements involve risks and uncertainties for us and actual results could differ materially from those projected in the forward-looking statements for any reason, including those factors discussed in “Risk Factors” and elsewhere in this Report.

Investing in our common stock involves a high degree of risk. Some, but not all, of the risks and uncertainties that we face are related to:

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our ability to remain in compliance with the financial and operational covenants of the Credit Facility, as well as the risks associated with our wholly owned subsidiary, Funding I, and the restrictions imposed on Funding I by the Credit Facility;

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our ability to operate in a highly competitive market for investment opportunities;

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the prospects of our portfolio companies and the ability of our portfolio companies to achieve their objectives, the decline or failure of which may result in our borrowers defaulting on their payments to us;

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the ability of our Investment Adviser to hire and retain qualified personnel, to monitor and administer our investments and to manage our future growth effectively;

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the impact of alternative reference rates on our business and certain investments;

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our reliance on information systems, the failure of which could result in delays or other problems with our business activities, and the susceptibility of such systems to cybersecurity threats;

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our ability to replicate historical performance of other investment companies and funds with which our professionals have been affiliated;

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our ability to raise additional capital while remaining in compliance with certain annual distribution, asset coverage, asset composition and other regulatory requirements needed to maintain our status as a BDC and a RIC;

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the use of leverage to fund our investments, including the indebtedness resulting from the Credit Facility, 2026 Notes, 2036-R Asset-Backed Debt, 2036 Asset-Backed Debt and 2037 Asset-Backed Debt, and the risk that we may fail to comply with the terms governing such indebtedness or maintain certain asset coverage ratio requirements;

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our issuance of debt or other securities and the impact of such issuances on the value of our common stock or NAV;

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market conditions that may make it difficult for us to refinance or extend the maturity of our existing indebtedness;

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potential conflicts of interest of our Investment Adviser and Administrator;

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the potential dilution caused by any future issuances of subscription rights or warrants;

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the impact of recent financial reform legislation and uncertainty about any future laws and regulations on our business and our portfolio companies;

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the investment objectives and decisions advanced by the board of directors or the Investment Adviser which are not subject to stockholder approval and potential activism by our shareholders;

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the illiquid nature of the assets in which we invest and our valuation procedures with respect to such assets;

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making investments in loans bearing a variable-rate of interest, or floating rate loans, first lien secured debt, second lien secured debt, subordinated debt and the equity of certain portfolio companies, and the risks of making such investments in privately held middle-market companies;

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the Investment Adviser’s incentive to make speculative investments to earn a greater incentive fee and, in some instances, our obligation to pay incentive compensation to our Investment Adviser even after we incur a loss;

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our investment in derivatives and the use of leverage;

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the potential dilution of our common stock which may result from issuances of our common stock below the then current NAV per share;

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our allocation of net proceeds from offering in ways which you may not agree and our inability to invest proceeds from offerings in new investment opportunities, which could negatively affect our financial performance;

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tax liabilities resulting from receiving our stock as a distribution;

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the measures we have taken to deter takeover attempts, which may adversely impact the price of our common stock;

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our interests in connection with the debt securitizations and the offering of the 2036-R Asset-Backed Debt, 2036 Asset-Backed Debt, and 2037 Asset-Backed Debt by the securitization issuers;

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changes to political, economic or industry conditions or conditions affecting the financial and capital markets, could cause volatility or prolonged disruption of the capital markets and impact the value of our assets;

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our cash balances at financial institutions that exceed federally insured limits and the impact of adverse developments affecting the financial services industry;

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the impact of economic sanction laws in the United States and other jurisdictions which may prohibit us and our affiliates from transacting with certain countries, individuals and companies;

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potential litigation, whether initiated by shareholders or other parties, and, with respect to the holders of our 2026 Notes, the ability to enforce civil judgments against us and our directors, officers and experts; and

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the impact of global climate change on the operations of our portfolio companies.

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We have identified material weaknesses in our internal controls over financial reporting, and we may identify additional material weaknesses in the future or otherwise fail to maintain effective internal controls over financial reporting, which may result in future financial statements containing errors that will be undetected and could impact the operations of our business including our ability to obtain financing, the cost of any financing we obtain or require additional expenditures of resources to comply with applicable requirements.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also have a material adverse effect on our business, financial condition and/or operating results. For a more detailed discussion of the risks that you should consider prior to investing in our securities, see Item “1A. Risk Factors” below.